Some banking households may pay an extra $111k in income tax under Zohran Mamdani
Zohran Mamdani declared victory in the Democratic primary for New York City yesterday. The left-wing populist’s rise shocked the Democratic political establishment, but there’s one group in New York probably even more startled: the city’s bankers.
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Mamdani’s proposed policies are not banker friendly. Alongside proposed state-owned grocery stores, they include an additional 2% tax on incomes above $1m.
Not everyone in banking earns $1m. Recent figures from the New York State Comptroller said average compensation in the New York securities industry was $471k in 2023, and that 70% of people earn less than $250k.
However, at senior levels in banks, seven figure incomes are common. Recruitment consultancy Prospect Partners said earlier this year that the “average” investment banking MD earns $1.3m per year in total compensation. This can go even higher with more seniority. Prospect Rock said the “average” group head earned $2.1m per year in total compensation. If those individual bankers pay an additional 2% in income tax on their total earnings, they would pay an additional $25k and $41k a year, respectively.
This may understate the pain. Mamdani plans to raise $4bn from his new tax. His campaign page states that “34,000 households” earn over $1m a year in New York and says that this group of people is “the top 1% of NYC taxpayers”. If Mamdani plans to raise $4bn from 34,000 households, the implication is that each household would pay an additional $118k.
That's a lot. If Mamdani's tax is applied at household level, it will also mean that vice presidents (VPs) in banking may be affected: Prospect Rock says VPs earn up to $591k on average, so married VPs would fall into the $1m bracket - unless they file separately, of course.
In fact, the pool of people and households earning over $1m in New York City may be smaller than Mamdani thinks. He appears to have drawn his figures from the office of the New York City Comptroller in 2021. However, 2021 was a bumper year for both banks and banking pay and has not been repeated since. This year, the pool of $1m+ earners across the city is likely to be smaller, implying far higher contributions per household. In 2019, for example, only 30,000 households earned $126bn in total. If Mamdani wants to raise $4bn from them, that would imply additional bills of $131k per household (a 3.2% tax rate) - or an acceptance that he will only raise $2.8bn instead, if he sticks to his 2% plan.
What are New York City high earners to do? There's always Miami, where the top income tax rate is 37% (the federal rate, with no additions) and where Citadel and Citadel Securities are keen to hire on salaries of $300k, according to the H1b database.
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