NEW YORK (BLOOMBERG) — New York Governor Kathy Hochul isn’t raising income or corporate taxes this year to fund the state’s $260 billion budget, easing concerns from some business leaders after Zohran Mamdani was elected mayor in a campaign that promised hikes on the city’s richest residents and businesses.
Hochul was able to pitch a new spending plan without increased taxes largely due to a bullish stock market, slower-than-expected impacts from federal tariffs and wage and bonus growth which provided roughly $9.5 billion in extra revenue over two years, according to her budget proposal.
“The last four years we’ve proven something important— that you can make historic investments without raising income taxes, without mortgaging the next generation, without losing sight of what people can afford,” Hochul said in her budget address on Tuesday.
Hochul has repeatedly resisted calls to raise taxes despite pressure from Mamdani, who called for raising income tax rates by 2 percentage points on people earning more than $1 million a year, and for hiking corporate tax rates by 4 percentage points. Late last year, Hochul mulled an increase in the state’s corporate tax rate to help fill any outstanding budget needs including funding child care programs, but ultimately decided against it.
Mamdani reiterated his call for higher levies on Tuesday. It’s time to “ask New York City’s wealthiest and large corporations to pay their fair share,” he said in a statement reacting to Hochul’s budget proposal. He added that his office is just beginning to dig into the plan.
Hochul recently committed to funding free child care across the state over several years, promising $498 million this year and next year to launch free care for 2-year-olds in New York City — fulfilling part of one of Mamdani’s biggest campaign pledges, to provide universal, free child care for city children aged six weeks to 5 years.
Hochul’s budget does include at least one small tax increase, calling for nicotine pouches, like the Philip Morris International Inc.-owned Zyn, to be taxed like cigarettes, which currently face a state excise tax of $5.35 per pack.
Hochul’s budget plan also severs the state tax code from certain business tax provisions in the 2025 federal tax law, a move estimated to preserve $1.6 billion in revenue, according to the state budget office. She also wants to end state taxes on tips, echoing the new federal treatment of tips in the GOP tax law. And Hochul will seek to protect tax-exempt charitable donations from changes at the federal level.