Gov. Kathy Hochul knows that speculation over whether or not she plans to raise taxes this year isn’t going anywhere.
“I know it’s a burning question on all of your minds,” she told reporters in the Red Room at the State Capitol Monday before attempting to punt any further discussion of the matter to the unveiling of her State of the State and Executive Budget in January.
Hochul has long insisted that she doesn’t want to raise income taxes, and last week her budget director, Blake Washington, said it was ‘the last thing’ on his mind amid higher-than-expected tax revenue and a shrinking budget gap that still equals $26.8 billion cumulatively by 2029.
But the state is facing further challenges stemming from the federal budget in Washington, high spending, and a pricey wishlist being pushed by New York City Mayor-Elect Zohran Mamdani and his supporters.
Reporting in Politico last week suggested a hike to the corporate tax rate could represent a side step of the potential toxicity of increasing income taxes on the state’s highest earners. Asked about the potential for additional revenue raisers in the context of finding an affordable alternative to Mamdani’s free bus proposal, Hochul notably didn’t rule anything out.
“I have to keep an eye on what’s happening in Washington,” she said. “I can stand here today and say ‘We can do quite a few things without any source of additional revenue based on the revenue coming in,’ but I don’t know what Washington is going to do. Are they gonna try and jam us up for another 3 billion and Medicaid costs?”
Downstairs, her budget director was taking part in hearings with state agencies, which help to tee up the budget process. Washington acknowledged the governor’s concerns, but reiterated that the state as of right now, is doing well. Last week, he called a tax hike “a last resort.”
“Uncertainty is really going to drive the discussion, but on the upside, New Yorkers should be aware that revenues are performing very well in the state of New York,” he said. “We’re going to be assessing that moving forward, even though there is six months until the budget is due.”
Washington added that there are significant variables outside of the existing projections for how the federal budget bill will impact New York, including changes to federal rules, and whether or not the state will be authorized to change the funding of its Essential health plan as outlined earlier this year. Even with that plan, he said the 450,000 who will be left uninsured will lead to uncompensated care and a cost burden for hospitals and the state.
Whether or not Hochul will raise taxes under pressure from Mamdani’s wish list has become a key campaign issue in the race for governor. Leading Republican candidate Rep. Elise Stefanik on Monday called Hochul’s comments “deceptive” and pointed to the governor’s pause of congestion pricing in the spring of 2024 —before the state ultimately moved forward with a modified model later that year.
“Now she’s lying about her plan to raise taxes in the upcoming state budget because election season is upon us once again,” Stefanik said. “Kathy Hochul doesn’t want to ‘Keep an eye on what is happening with Washington.’ She wants to keep an eye on her abysmal poll numbers which are dropping precipitously. While Hochul leans on delays, denials, and lies, I stand by my record in delivering the largest middle-class tax cut in history and expanding the SALT deduction to save New York families and businesses thousands of dollars each year.”
One of Mamdani’s primary objectives has been Universal Child Care. While state officials have continuously pointed to the exorbitant cost of going all in on Universal all at once, advocates have been compiling a plan for a phased in anchored by pilot programs. The Empire State Campaign for Child Care held a briefing on Monday in which they laid out multiple options, including one based on eligibility at a community level, similar to how free school meals have been handled in the past.
Asked if such a proposal is something that is being considered as part of this year’s budget, Washington said it is.
“What are the interventions we can do in the near term to get to the goal? I think everything is on the table— that and more,” he said of the proposal. “The governor wants this to be successful. She wants every community in the state to have access to affordable child care and thats the mission. However that goes, were going to have a lot of iterations over the next handful of months as we continue to kick the tires in the Division of Budget, certainly outside stakeholders are advising on the process as well, and everything is on the table.
Washington said part of compiling next year’s budget will involve instituting strategies learned this year, including potential risks identified during the government shutdown.
Earlier this fall, the Division of Budget asked state agencies and partners to find ways to cut regulations that are considered obsolete. Washington stressed the effort is not centered around cuts, but maximizing efficiency amid agencies where decades-old regulations grow stagnant and burdensome on the books.
“Revisions of any program in state government are in the offing because of the current level of instability,” he said. “There are a whole host of state programs that we know in our heart of hearts don’t run as they should — how can we reform them to the betterment of New Yorkers?”