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TaxBuzz Top 5 - Mamdani Wants to Tax the Rich Amid Governor's Pushback, IRS Eliminates a Free Filing Option & More

by
Rebekah Barton
on
11/7/2025
TaxBuzz Top 5 - Mamdani Wants to Tax the Rich Amid Governor's Pushback, IRS Eliminates a Free Filing Option & More

Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.

We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.

1. NYC’s New Mayor-Elect Unveils Childcare Tax Targeting Wealthy, Faces State Pushback

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Credit: Andres Kudacki/Getty Images

Zohran Mamdani, recently elected mayor of New York City, has proposed funding universal childcare—from the ages of six weeks to five years—via a new tax on the city’s highest earners and corporations. His plan would target residents earning over $1 million and raise income tax rates above the existing top levels. 

However, his vision hit a major barrier: Kathy Hochul, governor of New York State, has reiterated her “no new taxes” pledge and made clear she will not back a state law amendment to allow the city to levy the required tax hike. 

“We’ll find a way to cover the tab … without raising taxes,” Hochul said at a recent event.

Mamdani argues the childcare investment will cost an estimated $5 to $7 billion annually, framing it as essential to affordability and workforce participation in New York. Yet the governor’s refusal to green-light the tax increment places him in a tight spot—caught between campaign promises and the state legislature’s power over city tax policy.

Despite his rather meteoric rise from relatively-unknown Queen assemblyman to mayor-elect of one of the most powerful cities in teh world, Mamdani, a democratic socialist, has faced criticism. Skeptics of his policies argue the tax would push even more high-earning residents and businesses out of the city, further eroding the tax base at a time when New York is already struggling with out-migration. Fiscal conservatives say Mamdani’s plan relies on “a shrinking pool of golden geese” and warn that taxing wealthier New Yorkers to pay for universal benefits could lead to budget shortfalls down the road.

The clash spotlights wider challenges of municipal autonomy, funding major social programs, and navigating layered tax systems in U.S. cities besides NYC.

2. IRS Eliminates One of Its Free Filing Options for Taxpayers

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Credit: HABesen/Getty Images

The IRS has confirmed that its “IRS Direct File” e-filing system—a free way to submit federal tax returns—will no longer be offered in the 2026 filing season.

Launched in 2024 across 12 states and expanded to 25 states for the 2025 filing year, Direct File allowed eligible taxpayers to file directly with the IRS without commercial software. Although more than 296,000 accepted returns were filed via the platform in 2025, that comprised less than 0.5% of all returns. 

Treasury Secretary Scott Bessent, who also serves as acting IRS Commissioner, said at the White House that “better alternatives” exist and asserted the private sector can “do a better job.”

Industry observers and consumer-advocacy groups argue the decision favors commercial tax-prep firms. One commented: “This move takes away one of the few public options for free filing—and sends more taxpayers into [paid] corporate software.”

For taxpayers, the end of Direct File means fewer no-cost direct-to-IRS options—particularly for filers with straightforward returns in participating states. The IRS says the focus will shift toward upgrading the Free File program (income-based and partner-run) and encouraging “public-private partnership” models—but full details remain unclear. 

3.  Illinois Moves to Decouple State Tax Code from Federal Changes, Drawing Business Backlash

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Credit: Ultima_Gaina/Getty Images

Illinois lawmakers have passed legislation to decouple several key elements of the state tax code from the federal tax system, aiming to protect roughly $250 million in annual state revenue. 

One major target: provisions in the new federal tax law known as the One Big Beautiful Bill Act that allow manufacturers to deduct new equipment purchases immediately. Illinois will block that deduction at the state level—preserving about $144 million in revenue. The bill also ensures the state can tax multinational corporations on overseas profits, locking in an estimated $90 million. 

The move, part of Senate Bill 1911, is designed to help balance the FY 2026 budget and shore up the state’s fiscal stability. Supporters say it prevents federal tax cuts from leaving Illinois taxpayers to make up the difference. A spokesperson said the legislation “secures revenue that would otherwise vanish.” 

However, business groups are pushing back. The Taxpayers' Federation of Illinois warned the law “pushes Illinois’ corporate tax structure even further out of line when you compare it to other states.” Critics argue the decoupling increases complexity and may erode competitiveness, possibly driving investment to states that maintain closer alignment with federal rules.

As the bill heads to Governor J.B. Pritzker for signature, observers will be watching whether Illinois’ strategy becomes a model for other states, or a cautionary tale of tax policy gone solo.

4. Albuquerque Business Owner Faces Up to 37 Years in Prison for Tax Scheme

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Credit: EJ_Rodriquez/Getty Images

An Albuquerque entrepreneur has been hit with indictments that could land him up to 37½ years behind bars if convicted. Dennis Pyle, 52, was charged by the New Mexico Taxation & Revenue Department (TRD) with one second-degree felony, eight third-degree felonies and three fourth-degree felonies for alleged tax evasion tied to his landscaping business, Earthtech Landscaping. 

The alleged misconduct, uncovered after a multi-year investigation, includes failing to report business income and avoid paying taxes. The TRD estimates the maximum sentence exposure at up to eight years for third-degree felonies and nine years for second-degree felonies, but combined the charges escalate the total potential to 37 ½ years. 

“This indictment … serves as a reminder that tax fraud won’t be tolerated,” TRD Secretary Stephanie Schardin Clarke stated. 

While Pyle’s case is a cautionary signal for enterprises operating in cash-intensive markets or relying on self-reporting without robust documentation.

The story is notable for two reasons: the lengthy potential sentence, which is unusually high for state tax matters, and the visibility of a local business in a major metro market—raising the profile of state tax enforcement for non-criminal audiences. Investors, business owners and tax advisors alike will want to track how this prosecution unfolds and whether sentencing norms shift upward in similar cases.

5. Boston Mayor Wu Signals Caution Over Tax Shift Targeting Large Apartment Buildings

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Credit: Kayla Bartkowski/Getty Images

Boston Mayor Michelle Wu is treading carefully on a new proposal that could shift millions in property tax liability onto large apartment buildings in the city. The plan, introduced by City Councilor Brian Worrell, would reclassify residential buildings with 30 units or more as commercial properties, a move supporters say could lower tax bills for homeowners by as much as $1,000 a year.

Wu, however, struck a cautious tone when asked about the plan, saying she is "not closing the door" but warning the city must “fully understand the ripple effects before making any drastic changes.” She noted concerns that taxing large apartment complexes at commercial rates could ultimately push costs onto renters, worsen housing shortages by chilling development, and undermine the city's long-term goals for affordability and density.

“Any approach to tax relief has to be paired with protecting tenants and encouraging more housing creation,” Wu said, signaling she won't back reforms that could “unintentionally raise rents or slow solutions to the housing crisis.”

The council will continue weighing the proposal as Boston seeks new revenue strategies after falling commercial real estate values weakened its once-reliable tax base. Depending on how it plays out, Worrell's proposal could also spur policy shifts in other major cities nationwide.

Which headline this week most interests you?

Feature Image Credit: Andres Kudacki/Getty Images

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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