Potential NYS Budget Shortfall and Cost of Mamdani’s Agenda Could Lead to Corporate Tax Hike
The recent Bloomberg press release posted on the website of Crain’s New York revealed that Governor Hochul is considering raising corporate taxes as New York State faces a potential budget shortfall. A news report in July by Crain’s New York indicated that although estimates were preliminary at the time, New York State is “facing a $750 million gap in the current fiscal year and at least $3 billion next year due to federal Medicaid reductions that will go into effect beginning January” as part of the White House’s “One Big Beautiful” spending and tax bill that became law on July 4th. It was further noted that there are several other reductions in federal Medicaid funding slated in the coming years that New York is not prepared to replace, having passed a $254 million state budget in May that included major increases to the state’s Medicaid program but did not account for the cuts within the bill that had yet to be assessed by the Congressional Budget Office. However, due to higher-than-expected revenue from Wall Street, a contribution to the state’s SFY 2024-25 budget of $22 billion by the sector has significantly narrowed the budget gap according to an October report by the New York State Comptroller’s office; and in a separate news report by Crain’s New York, the additional revenue helped to reduce the state’s “budget gap for the next fiscal year, beginning April 1,” by more than $3 billion from the “$7.5 billion when the current budget was enacted in May, according to the state’s mid-year financial plan update released Friday [October 31st].”
If state legislators move forward with the corporate tax increase, a portion of the additional taxes collected would also help fund some of mayor-elect Mamdani’s agenda. It has been estimated by Mamdani, that his campaign promises to provide “free childcare, buses and a slew of other services will cost about $10 billion.” To cover the cost, he has reportedly stated that he wants to lift the top state corporate tax rate to 11.5% from 7.25% to match New Jersey. For businesses in New York City, that would mean a combined effective tax rate of nearly 19%, the highest in the country.” Perhaps they should be reminded of the results of a year-long study released September 2025 “after one year of focus groups with over 500 business leaders and 40 associations commissioned by the Public Policy Institute of New York State, Inc. an affiliate of the Business Council of New York State, Inc. (BCNYS), along with the New York State Economic Development Council (NYSEDC). An overview of the study’s results by BCNYS reveal that although “New York has always had the reputation of being the home of company headquarters – the place where management wanted to work and live. The numbers are poking holes in that theory. Between 2014 and 2024, New York management jobs grew a stagnant 2.8%. Nationally, that number is 19.7%. Management jobs in Texas soared by 64.2%.” The results of the statewide survey further revealed that:
- Only 2% of business owners surveyed feel lawmakers represented their interests in Albany.
- Only 3% of business owners surveyed feel lawmakers and state regulators understand and support their business.
- Only 8% of business owners say government actively supports innovation
- 21% say New York State is on the right track
- 72% of businesses do not see the current economic conditions of New York as good.
Both BCNYS and NYSEDC are calling on lawmakers to act upon the need to:
- Reduce state and local government regulations
- Reduce business taxes
- Take a more active role in business retention and expansion efforts
- Greater emphasis on addressing energy issues
- Better support for businesses
Once again politicians are moving to increase the cost of running a business in New York rather than giving priority to the much-needed efforts towards reducing costs that are resulting in the state, that was at onetime considered the epicenter of the U.S. economy, continuing to lose its economic edge. Perhaps similar to the environmental review process required when rezoning or variance applications are submitted to determine the effect, if any, a discretionary action may have on the environment, some of the decisions to increase taxes or enact new regulations on businesses should go through a similar review process such as an economic impact study to help determine the effect on the economic conditions of New York.