NY Lawmakers Split on Hochul Tax Rebate Plan, Push Tax Hikes (1)

New York lawmakers are divided on a proposal by Gov. Kathy Hochul (D) to send households checks for as much as $500 and are calling for income tax increases as the state faces fiscal uncertainty.

While the Assembly backed Hochul’s measure in the budget resolution it released late Monday, the Senate wants the rebates to be limited to senior taxpayers, ages 63 or older. Both chambers also called to raise income taxes on high earners and large companies.

Hochul first proposed the one-time rebates in December as a response to rising costs and the 2024 election, in which Republicans leveraged the inflation issue to win the presidency and Congress. But Senate Democrats called to limit the scope of the checks in their budget plan, also released Monday, which calls for rebates to last three years and go to senior homeowners, said Senate Finance Committee Chair Liz Krueger.

Negotiations on a final spending plan, due April 1, will hinge on how the governor and lawmakers decide to pay for a state budget likely to exceed $252 billion. Hochul has proposed dipping into higher-than-expected tax receipts to pay for $5 billion in tax cuts, which in addition to her $3 billion rebate check proposal includes income tax reductions for taxpayers making up to $323,000 annually and an expansion of the child tax credit to as much as $1,000 per child. The credit currently maxes out at $330 per child.

Both chambers’ budget resolutions backed Hochul’s tax cuts for the middle class. The Senate also called for a larger child tax credit than the Assembly and Hochul, of up to $1,600 per child, and an expansion of the earned income tax credit for certain taxpayers without children.

Krueger said in an interview that the Senate’s alternative tax relief package was designed to “refocus on three different populations of New Yorkers who we believe really need the help” without exceeding the total amount Hochul set aside for tax cuts.

But Hochul said Tuesday she would prefer the rebates to be delivered in one shot.

“I have proposed for one year because I cannot guarantee that the money will be there,” she told reporters at a press conference. “I’m not in the habit of spending money you don’t have.”

Push to Raise Taxes

The Senate and Assembly both backed tax hikes on high incomes to raise billions of dollars in new revenue. Hochul hasn’t proposed any income tax increases, but has called to extend until 2032 the state’s top income tax rate on New Yorkers making more than $1 million. The higher tax rates, ranging from 9.6% to 10.9%, were originally set to expire in December 2027.

The Assembly’s plan would impose rates of 10.75% on income between $10 million and $25 million, 11.75% on earnings between $25 million and $100 million, and 12% on income above $100 million. The Senate proposal would bump rates to 10.8% for income between $5 million and $10 million, and 11.4% for income above $25 million. Hochul has opposed income tax hikes.

Both chambers also called to increase the top tax rate for businesses, which is currently set to expire in December 2026. The Senate wants to raise the tax rate on corporations making more than $5 million to 9%, from 7.25%, through 2029. The Assembly wants to levy a 9.25% tax on businesses earning at least $10 million, and extend the current 7.25% tax rate on businesses making between $5 million and $10 million, also through 2029.

The talks come as budget watchdogs warn of looming budget gaps as GOP control of the federal government threatens funding cuts to areas like Medicaid that could blow a hole in state revenue projections. The state’s cumulative budget gap through fiscal 2029 is projected to grow by $4 billion from last November’s midyear budget report, reaching $27.3 billion.

“We do want to be putting away for a rainy day, which we unfortunately think is coming any minute,” Krueger said of the financial headwinds.

Assembly Speaker Carl Heastie said at a Tuesday press conference that the budget plan prioritizes “relief to middle-class people,” with high earners poised to benefit from the federal tax rewrite under consideration in Congress.

Top lawmakers are facing increased efforts this year from a coalition of progressive groups called Invest in Our NY to raise taxes amid fears of federal cuts.

“Anyone can see with their eyes that inequality is just getting worse,” said Morris Pearl, a former BlackRock managing director who chairs the board of Patriotic Millionaires, an advocacy group part of the Invest in Our NY coalition. “We’re getting more millionaires, multi-millionaires and billionaires in our state, but we’re also getting more people who are barely making enough money to get by.”