Millionaire Tax Hikes? Inflation Rebate Checks? New York’s 2025 Budget Showdown

All decisions in the New York state budget — due April 1 — depend on one central question: How much money does the state have to spend? The answer to that question is determined by how the state structures its taxes, and how much it plans to save.

In recent years, the legislature has favored more spending and higher taxes on the wealthy. Governor Kathy Hochul has opposed some tax hikes on high earners, and as a result, proposed smaller budgets. She has also pushed to save more cash in the state’s “rainy day” funds, while the legislature has called for greater spending on current needs.

This year continues both of those trends.

Here are the key proposals on taxes and other questions that will determine the shape of the budget this year.

Total Spending

Hochul proposed a $252 billion budget, a small jump from last year’s final $243 billion sum once inflation is factored in.

The Assembly’s budget proposal is slightly larger, at $257 billion. The Senate’s budget comes in at $259 billion.

Tax Hikes

The Senate and Assembly want to pay for some of their additional spending by raising taxes on New Yorkers who make more than $5 million a year. The Assembly proposed creating two new, higher tax brackets for uber-wealthy New Yorkers who make more than $10 million and $100 million a year.

These ideas might not fly with the governor: In the past, Hochul has resisted calls to raise taxes on the wealthiest New Yorkers. Her office didn’t provide details about her stance on that issue this year.

Hochul proposed extending a law raising taxes on New Yorkers who make over $1.1 million through 2032, rather than letting it expire in 2027, but did not propose raising taxes on anyone.

Middle-Class Tax Cuts

Governor Hochul proposed slashing taxes by .2 percent for all New Yorkers making up to $323,200 for joint filers or $215,400 for single filers. The Senate agreed with this proposal. The Assembly went further by proposing a 1 percent tax cut for all but the highest and lowest tax brackets. Under this proposal, New Yorkers in the lowest brackets would still get a cut, but it would be smaller.

Inflation Rebate

A unique element of the governor’s self-proclaimed “affordability agenda” is her idea of mailing checks of up to $500 directly to New Yorkers, to give them a refund on higher-than-expected tax returns that the state has received.

Both conservative and liberal budget watchdogs have criticized the plan as a poor way to promote affordability, since it is a one-time benefit and doesn’t offer a large sum of money.

But that didn’t stop the Assembly from signing onto the idea. The Senate modified it to apply only to senior citizens, and to last three years, instead of one.

Reserves

The state currently has about $37 billion in cash on hand, of which a little less than half is a rainy day fund reserved for emergencies. Growing that rainy day fund has been a high priority for Hochul since she became governor, when the state barely had any spare cash.

Under the governor’s proposal, the state’s unused cash supply would shrink to $32 billion by the end of next fiscal year. The Senate estimated a similar change. The Assembly’s longer wish list would shrink the fund to $25 billion.

MTA Funding

One of the thorniest issues in this year’s budget is how to fund the Metropolitan Transit Authority, which runs New York City’s subways and buses, and the Metro-North and Long Island railroads. The agency’s repair and upgrade plan for the next five years has a $68 billion price tag and is still short more than $2 billion a year.