Senate Finance Committee and Assembly Ways and Means Committee (Joint)

New York State lawmakers heard competing visions for the 2025-2026 budget's tax provisions at a joint legislative hearing on February 27, with Acting Tax Commissioner Amanda Hiller defending Governor Hochul's proposals while advocates and business groups clashed over revenue-raising strategies amid looming federal funding cuts. Commissioner Hiller outlined the Governor's three-part tax relief package: a $3 billion sales tax rebate to 8.6 million households, income tax rate cuts bringing rates to their lowest levels since 1934 and providing nearly $1 billion in recurring relief to 8.3 million New Yorkers, and a historic expansion of the Empire State Child Credit that would increase the maximum credit from $330 to $500 for children ages 4-16 and to $1,000 for children under age 4. She also proposed simplifying the STAR property tax exemption program to reduce complexity for seniors and local assessors. However, progressive advocates challenged the adequacy of these measures. The Fiscal Policy Institute opposed the income tax cut as a permanent revenue loss at a time of federal funding risks, noting that 65 percent of the tax cut benefits households making over $150,000. The Strong Economy for All Coalition warned of catastrophic federal cuts, including at least $880 billion in Medicaid reductions affecting 7 million New Yorkers, and urged immediate state action to prepare. New Yorkers for Fiscal Fairness proposed increasing top income tax rates on those earning over $5 million and $25 million by 0.5 percent each, generating nearly $1 billion, and raising the corporate tax rate to 9 percent, generating about $2 billion annually. Small business representatives from the National Federation of Independent Business focused on the state's $6.3 billion unemployment insurance debt to the federal government, which they said is crushing small employers. They noted that small businesses are paying $105 in increased federal UI taxes and $250 per employee in state UI taxes, and warned that the federal FUTA offset will double next year if the debt remains unpaid. NFIB supported the Governor's proposal to pay the UI interest assessment surcharge but called for state action to address the underlying debt, noting that 36 other states used COVID relief funds to pay down their UI obligations. The Schuyler Center for Analysis and Advocacy supported the Governor's child tax credit expansion but advocated for even larger increases aligned with the Child Poverty Reduction Advisory Council's recommendations, which would reduce child poverty by 23 percent compared to the Governor's estimated 8 percent reduction. The New York State Council of Churches called for taxing the wealthiest New Yorkers and eliminating the 100 percent rebate of the stock transfer tax, which could generate $10-14 billion in revenue. Senators pressed Commissioner Hiller on federal tax policy risks, the gold bullion exemption costing over $600 million in foregone sales tax revenue, and whether the state can adequately respond to potential massive federal funding cuts. Sen. Liz Krueger expressed deep concern about federal Medicaid cuts and questioned whether the state's rainy day fund and tax increases alone could bridge a potential $10-15 billion federal funding gap. Sen. Andrew Gounardes sought to identify tax giveaways that could be reclaimed as revenue sources. Sen. Thomas O'Mara challenged the administration's assertion that corporate tax reforms have helped, noting that Texas now has more financial services jobs than New York. The hearing underscored the state's fiscal dilemma: while the Governor proposes tax relief and child poverty reduction investments, lawmakers face the prospect of massive federal funding cuts that could require either significant new revenue or severe spending reductions. The debate reflected fundamental disagreements about whether to cut taxes for middle-income earners, raise taxes on the wealthy and corporations, or preserve reserves to weather federal cuts.