New York City Mayor Zohran Mamdani is pushing to reduce the pass-through entity tax credit as part of a broader effort to close a widening city budget gap, and prominent business figures are warning the move could chase middle-income earners and small-business owners out of the five boroughs, Fox Business reported.
The proposal targets the pass-through entity tax, or PTET, a mechanism many states adopted to help businesses that file as S corporations or LLCs remain competitive. Mamdani's plan to pare back the credit is one piece of a larger tax push that also includes higher income, property, and corporate taxes, all aimed at generating revenue for a city government that cannot seem to stop spending faster than it collects.
For a city already losing residents and businesses to lower-tax states, the timing could hardly be worse. And the people closest to the problem, the ones who sign paychecks and stock shelves, are not shy about saying so.
Steven Fulop, president and CEO of the Partnership for NYC, laid out the stakes plainly. He explained that many states implemented the pass-through entity tax precisely because so many businesses file through S corps or LLCs, and the PTET became a workaround to keep those businesses competitive.
Fulop urged restraint:
"In a time where the economy is fragile in New York City, we're saying just be cautious on these sort of things."
That word, "fragile", is doing a lot of work. It is not the language of a business lobby angling for a handout. It is a warning from the head of one of the city's most prominent business organizations that the foundation is already cracking.
Mamdani's first months in office have given business owners plenty of reason for anxiety. His early tenure has been marked by a trail of broken promises and policy reversals that have left constituents and employers alike unsure what to expect next.
John Catsimatidis, the CEO of Gristedes supermarkets, offered an even blunter assessment. He warned that the impact of Mamdani's tax proposals would extend well beyond the city's wealthiest residents and hit the professionals who keep the city running, people earning between $300,000 and $500,000 a year.
Catsimatidis put it this way:
"The people that make $300, $400, $500,000 a year, they are the ones... They have an option. They get up and leave."
That is not a theoretical concern. It is a description of behavior New York has already seen. The pandemic era proved that high earners with portable incomes will relocate when the tax burden tips past what they consider fair. Florida, Texas, and a half-dozen other states have been happy to welcome them.
Catsimatidis also drew a comparison that should give City Hall pause. He pointed to London's real estate market as a cautionary tale:
"You can't destroy the real estate industry... In London, it's been destroyed... If you do the same thing in New York that is a disaster."
The warning is specific: real estate is not just an industry in New York City. It is the tax base. Property taxes, transfer taxes, commercial rents, all of it flows from a functioning real estate market. Undermine that, and the budget gap Mamdani is trying to close will only widen. Property owners have already started exiting the market in response to the mayor's rent-freeze proposals.
The PTET credit exists for a reason. After the 2017 federal tax reform capped the state and local tax (SALT) deduction at $10,000, high-tax states scrambled for workarounds. The pass-through entity tax was one of the most effective. It allowed businesses structured as S corps or LLCs to pay state taxes at the entity level, effectively bypassing the SALT cap and keeping those businesses on a more level playing field with competitors in lower-tax states.
Reducing the credit does not eliminate the underlying tax burden. It simply shifts more of it onto the business owners themselves, the same people Catsimatidis says have the means and the motive to relocate.
Fulop's point is worth repeating: many states implemented this mechanism specifically to retain businesses. Rolling it back in New York City while neighboring jurisdictions keep theirs intact is an invitation for capital to move.
The PTET credit reduction is not a standalone proposal. Fox Business reported that Mamdani is pushing higher income taxes, higher property taxes, and higher corporate taxes as part of the same revenue drive. The mayor frames the effort as necessary to close a widening budget gap, but the details, how wide the gap is, what spending cuts have been considered, and whether any formal legislative text has been introduced, remain unclear.
That lack of specificity is itself a problem. Business owners and investors make decisions based on predictability. When a mayor signals a broad appetite for tax increases without specifying their size, scope, or duration, the rational response is to plan for the worst.
Mamdani has already retreated from an earlier property tax hike proposal under pressure, pivoting instead to agency belt-tightening. That reversal raised its own questions about whether the mayor has a coherent fiscal strategy or is simply testing the political winds with each new proposal.
And the budgeting problems go deeper than any single tax fight. The mayor recently asked lawmakers for permission to blow past his own budget deadline, a move that did not inspire confidence in his administration's ability to manage the city's finances.
The political framing around proposals like this is always the same: tax "the wealthy" and "big business" to fund services for everyone else. But the PTET credit does not primarily benefit billionaires. It benefits mid-size businesses, law firms, medical practices, accounting partnerships, real estate developers, and retailers, that file as pass-through entities. These are the employers who fill office space, hire local workers, and keep commercial corridors alive.
When Catsimatidis talks about earners in the $300,000-to-$500,000 range, he is describing surgeons, senior attorneys, experienced accountants, and small-business owners who employ dozens of people. They are not the ultra-rich. They are the upper-middle class, the people who can relocate but who, until now, have chosen to stay because New York offered something worth the cost.
Every one of them who leaves takes a tax contribution with them. And the city does not replace that revenue by raising rates on the people who remain. It replaces it with nothing, or with more debt.
The ideological backdrop matters too. Mamdani's racial equity plan has drawn criticism from policy experts who argue it is designed to justify expanding government rather than solving specific problems. If the tax push is funding an ever-growing bureaucracy rather than core services, the business community's resistance will only harden.
Fox Business's reporting leaves several important questions unresolved. The specific size of the proposed PTET credit reduction has not been disclosed. The precise dimensions of the city's budget gap have not been publicly detailed. Whether the proposal has been formally introduced before the City Council, or exists only as a mayoral talking point, is unclear. And which businesses would be affected first or most directly remains unstated.
Those gaps matter. A mayor asking for new taxing authority owes the public specifics, not slogans. Taxpayers and business owners deserve to know exactly how much more they will owe, when the increases take effect, and what the money will be spent on.
Until those answers arrive, the business community is left to interpret signals, and the signals all point in one direction: more taxes, fewer incentives to stay, and a City Hall that views the private sector as a revenue source rather than a partner.
New York City has survived fiscal crises before. It has never survived one by making it more expensive to do business while the competition rolls out the welcome mat.
