Facing a growing fiscal challenge, New York City Mayor Zohran Mamdani is signaling that tax policy will be central to upcoming budget negotiations with the state, as reported by New York Daily News.

With a projected budget gap of roughly $12 billion, Mamdani said this week that his administration is prepared to push for higher taxes on millionaires and corporations as part of an effort to fund a sweeping affordability agenda that includes universal preschool, free bus service, and expanded affordable housing.

“Our administration is preparing to make the case that it is the time for New York’s most profitable corporations and wealthiest residents to pay their fair share,” Mamdani said, arguing that the city sends far more in tax revenue to the state than it receives back in services.

His comments set up a potential clash with Kathy Hochul, whose $260 billion state budget proposal does not include broad-based tax increases, despite extending the state’s top corporate rate and adding a smaller levy on nicotine products.

Hochul acknowledged that Mamdani’s position is cautious, saying “I’m sensitive to the impacts.” The governor also faces re-election later this year, a factor that continues to shape the political calculus around tax hikes. 

City Comptroller Mark Levine has attributed much of the looming shortfall to prior under budgeting of known expenses, while also warning that potential federal funding cuts could worsen the outlook.