Governor Kathy Hochul just bought New York exactly two years of peace. In her latest budget address, she unveiled a massive $260 billion spending plan that keeps income taxes flat—for now.
On the surface, it looks like a win. There are no new income taxes, and she is offering a “No Tax on Tips” policy for service workers. But financial analysts warn that the math behind this budget relies on risky assumptions that could explode by 2028.
The ‘No Tax on Tips’ Distraction
The Governor threw a bone to the working class. Her proposal to end state taxes on tips is a major victory for waiters, bartenders, and delivery drivers. It is a popular move that mimics federal proposals. However, critics argue this is a “sugar coat” designed to distract from the massive spending increases elsewhere in the plan. While it puts money in pockets today, it does not solve the state’s long-term spending problem.
Gambling on Wall Street
How do you fund a $260 billion budget without raising taxes? You gamble. Hochul’s plan relies heavily on **$14.6 billion in reserves** and projected tax revenue from Wall Street. Because the stock market had a good year, the state is cash-rich right now. But if the market corrects, that revenue stream dries up instantly. Spending “rainy day” funds during a boom is risky. It is like spending your savings account while pretending your salary went up.
The 2028 Cliff
The real danger is hidden in the “out-years.” The budget uses temporary money and expiring federal funds to pay for permanent new programs.
This creates a bridge to nowhere. When those temporary funds run out in 2028, the bill will come due. Since the state isn’t raising taxes now, analysts predict they will have to raise them aggressively later—or slash services like subways and sanitation—to fill the gap.
As one budget watchdog noted: “They are kicking the can down the road. They get the headlines today; taxpayers get the headache tomorrow.”
SOURCES
- New York State Division of the Budget (FY 2027 Executive Plan)
- Office of the State Comptroller (Fiscal Risk Report)
- Empire Center for Public Policy (Budget Analysis)