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NY Gov. Hochul, Democrats poised to raise taxes. But on whom?
By
Jon Campbell
Published Feb 15, 2023
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Jon Campbell/Gothamist
By
Jon Campbell
Published Feb 15, 2023
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Gov. Kathy Hochul and many Democrats who run the state Legislature differ on a whole host of policies. But there’s one thing they agree on: They want to raise taxes this year.
However, the two sides still appear headed for a potential clash when it comes to taxation, in large part because, at this stage, they don’t seem to agree on whom they want to tax — a debate that is sure to draw interest from business owners, transit riders, political donors and more.
Hochul proposed a $227 billion state budget in January that would increase a payroll tax in the MTA region, extend higher tax rates on wealthy corporations, and even increase the annual fee for snowmobile registration from $90 to $125 for residents.
Those proposals are drawing a wave of criticism — from left-leaning Democrats who want her to do more to tax the rich, Republicans who want her to eschew tax hikes altogether, and suburbanites who say the payroll tax increase will trickle down to employees throughout the New York City region.
Assemblymember Ron Kim, a Flushing Democrat, said all of Hochul’s tax proposals are “regressive, not progressive.”
“Progressive taxes mean we're holding the top 1% to 5% accountable and making sure they pay their fair share,” Kim said Monday at the state Capitol. “Regressive taxes impact our inability to improve social mobility, and put working-class families in a generation of debt they can't get out of. We want to break that cycle.”
New York’s tax structure will be a central piece of state budget negotiations over the next month-and-a-half, which will be largely held behind closed doors by Hochul, legislative leaders and their top staffers ahead of the April 1 start of the state’s fiscal year.
Hochul, a moderate Democrat from Buffalo, surprised some members of her party by backing an extension of the state’s corporate tax rates — in part because the state is projected to have a surplus this year, though projected deficits linger in future years.
The state increased the tax from 6.5% to 7.25% for corporations with more than $5 million in annual revenue beginning in 2021. That was only supposed to be a temporary rate increase, to expire at the end of the year. But Hochul, as part of her budget proposal, is backing a three-year extension, a move that — if approved by lawmakers — is estimated to bring in $800 million to $1.1 billion a year over the next three years.
Far more controversial, however, is Hochul’s push to increase what’s known as the “transportation mobility tax” in the MTA’s service region, which includes New York City, Long Island and much of the Hudson Valley.
Since 2009, employers within the region have been required to pay a tax on their total payroll, ranging from .11% for smaller businesses to .34% for larger ones, all as a way to help support the New York City-based public transit system.
Hochul wants to boost the top rate to .50%, a move she says will help bring in $800 million for the cash-strapped MTA, which continues to suffer from ridership levels that fail to match pre-pandemic levels. It’s part of her multipronged MTA bailout plan, which also includes $300 million in direct aid from the state and $500 million from New York City.
A report from state Comptroller Thomas DiNapoli last year found the MTA could face an operating deficit of $4.6 billion by 2026 if it doesn’t figure out how to pull in more money away from the farebox.
“We have to be creative,” Hochul said last week on PIX11. “We have many sources of money — more direct money from the state, MTA finding $400 million themselves in savings, a payroll mobility tax so employers in the region contribute to what is a relatively inexpensive method, compared to driving, alternative to get their employees to work.”
The payroll tax was deeply unpopular when it was first implemented 14 years ago, particularly in New York City's suburbs, where lawmakers saw the issue used as a political weapon against them on the campaign trail. Critics say any increase in the tax now has the potential to trickle down to employees.
Senate Majority Leader Andrea Stewart-Cousins, a Democrat whose district includes both Yonkers and some of Westchester County’s wealthiest portions, is being careful not to rule anything out when it comes to funding the MTA. But she acknowledges that the payroll tax proposal may face difficulties.
“My conference will continue to look at everything that's on the table and try to figure out what makes sense,” Stewart-Cousins said last week. “It was certainly difficult at its inception and the idea is always hard. But like I said, we are just starting to dissect everything at this point.”
State Sen. Bill Weber, a Rockland County Republican, said New York City’s surrounding suburbs are one of the highest-taxed regions in the country, and Hochul’s proposal will only make things worse.
“The mobility tax should be repealed entirely,” he said Monday at a news conference at the Capitol. “Let me say that again: It should be repealed in its entirety.”
Progressive Democrats in the Legislature aren’t any more enthusiastic about the proposal.
A group of them gathered at the Capitol with organizers from the New York City Democratic Socialists of America on Monday to push a series of measures to increase taxes on the wealthy by an estimated $40 billion, including further increases in the corporate tax rate, adding taxes to capital gains and boosting taxes on inheritances worth more than $250,000.
The next day, many of the same Democratic lawmakers rallied for their own plan to rescue the MTA, which relies, in part, on those same tax-the-wealthy proposals and is partly aimed at staving off a pending fare increase to $3 — something Hochul’s plan doesn’t do.
Assemblymember Zohran Mamdani, a Queens Democrat, said he’s “encouraged” to see Hochul has a plan to tackle the MTA’s looming deficit. But he said he thinks there are “far more progressive proposals than a payroll mobility tax.”
“What I would really encourage the governor to input in this budget process is broad-based progressive measures,” he said. “I think it will take a lot of different proposals, but I think the answer really lies in a corporate tax increase, a personal income tax increase, an inheritance tax. These are the ways in which the wealthy are being allowed to accumulate more and more wealth and not paying the same percentages that so many working people are forced to do.”
Hochul, meanwhile, has shown a resistance to hiking income taxes — on the middle class or the wealthy.
“A majority of economists are predicting a recession,” she said during her Feb. 1 budget address. “But the good news is we're prepared. It's also one of the reasons we will not be raising income taxes after we just expedited middle-class tax cuts a year ago, because it's not a news flash that New Yorkers already believe they pay too much.”
Tagged
new york state
Kathy Hochul
new york city
economy
transportation
Jon Campbell
Jon Campbell covers the New York State Capitol for WNYC and Gothamist. Prior to that, he covered the Capitol for more than a decade for the USA TODAY Network. He has twice earned the Walter T. Brown Memorial Award, an honor given annually by the Legislative Correspondents Association alumni for outstanding state government coverage. Jon grew up in the Buffalo area and graduated from the University at Albany. Got a tip? Email Jon at [email protected] or Signal at JonCampbellNY.90.
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