At the center of Governor Kathy Hochul’s agenda this year is what she bills as a “middle-class tax cut” — but about half of those cuts will go toward New Yorkers who by some measures aren’t considered middle class.
According to an analysis shared with New York Focus by the liberal think tank Fiscal Policy Institute, the top 20 percent of earners statewide would receive the largest share of the tax cut’s benefits. More than half of the savings for joint filers would go to households making over $154,000 — nearly twice the state’s median household income. A commonly cited income cutoff for middle-class households, meanwhile, is just under $163,000.
“This is much more valuable for higher income households,” said Nathan Gusdorf, executive director of FPI. “It’s really an upper middle class tax cut, even though it’s been billed as something for working people.”
The slant towards well-off New Yorkers is because Hochul’s proposal, which would cost the state about $500 million next year, and $1 billion per year after that, would cut taxes by .2 percentage points for all joint filers making under $323,200 and single filers earning under $215,400. Taxpayers making $300,000 a year would save $600, while taxpayers making $50,000 a year would save only $100.
Tim Ruffinen, a spokesperson for Hochul’s budget team, said that the cut fits with the governor’s focus on affordability, pointing to other measures like extending a 2021 “millionaire tax” hike on the state’s highest incomes, a significant increase to the child tax credit, and universal free school meals.
“The cost of living crisis is hitting New Yorkers at all income levels, and we’re not interested in leaving any New Yorker behind,” Ruffinen said.
Patrick Orecki, a researcher at the fiscally conservative Citizens Budget Commission, said that the tax cut would be more effective at promoting affordability “if you tried to target lower-income individuals or households.”
“But lowering tax liabilities across the board is clearly a good thing,” he added.
Legislators are receptive to Hochul’s proposal. State
Senator Robert Jackson, who is pushing a bill to raise taxes on New
York’s top earners, said that it’s a good idea but doesn’t go far
enough.
“We need more income coming in for working-class people in New York state struggling to survive,” he said.
One justification for offering a tax break to those at comfortable incomes is that well-off New Yorkers already pay some of the highest tax rates in the nation. In 2023, the top five percent of taxpayers were responsible for half of all state income tax.
But high taxes haven’t sent
wealthy New Yorkers fleeing for lower-tax havens like Florida or Texas,
nor have high taxes stopped them from growing their fortunes. James
Parrott, who studies New York’s economy at the New School, found that
from 2019 to 2022, the top five percent of New York’s earners captured
more than half of the income gains in the state.
Even as Hochul calls on legislators to pass the tax cut, as well as a separate corporate tax cut, she is also pushing them to find over $2 billion a year
in funding for the Metropolitan Transit Authority’s next five-year plan
for upgrades and renovations — which will likely require some other
tax.
“The governor basically gets all of the political upside of
a tax cut, but now the legislature has to play the bad guy and find a
way to raise taxes,” said Gusdorf from FPI.
Tax cuts could also be a risky move with a hostile
administration in Washington threatening major funding cuts and the
state’s own experts predicting a budget shortfall in the coming years.
In the case of a cash crunch, lawmakers would face two
unappealing choices: reversing their own tax cuts, or slashing social
programs that New Yorkers rely on, like Medicaid and free school meals.
And new expenses, like universal Pre-K or housing vouchers, would be out
of the question.
“The state’s never going to be able to achieve its goals of
investing in education, child care, and housing if we keep on cutting
taxes,” Gusdorf said.