Hochul’s State Budget Proposal Won’t Include Income Tax Increases
ALBANY – Governor Kathy Hochul is moving forward with her $260 billion state budget proposal without planning to increase income taxes, according to sources familiar with her plans.
The proposed budget for the 2026-2027 fiscal year surpasses last year’s $252 billion plan and is expected to spark a months-long debate with the Democratic-controlled state Legislature, which has been advocating for higher taxes on affluent residents.
“Our revenue forecasts are solid this year, thanks to Wall Street and a progressive tax system, allowing for significant investments, especially in childcare,” Blake Washington, Hochul’s budget director, shared ahead of the budget unveiling.
One of the key factors driving the increased spending is the ongoing push for universal childcare, which is championed by Democratic Socialist Mayor Zoran Mamdani.
To support childcare programs statewide, Hochul has committed $4.5 billion, which is $1.7 billion more than the current budget. This funding will help establish a new “2 Cares” initiative for all 2-year-olds in New York City and allocate $210 million to expand preschool education for 4-year-olds throughout the state.
Despite these advancements, Hochul has firmly dismissed calls to fund these initiatives through increased taxes on the wealthy. “She views raising taxes as a last resort,” noted Washington.
While income taxes won’t see an increase, the budget extends the existing top corporate franchise tax rate of 7.25%, first introduced by former Governor Andrew Cuomo and renewed by Hochul in 2023.
Mamdani is urging tax hikes on high-income earners to support his ambitious agenda, which includes substantial funding for childcare. Meanwhile, fiscal analysts have cautioned about a potential $12 billion deficit facing the city over the next two years, which might threaten Mamdani’s promises.
The proposed budget also signifies an eye-popping 11.4% increase in Medicaid spending, which aims to assist hospitals facing funding losses due to the federal government withholding subsidies related to Obamacare. Last year, New York removed about 450,000 individuals from essential plans, leaving hospitals concerned about rising costs when uninsured patients seek care.
“Without intervention at the federal level, we anticipate an increase in unpaid care,” Washington explained, emphasizing the financial strain on hospitals. “We’re aiming to provide states with the necessary resources,” he added.
New York State is bracing for a $10.3 billion decrease in federal funding, the Budget Office has reported. However, Hochul may still consider tax increases if federal pressures on blue states like New York continue.
It’s expected that her executive budget won’t boost the state’s $14.6 billion reserve fund, especially after using $7 billion from it last year to settle unemployment insurance debts owed to Washington.
Hochul plans to unveil her executive proposal in a high-profile address on Tuesday, which will kick off weeks of mostly private discussions with the state Legislature.
The fiscal year wraps up on April 1, but Hochul has strategically missed this deadline in recent years to leverage negotiations, with lawmakers not receiving pay while the budget remains unresolved. For context, last year’s budget was finalized on May 8.
Uncertainty surrounds Hochul’s approach to her re-election campaign this year, especially with a primary challenge from former Lt. Governor Antonio Delgado.
Hochul appears to be steering clear of contentious debates regarding the state’s controversial law that prevents 16- and 17-year-olds from being tried as adults for non-felonies, a decision influenced by rising concerns over youth violence among moderates and conservatives, including NYPD Commissioner Jessica Tisch.
On the other hand, far-left Democrats and criminal justice advocates have been vocal, signaling to Hochul that tackling this issue could result in significant political backlash. As of late last week, Hochul’s office indicated she intends to sidestep this confrontation entirely.
