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With deficits looming, should New York cancel its rebate checks?
By
Jimmy Vielkind
Published Aug 15, 2025
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Jimmy Vielkind
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Jimmy Vielkind
Published Aug 15, 2025
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A looming fiscal cliff tied to President Donald Trump's funding cuts has reignited a progressive push to raise taxes on the rich — and to cancel Gov. Kathy Hochul's planned rebate checks for middle-class New Yorkers.
A half-dozen progressive state lawmakers, including several members of the Democratic Socialists of America, called on the Democratic governor to convene a special session of the Legislature before the end of the year. They said the $2 billion in rebates are fiscally irresponsible given looming deficits that could force cuts to social service programs.
“We have a responsibility to actually tax the ultra-wealthy and big corporations,” Lt. Gov. Antonio Delgado, who is challenging Hochul in a Democratic primary next year, said at a rally in Manhattan this week. “ Two billion dollars — that could be very useful right now.”
“That was a gimmick in the first place,” he continued, referring to the rebates. “Everybody knew this was going to come, and yet the governor thought it was somehow going to be important to hand out a sugar high.”
State lawmakers face a $10.5 billion deficit in next year’s budget, according to the most recent projections by Hochul’s budget division. It’s the first part of $34.3 billion in budget gaps over the next three years, according to an analysis by Comptroller Tom DiNapoli. That’s the highest level since the 2009 Great Recession.
And that global figure doesn’t fully include federal funding reductions cast by the tax-and-spending bill approved by Congress last month and signed into law by Trump, DiNapoli said. The budget division’s initial estimate is that the federal law will put a $750 million hole in the current $254 billion budget and is responsible for $3 billion of next year’s budget gap.
What Republicans call the Big Beautiful Bill cuts Medicaid funding and changes the rules for who is eligible to receive benefits. Hochul’s office estimates 1.5 million people could lose state-backed health insurance. Hospital groups estimate they will lose $8 billion in funding as a result of the new legislation. Republicans say the bill cuts waste, fraud and abuse.
Hochul has said the state can’t fully backfill federal cuts and she’s opposed increasing state income taxes. The governor initially wanted to spend $3 billion on the rebate checks, but her proposal was narrowed during budget negotiations this spring. A family that reported less than $150,000 of income in 2023 can expect a $400 check this autumn.
“ What I want to do is help struggling families and those who think we should just set it aside — I mean, I don't understand the logic of that,” she said Thursday in Schenectady. “Now more than ever, that money is essential. And anyone who criticizes … you're tone deaf to what the New Yorkers that I'm running into want.”
Assemblymember Clare Valdez, a Queens Democrat who was at the rally with other progressive lawmakers in Foley Square on Wednesday, said the money would be better spent on government programs.
“Those billions of dollars should be going to SNAP benefits, to Medicaid — to things that really keep people alive. It feels a little misguided,” Valdez said.
DiNapoli, a Democrat, said the state has the money to cover the cost of the checks.
“I think the policy debate on whether that was a better choice is over, and it’s time to move on and really focus on the harder decisions that have to be made next year,” he said.
Gov. Kathy Hochul has rejected calls to eliminate the rebate checks, calling them "essential."
Darren McGee/Office of Governor Kathy Hochul
The comptroller didn’t directly weigh in on whether lawmakers should raise taxes to cover the coming deficits. High-income people in New York City currently pay the highest combined state and local tax rate in the country.
The personal income tax is the largest source of state revenue, and the wealthiest taxpayers account for most of the income: Millionaires make up 1.5% of tax filers but account for about a third of all income tax paid, according to state data. About 20% of state revenue comes from Wall Street firms and their employees, DiNapoli said.
Delgado, Valdez and the other legislators at the Wednesday rally said the wealthy wouldn’t leave in response to higher taxes. Hochul, business leaders and Republicans argue the opposite.
Assemblymember Ed Ra, a Republican from Suffolk County, said it was risky for the state budget to rely on a small number of wealthy individuals.
“It's a very volatile source,” Ra said. “We have a lot of different things that we do spend money on that are, I think, luxuries.”
He pointed to tax credits for film and television production.
Assembly Speaker Carl Heastie, a Bronx Democrat, recently told reporters that he believed the state deficits were too big to be bridged only by raising revenue. Hochul this week repeated her past position on raising income taxes but then declined to rule it out going forward.
“That is my policy at this time. But I will say this: The future is going to be always very challenging for us under this administration,” she said. “I'm just not going to engage in hypotheticals about what the future may bring. It’s just, it's not useful.”
Hochul will formally propose a budget in January. DiNapoli, who previously spent 20 years as a state lawmaker, predicted negotiations about this year’s spending plan would be particularly contentious because there’s a big deficit and it’s an election year.
“Sharpen your pencils,” he said. “You’re going to have to make some very hard decisions.”
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Jimmy Vielkind
Jimmy Vielkind covers how state government and politics affect people throughout New York. He has covered Albany since 2008, most recently as a reporter for The Wall Street Journal. Jimmy led a team of reporters that won a New York Press Club award for coverage of Andrew Cuomo’s downfall and was on a team that won a Gerald Loeb Award for coverage of Amazon’s HQ2 process. A native of the Capitol Region, Jimmy has two degrees in urban planning. His position is funded by a grant from the Corporation for Public Broadcasting. Reach Jimmy at [email protected].
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