Tax competition to Mamdani means that New York City should raise its tax burden to equal neighboring jurisdictions.
Zohran Mamdani, the socialist Democratic nominee for mayor of New York City, has a very different idea from conservatives about what tax competition between jurisdictions means.
Usually when conservatives talk about tax competition, they’re talking about reducing the tax burden on businesses and individuals relative to their neighbors. For example, Iowa Speaker Pro Tempore John Wills (R.) said in 2023 that having a higher income tax rate than Illinois served as a wake-up call that Iowa needed tax reform. They have since shifted to a flat tax of 3.8 percent, below Illinois’s 4.95 percent.
When I was an intern at Tax Foundation, we prepared books for state legislators comparing their taxes and economies with their neighbors’. Here’s one I helped with about Kansas from 2019. “All else being equal, lower rates and lower tax burdens will incentivize investment and spur economic growth,” it says.
That is not to say that cutting tax rates is always better, or that larger cuts are always better than smaller cuts. But the basic idea is to look at areas where the state’s tax burden is worse than its neighbors’ — either because it is higher or because it is more complicated or because it is outdated — and update policy to improve it. That’s what conservatives usually mean by making a tax code more competitive.
Mamdani has a very different idea. Tax competition to him means that New York City should raise its tax burden to equal neighboring jurisdictions.
He basically sees New York’s corporate tax rate as leaving money on the table, because other states’ are higher. “New York’s corporate tax rate now lags behind 15 other states and Washington, D.C.,” his campaign website says. “That includes all of our bordering neighbors in Connecticut, New Jersey, Massachusetts, Vermont, and Pennsylvania.”
He intends to win this competition by raising the corporate tax to the highest rate of any neighboring state: “The Mamdani administration will champion an increase of the top corporate tax rate to 11.5 percent — the same rate as New Jersey — which will raise $5 billion per year.” New Jersey’s top rate of 11.5 percent also happens to be the highest state corporate tax rate in the country.
That is one definition of competition, I guess. Mamdani’s view is basically that New York City will always have rich people and big corporations no matter what, so the city government would be stupid to not tax them as much as it possibly can. There are certainly plenty of non-tax reasons why New York City is an attractive place to do business, and it’s not as though they’ll all leave.
It’s just a very different perspective on what businesses are. Are they job creators and producers of goods and services that public policy should foster for the good of residents? Or are they piñatas that public policy should smack to collect the revenue that falls out of them and spend it on a larger public sector?
In the latter view, profits are a loss to society. That money could have been better spent by the government than whatever the business spent it on instead. There’s no limiting principle to this, as Mamdani’s vilification of private grocery stores proves. They have very low profit margins, but even those are too much for Mamdani, who thinks city-owned grocery stores that don’t make profits would have lower prices. (Incidentally, he also says one reason city-owned stores would have lower prices is that they would not have to pay taxes, so apparently taxes do raise prices for grocery stores but not for other businesses.)
Businesses also consider the total tax burden, not just the corporate tax rate, and it’s laughable to portray New York City as a low-tax jurisdiction. But they voted for the guy, and that’s what he says.
It’s illuminating to see Mamdani lay all of this out so plainly. There’s a real contrast of visions here: Prosperity comes from the private sector vs. prosperity comes from the public sector. I know which side I’m on.