New York’s affordability debate is taking a familiar turn. Faced with rising costs and public pressure to expand services—from transit to child-care to housing—policymakers are searching for new revenue.
Mayor Zohran Mamdani has tossed around various tax-based solutions: raising income-tax rates on top earners, imposing a new wealth tax on the city’s richest residents, an across-the-board increase in property taxes, and, most recently, a pied-à-terre tax. Each solution addresses part of the problem, but none is adequate on its own.
Raising top earners’ tax rates may be politically appealing and would likely raise revenue in the short term, but doing so risks eroding the city’s tax base. New York already depends heavily on its highest earners—many of whom work in service industries that are easily movable, such as finance, technology, and media. Business owners and professionals are already eyeing moves to Connecticut, Florida, Texas, or elsewhere.
Wealth taxes pose other logistical challenges. Valuing privately held businesses and illiquid assets on an annual basis is notoriously difficult. And like high income taxes, wealth taxes may discourage entrepreneurs away from the city, with spillovers for workers across the income distribution.
Raising property taxes poses a different problem. Taxing buildings and land together at the same rate discourages precisely the activity cities most need, namely new construction and redevelopment.
Mamdani’s pied-à-terre tax, which targets high-value second homes that owners use only part of the year, is intuitively appealing. Real estate is a natural tax base for the city. But the pied-à-terre tax would burden a narrow and administratively complex tax base, and it would only raise limited revenue.
Land, by contrast, is neither mobile nor difficult to identify and tax—and provides a far broader foundation.
If New York City wants a stable and economically sensible way to raise new revenue, it should look to the one tax base that cannot move: land. A tax on land is the best, least distortionary way to fund Mamdani’s agenda to make the city more affordable.
The solution is a simple, split-tax approach to infrastructure. Taxes on structures—office buildings, apartments—will remain fixed or even lowered. The land beneath those buildings will be taxed at a uniform higher rate. This isn’t a new idea. Since the 19th century, economists, most notably Henry George, have argued that taxing land can raise revenue without discouraging productive investment.
Pittsburgh has long used a two-part property tax with a higher rate on land. In 1979, it significantly increased its rate on land to fund new city services while holding other taxes fixed. Pittsburgh saw building on commercial land nearly double, setting the foundation for its tech economy of today.
A number of cities in Pennsylvania, including Harrisburg and Allentown, have used higher tax rates on land than on buildings, with evidence of increased development and reduced vacancy. Variants of land-focused taxation are also used in parts of Australia and Northern Europe, again with favorable outcomes for economic development.
New York City can do the same. Its legal framework already accommodates this approach by distinguishing between several types of property, including small homes, large apartment buildings, and commercial property. Land and improvements are also assessed separately in the city’s property-tax system. A split-rate system would build on this structure by treating land as a separate property class.
The city doesn’t lack wealth. It lacks an efficient tax system that raises revenue without discouraging the economic activity that makes the city thrive. Income taxes chase away people. Wealth taxes scare off entrepreneurs and their innovative capital. Land taxes, by contrast, target the one form of wealth that cannot move.
Importantly, land values largely reflect the benefits of public investments that make urban locations desirable—in transit, schools, parks, for example. Taxing those values allows cities to recapture some of the gains created by their own policies.
If New York wants to expand services for its residents while preserving growth and investment, it should stop chasing away its highest earners and start taxing land more heavily instead.
