Democratic state lawmakers are formally backing a version of Mayor Zohran Mamdani’s proposal to tax the rich, setting up a budget showdown in Albany with Gov. Kathy Hochul.
Leaders of the state Assembly and Senate inserted much of the Democratic mayor’s agenda Tuesday into their official “one-house” counterproposals to Hochul’s state budget plan. That includes a tax hike on people reporting more than $5 million of income as well as an increase in the state’s corporate tax rates from 7.25% to 9%.
The two houses, both controlled by Democrats, also included various changes to New York City’s tax code sought by Mamdani, including versions of his proposals to boost New York City’s corporate, business and “mansion” taxes. The new revenue would help the city erase an estimated $5.4 billion budget deficit.
But lawmakers will have to convince Hochul to go along with the revenue raisers if they have any chance of taking effect. The governor, a moderate Democrat, has steadfastly opposed income-tax increases since taking office in 2021 and has centered her re-election campaign on a message of affordability.
State Senate Majority Leader Andrea Stewart-Cousins, a Democrat from Yonkers, said it’s important the state has “sustained revenue” at a time when funding from the federal government is unpredictable.
“We will earnestly and honestly push to make sure that some of these things are included [in a final budget],” Stewart-Cousins told reporters. “It's just important. I think the momentum is certainly on our side for this.”
Taken together, the legislature’s proposals would raise at least $4 billion in revenue for the state and $2.5 billion for the city, money that Democratic lawmakers want to put toward helping New York City and other cities grapple with budget deficits while boosting aid for immigrant legal defense and programs to offset high utility costs, among other initiatives.
The Assembly, for example, proposed sending rebate checks of $300 or $500 to millions of utility ratepayers hit with high electric and gas costs in recent months, which would cost $2.6 billion. The city would also gain the power to raise its own income taxes in the Assembly plan, a key provision sought by Mamdani.
Both houses, meanwhile, included one of Mamdani’s biggest priorities: establishing a pilot program for fare-free buses in New York City, which the mayor specifically asked legislative leaders to include in their budget plans amid opposition from Hochul.
“The mayor never said to me, ‘You’ve got to give me this list of things,’” said Assembly Speaker Carl Heastie, a Bronx Democrat. “I think for him, he was hoping that the [budget proposal] was supportive of … helping the city with its huge deficit, which we did.”
The budget documents written by the state Senate and Assembly are designed to give Mamdani enough money to cover the city’s $5.4 billion projected deficit and expand education and child care initiatives while avoiding a property-tax increase.
Heastie said he’s encouraging the city to come up with additional savings on its end, too. And he’d be open to other taxes and revenues, so long as they ensure cities across the state get additional aid.
“ I'm committed to making sure that the city and all of the cities around the state are on solid financial ground,” he said. “So that's what my commitment is. I'm not committed to any one tax.”
Mamdani, a former state assemblymember, said he was grateful to his former colleagues for including the tax hikes.
“New York City is the economic engine of our state — restoring our city's fiscal health is an investment in the state’s economic well-being,” he said. “I am encouraged and heartened by the relationship that we have built with Governor Hochul and the state Legislature and I look forward to continuing to review their proposals and build upon the work we have done together throughout this budget process.”
The Senate and Assembly are expected to pass resolutions this week on their budget counterproposals, which will kick off formal negotiations with Hochul. The governor’s spokesperson on Tuesday said she looks forward to the talks. Last week, Hochul blew off the legislative tax proposals as a normal part of the budget process.
“We already put $1.5 billion on the table,” Hochul said Thursday, referencing a special appropriation of state aid to the five boroughs. “So we're going to get to the right resolution and just be assured that I take nothing personal in this business.”
Republicans reiterated their position that the state already spends too much money, and that increasing government taxes and spending won’t lower the cost of living. State Sen. Andrew Lanza, a Staten Island Republican, called the proposal “a disgrace,” while Senate Minority Leader Rob Ortt questioned the huge influx of cash it would send to the five boroughs.
“How much money does the City of New York need?” said Ortt, a Buffalo-area Republican.
The fiscal watchdog Citizens Budget Commission warned that New York City millionaires already pay the highest combined income tax rate in the country. CBC President Andrew Rein said raising taxes now “is simply bad fiscal mismanagement.”
“With looming federal cuts and economic uncertainty, not to mention fierce competition for residents and businesses, the State must better manage critical services and hold the city accountable for doing the same — not risk New Yorkers' futures by destabilizing the budget,” Rein said.
Polls show that levying higher taxes is politically popular. Progressive groups that helped propel Mamdani to victory have been rallying supporters to the state Capitol. Around 1,500 people — a smaller crowd than was expected — demonstrated last month at a nearby armory.
On Tuesday, hundreds of people filled the Capitol’s Great Western Staircase. They chanted “tax the rich” while also urging lawmakers to protect immigrants and resist efforts to rollback a 2019 law designed to combat climate change.
State Sen. Michelle Hinchey, a Hudson Valley Democrat, said the wealthiest New Yorkers were driving policies that ignored the needs of the many.
“ They're the ones that are driving us into a disaster, and so we have to level the playing field,” she said. “We need to make sure that the people who got tax breaks under Trump are paying their fair share to our communities.”
Lanza said the proposals to hike taxes should serve as a warning to taxpayers.
“This ought to scare the hell out of anyone in New York City,” he said.
The state budget is due before the start of the state’s fiscal year on April 1. But Hochul and lawmakers have regularly missed that deadline and passed short-term budget extenders in years past.
Samuel King contributed reporting.
