FINANCE

NEW YORK STATE SENATE FINANCE COMMITTEE — Acting Tax Commissioner Amanda Hiller presented Governor Hochul's 2025-2026 tax agenda to a joint legislative hearing on Thursday, emphasizing affordability relief through a $3 billion sales tax rebate for 8.6 million households and personal income tax rate cuts that would be the lowest in nearly 70 years for low- and middle-income earners. Hiller also outlined a historic expansion of the Empire State Child Credit, increasing the maximum benefit from $330 to $500 for children ages 4-16 and to $1,000 for children under age 4, while eliminating income verification requirements that have historically excluded the poorest families. The changes are designed to support the state's goal of cutting child poverty in half by 2031. The commissioner highlighted the Tax Department's modernization efforts, including expansion of the Direct File program, which allowed 14,000 New Yorkers to file state returns for free in its pilot phase, saving an average of $260-$270 per filer. She noted that 83 percent of users completed filing in less than 15 minutes with a 97 percent satisfaction rate. Hiller proposed simplifying the STAR property tax exemption program, which she described as "very confusing" due to decades of legislative patches. The changes would require only one resident owner to be 65 years old for Enhanced STAR eligibility and would consider only the income of owners who reside on the property, reducing administrative burden on the Tax Department and local assessors. Sen. Andrew Gounardes pressed Hiller on tax expenditure transparency, questioning whether eliminating IDA reporting requirements would obscure the $86 million in foregone sales tax revenue from those exemptions. He also sought detailed breakdowns of who claims high-value deductions, including the $600 million gold bullion exemption and charitable contribution deductions for high-income earners. When asked about outmigration of wealthy New Yorkers, Hiller noted that New York has experienced net outmigration at all income levels, with the rate spiking during the pandemic and again when tax brackets were increased, but returning to historic pre-pandemic levels. She emphasized that in-migration problems, not just outmigration, drive the state's net migration numbers, and directed legislators to the Tax Department's Tax Facts website for detailed migration data by age and income bracket. Sen. John Liu questioned Hiller on the Secure Choice retirement savings program, which will require employers with 10 or more employees to offer the program to workers who lack other retirement options. Hiller confirmed the program will launch with a limited pilot in June, with full rollout in the fall, and that participants will receive both state and federal tax benefits similar to 401(k) plans. The hearing, held February 27 in Albany, is the 13th in a series of joint legislative budget hearings. No bills were formally discussed, though the hearing focused on provisions of the Governor's proposed budget. NEW YORK — The state Department of Tax and Finance outlined an ambitious tax relief package during a joint legislative hearing on the 2025-2026 executive budget, proposing to deliver $3 billion in inflation refunds to 8.6 million households while reducing income tax rates to their lowest levels since 1934. Commissioner Hiller testified that the middle-class tax cut would reduce income tax brackets by one basis point this year and another next year for taxpayers earning up to $323,000 for joint filers and $160,000 for single filers. The inflation refund checks, tied to higher-than-expected sales tax collections, would be mailed later this year alongside existing STAR credit mailings. The hearing revealed significant tensions over tax policy effectiveness. Sen. Tom O'Mara challenged the administration's response to New York's loss of financial services jobs to Texas, which now has more such jobs than New York for the first time. O'Mara cited an independent tax expenditure study showing the Excelsior Jobs Program returns $5.25 for every dollar invested, yet the state continues spending $700 million annually on the Film Tax Credit, which returns only 31 cents per dollar. Commissioner Hiller defended the film credit, noting that return-on-investment calculations don't capture intangible benefits like enhancing the state's reputation. "One of the great things about my job is that that's not my call," she said when pressed on whether the program is worthwhile. Sen. Liz Krueger raised concerns about the federal government's cuts to IRS funding, warning that reduced federal tax enforcement could undermine New York's voluntary compliance rate of 96 percent. She expressed frustration that the state spends its entire agency budget collecting the remaining 4 percent of unpaid taxes. The hearing also addressed the Farm Employee Overtime Credit, with Assemblyman Miller pressing for a solution after the Governor vetoed a unanimously passed bill to expand eligibility. Commissioner Hiller acknowledged the issue was complicated but expressed confidence a solution could be reached during budget negotiations. Other proposals discussed included moving the pass-through entity tax election deadline from March to September—a change that would shift estimated payments into the next fiscal year but which the Division of Budget said the state has sufficient cash reserves to manage—and expanding the Secure Choice retirement savings program to freelancers, expected in 2026. The hearing was held Feb. 27, 2025, before the Senate Finance Committee and Assembly Ways and Means Committee. New York State faces a fiscal crisis that could dwarf the state's ability to respond, according to testimony at a joint legislative hearing on the 2025-2026 Executive Budget on taxes held February 27. Advocates and business representatives warned that proposed federal budget cuts—particularly to Medicaid—could create a $70 billion hole in the state budget, far exceeding the revenue that even aggressive tax increases could generate. Charles Khan of the Strong Economy for All Coalition testified that federal budget reconciliation proposals include at least $880 billion in Medicaid cuts, which could reduce New York's budget by $5 billion to $10 billion. With 7 million New Yorkers relying on Medicaid and 45 percent of the state's children receiving healthcare through the program, Khan warned that state action is needed immediately, not after federal cuts take effect. Chairman Jose Pretlow expressed alarm at the scale of the potential crisis, noting that Medicaid represents 47 percent of the state's $257 billion budget. "If the feds cut half of that, you're looking at a $70 billion hole," Pretlow said. "PIT is not going to take care of it, the rainy day fund's not going to take care of it. Nothing is going to take care of it." Advocates testified in favor of aggressive revenue-raising from wealthy New Yorkers. Nathan Gusdorf of the Fiscal Policy Institute opposed the Governor's proposed income tax cut, calling it a permanent $1 billion revenue loss. Ron Deutsch of New Yorkers for Fiscal Fairness advocated for increasing marginal income tax rates on those making over $5 million and $25 million by 0.5 percent each (generating nearly $1 billion) and raising corporate tax rates from 7.25 percent to 9 percent (generating $2 billion annually). These proposals would affect only the top 0.25 percent of taxpayers—26,500 people—and were included in both houses' one-house budgets last year. Gusdorf noted that 80 percent of capital gains in New York go to people making over $1 million annually, and proposed a 2 to 3 percent capital gains surtax could generate $1 billion to $4 billion yearly. He also recommended reducing the pass-through entity tax rebate from 100 percent to 85 or 90 percent, generating $1.5 billion annually. However, Gusdorf cautioned that even $15 billion in new revenue would be insufficient if federal cuts reach the scale some fear. "You're not going to get $15 billion by only taxing people who make over $5 million a year," he said, calling for broad-based business taxation, sales taxes on services, and broad-based income tax increases. Small business representatives opposed additional tax burdens. Ashley Ranslow of the National Federation of Independent Business testified that small businesses employ 40 percent of the state's private-sector workforce—over 3 million New Yorkers—and account for nearly half of the state's GDP. She focused on the $6.3 billion unemployment insurance debt, noting that small businesses are paying $105 in increased federal UI taxes and $250 per employee in state UI taxes. She supported the Governor's proposal to allocate $165 million to pay interest on the UI debt but opposed placing the full burden on businesses for a debt incurred due to state-mandated COVID closures. Sen. Liz Krueger raised the possibility of New York withholding federal taxes to fund state services if the federal government cuts funding, citing Maine Governor Janet Mills' proposal. Gusdorf, a tax attorney, said he doubted such action would be legal but acknowledged the desperation of the situation. Kari Siddiqui of the Schuyler Center for Analysis and Advocacy testified in favor of expanding the Empire State Child Credit to $1,500 per child per year for all children ages 0-18, which she said would reduce child poverty by 23 percent compared to 8 percent from the Governor's proposal. The hearing underscored the tension between revenue-raising advocates and those concerned about business competitiveness, with the looming federal cuts creating urgency for action but uncertainty about what measures would be sufficient. NEW YORK — A joint legislative hearing on the 2025-2026 executive budget revealed sharp divisions over how to raise revenue and support struggling New Yorkers, with religious leaders and policy advocates calling for higher taxes on the wealthy while small business representatives warned against broad tax increases that could harm employers. Peter Cook, executive director of the New York State Council of Churches representing 7,500 congregations, urged lawmakers to increase top income tax rates for those earning over $5 million and $25 million by 0.5 percent and eliminate the stock transfer tax rebate, which he said could generate $10 to $14 billion in additional revenue. "Taxing the wealthiest a little bit more is actually going to be more economically productive in terms of improving the social safety net," Cook testified. But Ashley Ranslow of the National Federation of Independent Business pushed back, warning that small business owners cannot afford tax increases. She detailed how New York's $6.3 billion unemployment insurance debt will become increasingly burdensome, with federal FUTA offsets doubling next year from 1.2 percent to 2.3 percent—adding roughly $105 per employee in federal UI taxes on top of state taxes averaging $250 per employee annually. "You have to use a scalpel instead of a sledgehammer," Ranslow said, cautioning against broad revenue measures. Ranslow noted that New York and California are the only two states still carrying UI debt, while 36 other states used COVID relief funds to pay theirs down. She also called for tax parity between C corporations and pass-through entities for small manufacturers, and criticized New York's economic development programs for favoring new businesses over existing ones. Policy analyst Kari Siddiqui testified that the Governor's child tax credit proposal would provide only a $170 boost to 86 percent of families, and warned that allowing federal child tax credits to expire would worsen New York's child poverty rates, which rank among the nation's highest. She cited the COVID-era expanded federal child tax credit, which cut child poverty in half. Sen. Jackson sought to establish consensus on taxing the wealthiest New Yorkers, carefully distinguishing between wealthy individuals and small business owners. Sen. Gounardes pressed for analysis on federal tax policy impacts on child poverty, while Sen. O'Mara questioned how other states have addressed UI debt compared to New York's approach. The hearing, held Feb. 27 before the Joint Legislative Committee on Finance, underscored the competing priorities facing lawmakers as they craft the state budget: funding social programs and addressing structural deficits while protecting small businesses from additional tax burdens.