Mamdani wants to raise NY's corporate tax. Why are Long Island Republicans and business groups worried?

Nassau Republican lawmakers on Monday publicly denounced a plan set forth by New York City Mayor-elect Zohran Mamdani to raise taxes on corporations and vowed to fight Gov. Kathy Hochul should she sign on. 

 Three members of the State Senate and two town supervisors joined Nassau County Executive Bruce Blakeman  to support the concerns of Long Island Association CEO Matt Cohen and Nassau Council of Chambers  of Commerce president Frank Camarano that the plan would have a ripple-effect that would drive corporations and jobs from the state as well as hurt the small businesses that service them and their employees.

 "This will make it less affordable to live here on Long Island. It will make it less affordable to live in New York City," said Blakeman, who has been mulling a run for governor. "This is a tax on the middle class. This tax increase on corporations will be passed along to the consumers and many businesses will say they've had enough of New York State, they will leave and they will take jobs with them."

Meanwhile, most Americans say they are in favor of raising taxes on corporations, according to a Pew Research Center report published in March.

According to the report, 63% of U.S. adults surveyed said they were in favor of raising the tax rates on large businesses and corporations, including 34% who say they should be raised a lot. Another 19% say tax rates for large businesses should be lowered, while 17% say they should be kept the same as they are now. 

Here's what to know about the plan that is being discussed and how it might impact Long Island: 

What is the corporate tax rate and what has been proposed?

Businesses operating in New York pay taxes depending on the type of business and how much income it generates. Those with income under $5 million are taxed at a rate of 6.5% and those with income more than $5 million pay a rate of 7.25%. Revenue from the tax on corporations goes  into the state's operating budget.   

Mamdani, a democratic socialist who's mayoral campaign platform focused on affordability issues for working people, has advocated to increase the top corporate rate from 7.25% to 11.5%. His campaign proposals to fund universal child care, free buses and to freeze the rent for people living in rent-stabilized buildings requires approvals from state lawmakers and boards.

The plans also will require additional revenue, which he has proposed getting from increasing taxes on businesses in addition to individuals making more than $1 million. 

 Hochul, who endorsed Mamdani and is herself up  for reelection, will need to take a position on the corporate tax rate. The current rate, which was set to expire at the end of 2023, was temporarily extended for another three years. The extension will expire on Jan. 1, 2027. 

Hochul has not said what she thought the new rate might be but various financial news outlets have recently reported on members of her administration indicating a proposal to raise the rate, in addition to planning for other streams of revenue to close possible gaps in the state budget.

Why should Long Islanders care about a proposed increase?

Long Island is home to more than 300 companies with more than $5 million in earnings and business owners with companies in New York City and elsewhere in the state, which is the reason Cohen says, "It's going to be a real problem."

About 1,000 of New York City's most profitable companies would be impacted, according to Mamdani campaign literature. 

"The business community here has been stressed, has been punched in the gut numerous times," said Cohen, who heads the largest business group on the Island. "We have an affordability crisis and nowhere is it more acute than here on Long Island. When you are driving out businesses and when you are driving out jobs — that's going to make it worse." 

 Cohen and others say that when corporations pay more in taxes they pass the cost on to the consumer. The local economy would feel the brunt of companies leaving or having to lay off workers, too. 

 "At a time when we are dealing with an affordability crisis, the last thing we should be doing is raising taxes and making the cost of everyday things — milk, school supplies, clothing — more expensive," said State Sen. Jack Martins  (R-Mineola), who was among the officials at the Monday news conference. 

What are the pros and cons of a corporate tax increase?

Mariano Torras, economics professor at Adelphi University and chair of its finance and economics department, said an increase of the state’s corporate tax rate would be a move toward greater economic balance.

"It’s a step in the right direction of reversing what’s really been a redistribution of wealth from the middle class to the rich decades in the works," Torras said. "This is overdue."

 New York's corporate tax rate is the 17th highest in the country, according to data from the Tax Foundation, a nonpartisan think tank and tax policy researcher. 

A proposal to raise it to 11.5%, would bring it on par with New Jersey, tying  it for the highest in the nation, according to foundation figures. 

Torras said while there are fears among some in the business community that increases in the corporate tax rate would lead to a mass exodus of employers, he believes those claims are "oversold."

Torras said for businesses that  choose New York State as their home, tax increases may not be the sole determining factor on whether a business stays or goes.

"Taxes are one issue among many," he said. "If they triple the corporate tax rate, well maybe that would be more impactful."

Overall, he said, the benefits of the state having access to new funding far outweighs any cons.

"It just makes more funds available and increases state revenues so the state can do more," he said.

 Bill Hammond, senior fellow at the Albany-based Empire Center, a government fiscal watchdog, in an October report questioned whether Hochul would back Mamdani's proposal to raise taxes on corporations and millionaires.

"Before going ahead with these plans, city and state leaders should consider how much money those narrow groups are already pumping into government coffers — and the broader economy — and whether New York should risk chasing some of them away," he wrote.