Mamdani wants city to keep chunk of tax credit; why Hochul says no

One of Zohran Mamdani's biggest tests since becoming mayor has been trying to figure out how to deal with a multi-billion-dollar city budget gap.

Now, he's calling on the state to step in

Here's how he's trying to close the gap, and what the governor said about Mamdani's proposal.

What is the budget gap in New York City?

The city's budget deficit is over $5 billion, according to reporting by ABC7. In February, it sat at $7 billion, the mayor's office said at the time.

As time is running out, Mamdani is turning to the state for assistance.

Alongside asking Albany to help with the crisis, the mayor and speaker Julie Menin announced that they were extending the deadline for the executive budget through May 12 for the 2027 fiscal year. The deadline was May 1 prior to the extension, and the final budget is due June 30.

Mamdani's administration argues the delay is necessary as it waits for the state budget and a response to a request for more money from Albany.

How is Mamdani trying to fill the budget gap?

In asking Albany with budget help, the Mamdani administration wants the NYC Passthrough Entity tax credit chopped from 100 percent to 75 percent, with the city keeping the other 25 percent.

That shift would put about $1 billion back into the city’s coffers, “while still allowing New York City residents to save on federal taxes,” the city argued in a news release.

The 2017 Tax Cut and Jobs Act restricts some state and local taxes from being deducted from federal taxes. The pass-through credit restores some of the deduction by sending 100 percent of a New York City business tax back to business owners.

"Speaker Menin and I are calling on Albany to reset its longstanding fiscal relationship with the City and amend the Passthrough Entity Tax Credit," Mamdani said in the release.

In February, Hochul committed to sending an additional $1.5 billion to NYC over two years to assist with the budget crisis. But her office isn't prepared to trim the pass-through credit.

Gov. Kathy Hochul responds

Hochul said that the state is "not changing PTET,” according to News 10, and advised the city to take a closer look at its spending.

“We put in $1.5 billion of fairly unrestricted money to the city so they could plan on that,” she explained.

“They have programs that are growing, not 4% a year, but 4% a month. And so, they have to do what every other city’s doing," in reviewing spending, Hochul said.

The governor's office did not immediately respond to a request for comment by USA TODAY.