In January, New York City released its fiscal plan for the upcoming year. Mayor Eric Adams signaled his ambition to eliminate city income taxes for those making up to 150 percent of the federal poverty limit—a proposal he calls “Axe the Tax.”
Axing the tax would surely resonate with voters, a relevant consideration for an incumbent mayor facing an uphill reelection battle. But the proposal could also pose a serious risk to the city’s already-fragile tax base, alienating the top earners who shoulder an ever-growing share of the budgetary burden and pushing them elsewhere.
The city’s $115 billion municipal budget does not include Adams’s proposed tax cuts, which require signoff from Albany. But the mayor continues to push the plan. Meanwhile, Governor Kathy Hochul’s $252 billion state budget, also announced in January, includes one-off “inflation refund checks” worth up to $500 for joint filers. More revealingly—because it suggests how Mayor Adams’s proposals might be funded—the state budget also includes $1 billion in “middle-class tax cuts.”
Here’s the catch: those tax cuts, applying across the five lowest tax brackets, are funded through an extension of the High-Income Surcharge—the so called millionaire’s tax--which is projected to bring in $5 billion annually. In effect, what appears to be a tax cut is really a tax shift, redistributing the burden rather than reducing it.
Adams’s plan to “Axe the Tax” would likely follow the same model. His budget proposes a $2.5 billion across-the-board spending increase, making it improbable that he intends to offset the lost revenue with cuts. Instead, his proposal would amount to moving more of the tax burden onto higher earners. This approach risks backfiring accelerating their exodus out of the city. A better, more sustainable strategy would be to pursue broad-based tax-reductions.
New York City remains the nation’s most expensive metropolitan area, and state and local taxes play a major role in that reality. New York State ranks dead last in the Tax Foundation’s 2025 Tax Competitiveness Index. But the wealthy are paying a huge portion of those taxes—New York’s top 200,000 earners account for more than half of its income-tax revenues, for example. People are willing to pay a premium to live in New York, but not an unlimited one.
As E. J. McMahon has chronicled, New York may have already hit a tipping point. In relative terms, New York’s domestic migration loss since 2020 has been the largest of any state, at 4.8 percent of base population. Much of this outflow is due to the appeal of lower-tax states. The issue isn’t whether the wealthiest can bear the burdens, but that, beyond a certain threshold, they may choose not to and leave.
Further reporting in the Financial Times highlights another worrisome trend: young professionals, who “earn substantially more than the overall New York population,” are leaving at the highest rates, opting for cities like Miami, Denver, and Chicago. This is precisely the demographic on which New York’s dynamism and ability to innovate depends.
Proportionally higher taxes for the wealthy might not directly affect many young professionals early in their careers, but a broader-based tax system would make it easier for them to establish themselves and succeed. And by not imposing excessive tax burdens on them later, broader taxes would reinforce the message that New York rewards ambition and success. For those considering where to build their futures, this matters.
If New York City is to maintain itself on a sustainable economic footing, it must also avoid overdependency on a small group of wealthy taxpayers. The risk of this strategy is well-documented. A 2023 report from the New York Comptroller cites several studies showing that similar tax-the-rich policies in New Jersey and California ultimately led to revenue declines. The federal limit on how much state tax filers may deduct from their federal tax bill only worsens this effect. The city’s figures show that over 80 percent of its income-tax revenue comes from the top 20 percent of earners. Squeezing this group further risks triggering a fiscal crisis reminiscent of the 1970s.
Mayor Adams has correctly identified the problem: taxes in New York are too high. But if his Axe the Tax plan is to serve the city’s long-term interests, it cannot just transfer the burden onto high earners, as the state’s budget does. This risks driving away the very people who sustain the city’s finances, further concentrating tax obligations on a dwindling base. Real, across-the-board tax cuts, accompanied by responsible spending reductions, might not yield immediate political dividends, but they would strengthen New York’s appeal to the entrepreneurs, innovators, and visionaries who have always been its lifeblood.
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