Governor Kathy Hochul’s latest effort to raise taxes on wealthy New Yorkers may satisfy Mayor Zohran Mamdani’s calls to “tax the rich,” but critics are warning the rushed proposals could create major complications for New York City’s already tangled property tax system.

Among the ideas floated during ongoing state budget negotiations are a new pied-à-terre tax — a levy on luxury second homes that are not used as a primary residence — as well as a transfer tax on all-cash purchases of homes valued above $1 million.

The proposals emerged as Hochul and state lawmakers entered a sixth week of extended budget talks over New York State’s next spending plan.

Experts told the NY Post the late-stage proposals would require sweeping changes to the city’s notoriously complex property tax structure, raising concerns about unintended long-term consequences.

“Should we rationalize our property and transfer tax system? Yes,” Citizens Budget Commission President Andrew Rein told the NY Post. “Should we do it piecemeal, 45 days into the state fiscal year based on unvetted proposals? No.”

“That’s not the way for a good outcome.”

Mamdani has repeatedly argued that wealthy New Yorkers should shoulder more of the city’s financial burden, claiming the current system unfairly benefits high earners while the city faces a reported $5.4 billion budget gap.

Hochul had previously rejected Mamdani’s push for a direct millionaire’s tax, warning it could drive wealthy residents out of New York altogether.

However, the governor later shifted course by backing the proposed pied-à-terre tax, a move viewed by many as an attempt to appeal to Mamdani’s progressive political allies ahead of her re-election campaign.

Mamdani celebrated the development in a polished social media video filmed outside billionaire Ken Griffin’s Manhattan penthouse, declaring: “Today we’re going to tax the rich.”

“The two fundamental facts here are that the mayor is unwilling to control spending and separately wants to be seen taxing the rich. And the practicality or sustainability of his solutions look to be afterthoughts,” Manhattan Institute fellow Ken Girardin told the NY Post.

The video reportedly angered Griffin, who responded by pledging to expand hiring in Miami instead of New York “as a direct consequence.”

Even as the political fight escalated, many details surrounding the proposed pied-à-terre tax remained unclear.

Hochul’s office later clarified that the plan would target second homes in condos and co-ops assessed at more than $1 million, along with one- to three-family homes assessed above $5 million.

Under New York City’s current system, condos and co-ops are assessed based on potential rental income rather than actual market value, often resulting in substantially lower tax assessments.

The proposal would initially apply the new tax to units with assessed values above $1 million — a figure officials say typically corresponds to properties selling for roughly $5 million.

After two years, the proposal calls for New York City to overhaul the way condos and co-ops are valued so they would eventually be taxed similarly to traditional family homes.

Tax Foundation senior policy analyst Abir Mandal agreed the city’s assessment system is deeply flawed, particularly regarding condos and co-ops, but warned there are too many unanswered questions surrounding Hochul’s proposal.

“Imposing a tax on top of that flawed assessment system, it’ll lead to a higher deadweight loss,” Mandal told the NY Post.

“Do I support New York City going through a better assessment system? Yes,” he added. “But we’ll just have to take a look at and see exactly what they come up with. It’s like if we don’t have details yet, they could come up with something that’s even worse than what they have right now.”

Lawmakers are also discussing a separate transfer tax on cash purchases of homes priced above $1 million, which Bloomberg reported could generate another $160 million for the city.

A spokesperson for Hochul confirmed to the NY Post that the governor is still considering the proposal and has not ruled it out.

Mandal criticized the transfer tax idea as economically damaging, arguing it would make it more expensive both to purchase and sell homes.

“They’re economically even more harmful because they decrease the liquidity in the market,” he said. “If you really want a freer market for housing available for people increasing the transfer tax is not a good proposal.”

The tax debate comes amid continued growth in city spending.

Mamdani’s executive budget has climbed to $124.7 billion, fueled in part by increased funding from Albany.

Hochul is also directing another $2 billion toward expanded childcare programs for two years, though critics warn the city could later be left scrambling to replace that funding on its own.

Additional pension agreements under discussion could saddle city taxpayers with more than $100 million in new annual costs.

“Revenues are not a problem either for New York City or for New York State,” Mandal told the NY Post.

“It’s the fact that spending has grown even faster than the revenues have grown, which have grown pretty rapidly.”

Republican officials sharply criticized the proposed taxes, warning they could eventually impact far more than just the wealthy.

“This is exactly how ‘tax the rich’ turns into taxing everybody else,” City Councilman Frank Morano told the NY Post.

“A lot of middle-class New Yorkers bought modest co-ops or condos decades ago that now fall into these thresholds because of the insanity of the real estate market. They’re not oligarchs. They’re retirees, small business owners, and families who worked hard and played by the rules.”

“And let’s be honest: if Albany and City Hall keep moving the goalposts from $5 million down toward $1 million assessments, people are right to wonder who gets targeted next,” he added.

Councilwoman Joann Ariola warned that many pied-à-terre owners already contribute enormous sums in taxes and cautioned that pushing them out of New York would shift the burden onto remaining residents.

“There’s this mistaken belief out there that people will never leave New York no matter how high taxes go because ‘it’s New York,’” Ariola told the NY Post.

“But people can easily move right across the river to Hoboken, take their tax dollars with them, and still be minutes from Manhattan.”

“What we are seeing here is a short-term solution from the governor in an election year that will have long-term consequences for New Yorkers.”

Business leaders also warned the proposals could further damage New York’s already poor reputation for high taxes.

“We are already in last place in tax competitiveness. What are we trying to do, be in super-duper-extra last place?” Business Council of New York State President Heather Mulligan told the NY Post.