New York Plans to Extend Higher Corporate Taxes to Support Record $260 Billion State Budget
New York state officials say corporations will be required to continue paying higher taxes for at least three more years as part of a plan to support a record-breaking $260 billion state budget and reduce the impact of expected federal funding cuts. Governor Kathy Hochul is scheduled to introduce the spending proposal on Tuesday, with budget leaders describing the plan as a continuation of existing tax policy rather than a major new increase.
The proposed $260 billion budget represents a 2.4% rise from last year’s $254 billion spending plan. It also follows the governor’s earlier commitment to a multi-year child care initiative for New York City families with 2-year-olds, part of broader efforts to expand social support programs. Hochul, who is running for re-election in November, is expected to push for an extension of the state’s higher corporate tax rate for large companies earning more than $5 million in profits, keeping the measure in place through fiscal year 2029.
State Budget Director Blake Washington said the extension is intended to keep current tax laws in place to help fund key investments such as education, child care, and Medicaid. The tax rate increase was originally introduced during the COVID era and was previously expected to expire in early April. Officials estimate that maintaining it could bring in roughly $1.6 billion more each year as Albany faces political pressure from progressive leaders, including New York City Mayor Zohran Mamdani, who have called for higher taxes on the wealthiest residents.
The spending plan includes major allocations for public services, including $39.3 billion for education, which officials say is about 4.3% higher than last year, and $38.2 billion for health care. Budget officials also warned that New York will face approximately $10.3 billion in federal cuts in the upcoming fiscal year, which begins April 1, making state-level revenue decisions more critical.
At the same time, state leaders said they remain cautious about raising taxes too aggressively, citing concerns that both companies and high-income individuals may choose to relocate to states with lower tax burdens. Washington noted that business mobility is a factor in the state’s financial planning, and that tax policy must balance revenue needs with economic competitiveness.
In addition to corporate tax plans, the executive budget is also expected to propose a new tax on tobacco-free nicotine pouch products such as ZYN. The state is reportedly considering a 75% tax that could generate around $54 million for health-related costs, including rising Medicaid spending. Officials argue that such products contribute to public health risks and that higher taxes could discourage use while helping fund prevention and intervention programs.
New York currently projects a $6 billion budget shortfall next year, with the gap expected to widen in future years, reaching an estimated $12.5 billion by fiscal year 2030. Despite these challenges, the state plans to keep roughly $14.6 billion in reserves, following the use of about $6 billion last year to address unemployment insurance debt.
