Hochul presents $260B executive budget without taxes on the rich as Mamdani insists the city needs one to fix its finances

Gov. Kathy Hochul rolled out her $260 billion executive budget on Tuesday, which she says addresses the state’s needs without taxing the rich — something that Mayor Zohran Mamdani continues to insist is necessary to make New York City affordable for everyone.

The governor’s budget proposal, the first step in hammering out a new spending deal with the state Legislature by April 1, includes plans to provide free childcare to children aged two and over in New York City and children aged four and up throughout the rest of New York State, pledging $4.5 billion to expand free childcare statewide. That investment represents a $1.7 billion increase compared to the 2025 state budget.

Hochul, however, said the state can afford the expansion without raising income taxes.

“Over the last four years, we’ve proven something important: that you can make historic investments without raising income taxes, without mortgaging the next generation, without losing sight of what people can afford,” Hochul said in a press conference Tuesday afternoon.

But Mamdani — while praising Hochul for making “meaningful investments” to address the affordability crisis in the executive budget — also said Tuesday that a tax increase on New York’s wealthiest remains a necessity. He pointed to reports from both City and State Comptrollers Mark Levine and Tom DiNapoli, respectively, which found that the city’s finances are currently “unsustainable” — with a projected $12.6 billion budget shortfall accrued during the Adams Administration, according to Levine.

Mamdani said the state is on “solid financial footing” thanks to Hochul’s “fiscal stewardship” but added that the city does not enjoy the same financial security, pointing to Levine’s recent report. Along with blasting former Mayor Eric Adams for years of “short-term gimmicks with long-term consequences,” Mamdani vowed to restore long-term sustainability to the city’s finances.

Mayor Zohran Mamdani addresses New York City in his inauguration address.Photo by Dean Moses

At the same time, however, Mamdani pledged not to implement “austerity politics” to close the city’s budget hole. The only way to do that, the mayor insists, is to raise taxes on the city’s biggest moneymakers.

“It is time to ask New York City’s wealthiest and large corporations to pay their fair share,” Mamdani said.

Hochul’s proposed budget includes no plans to increase any income taxes but does include a three-year extension of the 7.25% corporate tax rates on companies earning more than $5 million, a measure originally introduced by former Gov. Andrew Cuomo.

Mamdani said his administration is beginning a review of the governor’s budget proposal, adding that he will have “more to say” when he has fully reviewed the budget.

“Our guiding principle, however, is clear: fiscal responsibility must go hand in hand with protecting working families, preserving our social safety net and building a city that works for the many—not just the few.”

Hochul and Mamdani break on ‘tax the rich’

Nevertheless, Hochul’s refusal to embrace Mamdani’s “tax-the-rich” dream marks a significant break between the pair. The mayor has consistently called for a 2% tax hike on all residents earning more than $1 million per year in order to fund his affordability agenda, which includes plans for free buses, universal childcare and a rent freeze.

When Hochul spoke at a Mamdani campaign event at Forest Hills Stadium last October, her speech was drowned out by a chorus of “tax the rich” chants from the 10,000-strong crowd, which prompted a response from the Governor.

“I can hear you,” she told the crowd at the time.

Mamdani may be banking on support from state legislative leaders in the budget negotiating process. Assembly Speaker Carl Heastie, in endorsing Mamdani’s election last fall, indicated he was “wholly supportive” of increasing taxes on the wealthiest New Yorkers and indicated at the time that he was “not concerned” Hochul would stand in the way.

State Senate Majority Leader Andrea Stewart-Cousins — who also supported Mamdani last fall — has also expressed support for the tax increase.

Governing in the era of Trump

Meanwhile, non-profit watchdog Citizens Budget Commission (CBC) praised Hochul for not raising income taxes in the state but criticized the Governor for extending a business tax surcharge, which taxes businesses in New York City at 17.44%.

“We commend Governor Hochul’s focus on affordability,” CBC President Andrew Rein said in a statement. “It should not come at the expense of the fiscal stability that undergirds service continuity. Instead of layering on new unaffordable spending, the State should target programs to those in need and fund them by scaling back less impactful spending, including wasteful economic development programs and school aid to shrinking and wealthy districts.”

The $260 budget proposal would represent a modest 0.7% increase on the 2025 budget, and includes a significant increase in the state’s contribution to the budget in a bid to offset federal cuts. Hochul said federal funding is down $10.3 billion compared to last year, a decrease of 11.4%. A significant chunk of that decrease is a result of the expiration of pandemic relief, which Hochul said the state was prepared for.

However, at least $3 billion of the federal cuts comes as a result of the Trump Administration’s “direct attacks” on states, Hochul said.

“When states stepped up to deliver federal programs, the federal government was a reliable partner, making sure the funds were there,” Hochul said at a press conference Tuesday. “In just one year, the Trump administration has shattered that trust, and we’re bearing the brunt of it time and time again.”

She said the state can cover the loss in federal funding through the state’s reserves, which have increased to $14.6 billion. She said the reserves are the “gold standard of responsible budgeting,” stating that they are strong enough to protect New York in a downturn.