New York City Mayor Zohran Mamdani is backing a proposal that would dramatically tighten the state’s estate tax rules, lowering the exemption threshold from more than $7 million to $750,000 and raising the highest estate tax rate from 16% to 50%.

The plan appeared in a memo circulated by Mamdani’s office to state lawmakers in recent weeks. The document outlined nearly a dozen possible measures to generate additional revenue as officials work through negotiations over the state budget. Mamdani is grappling with a projected $5.4 billion deficit in the city budget for the fiscal year beginning July 1 and is seeking assistance from Albany to help close the gap.

The likelihood of the proposal being adopted this year appears slim. Neither the State Senate nor the Assembly included the idea in their budget proposals, and Governor Kathy Hochul’s office also left it out of its own spending plan. Both legislative chambers did approve budget recommendations this week that included increases to income and corporate taxes, but the estate tax change was not among them.

Pressure to raise revenue is expected to intensify as state leaders confront growing fiscal challenges. According to New York City Comptroller Mark Levine, the city is projected to face a cumulative deficit of at least $28 billion over the next four fiscal years.

If enacted, the change supported by Mamdani would mark a dramatic shift in the state’s tax structure. New York already stands among roughly a dozen states that levy their own estate tax in addition to the federal tax. Reducing the exemption to $750,000 would give New York the lowest estate tax threshold in the country.

Across the United States, most states do not impose taxes on inherited wealth. Among those that do, exemption levels vary widely, ranging from $1 million in Oregon to nearly $14 million in Connecticut, according to figures compiled by the Tax Foundation.

Mamdani’s push for heavier taxes on large estates is likely to deepen concerns among wealthy residents who have already reacted nervously to his progressive agenda. The democratic socialist stirred debate after saying, “I don’t think that we should have billionaires” in an interview shortly after winning the June 2025 Democratic primary.

At the same time, some business leaders had initially taken encouragement from Mamdani’s tone during the months leading up to the November general election. During that period, he emphasized that he was not firmly committed to income or corporate tax hikes he had previously described as necessary to finance his broader policy platform. His campaign estimated that the agenda — which includes proposals for free universal child care for children ages six weeks through five years, no-cost bus service across the city, and freezing rents in regulated apartments — would require at least $7 billion annually once fully implemented.

Economists have warned that estate taxes can have unintended consequences in jurisdictions where income taxes are already high. A 2023 analysis by economists Enrico Moretti and Daniel Wilson examined state-level data and found that wealthy taxpayers may relocate to lower-tax states, particularly later in life, reducing the tax base in high-tax areas. In states with lower income taxes, estate taxes tend to be more effective at generating revenue, the study concluded.

“What we’re saying is you can either be progressive on income tax or be progressive on adopting an estate tax, but if you do both it’s going to backfire,” Moretti, a professor at the University of California, Berkeley, said at the time. The richest New York City residents pay some of the highest income tax rates in the nation, with the top rate reaching 14.8% for those earning $25 million or more.

{Matzav.com}