NYC Faces Fiscal Meltdown as Liberals Demand Soaring Tax Hikes

Paul Riverbank, 1/22/2026NYC battles a $12B deficit as leaders clash over tax hikes and ambitious social spending.

“We’re at a crossroads,” Mamdani told reporters, as construction noise from the West Side wove through his remarks. “If New Yorkers are going to trust this city with their dollars, those dollars need to come back to them in visible ways.” He spoke with the urgency of someone less interested in compromise than in setting a new tone.

The mayor's pitch is clear, though hardly novel: raise taxes on the well-heeled—individuals and corporations alike—to pay for bus rides that don’t cost a dime, city-backed preschools for every family, and other programs long stuck in the legislative hopper. But in Albany, Governor Kathy Hochul’s newly unwrapped $260 billion plan sidesteps those demands, shunning new income tax hikes and instead sprinkling selective funding into education and Medicaid.

Mamdani and his progressive wing see a different ledger: They note, with no small amount of irritation, that New York City routinely sends more than half the state’s tax revenue up the river, only to see less than 41 cents on each dollar return. For a mayor facing a $12.6 billion shortfall, that math breaches the boundaries of mere frustration. And in New York’s byzantine governance, even the boldest city tax ambitions must first pass Albany’s sniff test—a setup that all but ensures a spring full of public jabs.

Hochul, not unmindful of the political landmines ahead, now finds herself squeezed from the left by a restless party base—including her lieutenant governor, Antonio Delgado—while attempting to hold on to warier suburbanites. “We’re not looking to increase taxes right now,” said Blake Washington, the governor’s budget director, in language that fell somewhere between reassurance and warning. Hochul herself has stressed new revenue measures would be a “last resort”—words that carry plenty of wiggle room without offering Mamdani much hope.

Pressed on whether he’s picking the right battle, Mamdani casts blame on his predecessor, Eric Adams, for what he calls a legacy of underestimated expenses and deferred obligations. “This isn’t the economy,” he says, his tone pointed but measured. “It’s budgetary decisions—the kind that can’t be wished away.”

Mark Levine, the city comptroller who knows the roster of line items better than most, chimes in with some wonkish precision: “It’s not just macro trends; it’s the accumulations of subtle misses on cost projections, year after year.” Budget gaps, it seems, are more often born of slow leaks than dramatic ruptures.

That’s not to say Hochul has locked the vault entirely. Her plan nods toward new money with a higher tax on nicotine pouches and a proposal to keep the existing top corporate rate alive for another three years. But Mamdani’s call for a fresh, two-percentage-point bump on top earners—and similarly sweeping changes for corporations—hasn’t gotten real traction north of 125th Street.

Money trouble, however, isn’t limited to the city’s immediate books. Medicaid spending in the Empire State continues to defy gravity: It now sits 46% above the national average per enrollee. Costs have tripled over 15 years, home care and prescriptions eat up ever-larger shares, and with Hochul’s proposal to lift Medicaid outlays by another $3.9 billion, questions abound about whether the program has lost its fiscal bearings.

Looming in the background is a separate uncertainty: the fate of nearly two million Essential Plan recipients—many of whom arrived in the city seeking stability, yet lack citizenship papers. Whether their coverage survives could hinge on a decision in Washington, led by Dr. Mehmet Oz, now overseeing federal Medicaid policy. If approval for New York to tap a $9.6 billion trust fund doesn’t come, Albany faces a multibillion-dollar scramble to keep them insured. “If we don’t get it,” said Assembly Speaker Carl Heastie, “this turns into a five-alarm problem.”

On the Republican side, Assemblyman Josh Jensen, sounding half-wary and half-critical, notes just how far New York’s health coverage stretches compared to peer states. “We pay for a lot of things others simply don’t,” Jensen observes, hinting at the fraught balance between aspiration and affordability.

All of this lands squarely in the governor’s lap. Nassau County’s Bruce Blakeman, eager for a wedge, quickly brands Hochul as too cozy with her party’s far left. Yet, the governor seems content for now to split the difference—open to targeted, modest revenue bumps, but wary of the broader hikes Mamdani and company demand.

The clock, though, is the final unyielding force. April’s budget deadline draws closer, and the swirl of proposals, counter-proposals, and political feints is nowhere near conclusion. Will City Hall find support for its ambitious wish list, or will Albany’s more cautious hand win out? Somewhere in the span between service upgrades and new tax bills, millions of New Yorkers wait for an answer that touches their daily lives in ways both big and small.

New York City’s new mayor, Zohran Mamdani, didn’t waste much time before throwing down a gauntlet to Albany. With a gaping $12 billion deficit looming over the five boroughs and barely a month into his tenure, Mamdani seems allergic to backroom peacemaking. His first major press event—somewhat pointedly staged amid the minimalist art of the Whitney Museum—quickly morphed into an unmistakable signal: The city’s richest and its business giants, he argued, have skated past their fair share for too long.“We’re at a crossroads,” Mamdani told reporters, as construction noise from the West Side wove through his remarks. “If New Yorkers are going to trust this city with their dollars, those dollars need to come back to them in visible ways.” He spoke with the urgency of someone less interested in compromise than in setting a new tone.The mayor's pitch is clear, though hardly novel: raise taxes on the well-heeled—individuals and corporations alike—to pay for bus rides that don’t cost a dime, city-backed preschools for every family, and other programs long stuck in the legislative hopper. But in Albany, Governor Kathy Hochul’s newly unwrapped $260 billion plan sidesteps those demands, shunning new income tax hikes and instead sprinkling selective funding into education and Medicaid.Mamdani and his progressive wing see a different ledger: They note, with no small amount of irritation, that New York City routinely sends more than half the state’s tax revenue up the river, only to see less than 41 cents on each dollar return. For a mayor facing a $12.6 billion shortfall, that math breaches the boundaries of mere frustration. And in New York’s byzantine governance, even the boldest city tax ambitions must first pass Albany’s sniff test—a setup that all but ensures a spring full of public jabs.Hochul, not unmindful of the political landmines ahead, now finds herself squeezed from the left by a restless party base—including her lieutenant governor, Antonio Delgado—while attempting to hold on to warier suburbanites. “We’re not looking to increase taxes right now,” said Blake Washington, the governor’s budget director, in language that fell somewhere between reassurance and warning. Hochul herself has stressed new revenue measures would be a “last resort”—words that carry plenty of wiggle room without offering Mamdani much hope.Pressed on whether he’s picking the right battle, Mamdani casts blame on his predecessor, Eric Adams, for what he calls a legacy of underestimated expenses and deferred obligations. “This isn’t the economy,” he says, his tone pointed but measured. “It’s budgetary decisions—the kind that can’t be wished away.”Mark Levine, the city comptroller who knows the roster of line items better than most, chimes in with some wonkish precision: “It’s not just macro trends; it’s the accumulations of subtle misses on cost projections, year after year.” Budget gaps, it seems, are more often born of slow leaks than dramatic ruptures.That’s not to say Hochul has locked the vault entirely. Her plan nods toward new money with a higher tax on nicotine pouches and a proposal to keep the existing top corporate rate alive for another three years. But Mamdani’s call for a fresh, two-percentage-point bump on top earners—and similarly sweeping changes for corporations—hasn’t gotten real traction north of 125th Street.Money trouble, however, isn’t limited to the city’s immediate books. Medicaid spending in the Empire State continues to defy gravity: It now sits 46% above the national average per enrollee. Costs have tripled over 15 years, home care and prescriptions eat up ever-larger shares, and with Hochul’s proposal to lift Medicaid outlays by another $3.9 billion, questions abound about whether the program has lost its fiscal bearings.Looming in the background is a separate uncertainty: the fate of nearly two million Essential Plan recipients—many of whom arrived in the city seeking stability, yet lack citizenship papers. Whether their coverage survives could hinge on a decision in Washington, led by Dr. Mehmet Oz, now overseeing federal Medicaid policy. If approval for New York to tap a $9.6 billion trust fund doesn’t come, Albany faces a multibillion-dollar scramble to keep them insured. “If we don’t get it,” said Assembly Speaker Carl Heastie, “this turns into a five-alarm problem.”On the Republican side, Assemblyman Josh Jensen, sounding half-wary and half-critical, notes just how far New York’s health coverage stretches compared to peer states. “We pay for a lot of things others simply don’t,” Jensen observes, hinting at the fraught balance between aspiration and affordability.All of this lands squarely in the governor’s lap. Nassau County’s Bruce Blakeman, eager for a wedge, quickly brands Hochul as too cozy with her party’s far left. Yet, the governor seems content for now to split the difference—open to targeted, modest revenue bumps, but wary of the broader hikes Mamdani and company demand.The clock, though, is the final unyielding force. April’s budget deadline draws closer, and the swirl of proposals, counter-proposals, and political feints is nowhere near conclusion. Will City Hall find support for its ambitious wish list, or will Albany’s more cautious hand win out? Somewhere in the span between service upgrades and new tax bills, millions of New Yorkers wait for an answer that touches their daily lives in ways both big and small.