NY Lawmakers’ Budgets Oppose Governor’s Plans on Taxes, Housing

New York budget talks entered their final stage Tuesday as the Democratic supermajorities in the state Senate and Assembly released budget resolutions that would raise taxes on incomes above $5 million and on corporations.

The proposals set up a faceoff against Gov. Kathy Hochul (D), who previously ruled out income tax hikes, as well as on other issues like housing and education ahead of an April 1 budget deadline.

New Yorkers have one of the highest state and local tax burdens in the nation, and the push by lawmakers to raise taxes comes amid increased concerns about the number of taxpayers leaving the state. Progressive groups have been calling for a tax hike on the wealthy to counter Hochul’s proposal to limit funding for education and the state Medicaid program.

The one-house budget resolutions the Senate and Assembly released Tuesday highlight the chambers’ policy and spending priorities, revealing significant differences to the $233 billion draft spending plan Hochul unveiled in January, such as placing restrictions on social media to protect minors and building an AI research consortium.

Both chambers will likely approve their respective measures this week before three-way budget talks ramp up.

Tax Differences

The governor’s goals include boosting housing construction as well as enacting restrictions on children’s social media use and artificial intelligence. She also aims to close future budget gaps by curbing future spending for public schools and Medicaid.

Both chambers are backing increased income taxes for people making more than $5 million per year, as well as a higher corporate franchise tax. A proposed replacement to the expired 421-a tax abatement program for affordable housing was also not included in either chamber’s resolution.

The Senate and Assembly backed Hochul’s plan to create a commercial security tax credit to help offset the cost of security measures for business owners.

Both chambers also called for a five-year extension of the itemized deduction limit for high-income earners. Currently, individuals with incomes over $10 million have an itemized deduction limit of 25% of the federal charitable contribution. Hochul has called to permanently keep that cap in place.

Resolving differences on housing, education, healthcare, and taxes will be key to getting a final spending plan, but Hochul said Tuesday that increasing income taxes is a “nonstarter.”

Organized labor groups like the New York State United Teachers and 1199 SEIU—a key player in state politics—have called on lawmakers to push back against Hochul by including more funding for education and health care.

Both chambers also rejected Hochul’s proposed changes to public school funding while supporting higher levels of Medicaid spending.

Tech Tensions

Both chambers also declined to back Hochul’s proposed restrictions on AI-made deepfakes and algorithmic social media feeds for children. Data privacy bills that would place safeguards to protect children and more broadly state residents were also included in the Senate plan, but not the Assembly’s proposal.

Hochul said Tuesday she remains determined to get the social media measure approved in the budget. She declined to say whether language that would allow a private right to action must remain the proposal’s key enforcement mechanism.

“We’re the adults,” said Hochul. “If we don’t have the guts to take actions to protect our children from what has now been demonstrated to have a detrimental effect on our mental health, then shame on us.”

Hochul would have to choose between providing $250 million for an AI research consortium and other tech projects under the Senate plan. The Assembly is backing her proposed funding in its own resolution.

Budget Deadline Looms

Hochul has a few advantages over her Democratic counterparts in the legislature one year after fights over housing and criminal justice reforms led to a budget approved weeks later in early May.

New York’s Constitution gives her significant leverage over lawmakers, including the ability to control the details of any temporary spending resolution lawmakers might adopt to keep state government running past the deadline.

Any prolonged shutdown would also mean legislators—who are the highest paid in the nation—miss a paycheck.

An on-time budget could be difficult to achieve given the timing of the Easter holiday on March 31 and the April 1 deadline for a final spending plan. A final budget deal would underscore Democrats’ political messaging in the state ahead of key legislative and congressional races in November.

“It all begins now,” said Hochul. “And we’ve been waiting, we’ve been having conversations and our hope is to wrap this up this month.”