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New York Governor Kathy Hochul is evaluating potential increases to the state’s corporate tax rate as part of early budget deliberations and to help fund elements of New York City Mayor-elect Zohran Mamdani’s policy agenda, according to an individual familiar with the internal discussions.
The move would represent a significant shift for Hochul, who has consistently resisted new business-tax levies, warning they could erode the state’s competitiveness by driving out companies and high-income earners. The reconsideration comes as the state prepares to absorb funding reductions tied to President Donald Trump’s new federal budget law and as city officials outline ambitious social-service expansions.
Funding Mamdani’s Universal Childcare Plan
Mamdani, set to take office in January, has proposed providing universal childcare, expanded bus services, and other social programs, estimating the combined annual cost at roughly $10 billion. While the mayor-elect campaigned on raising taxes for corporations and high-income individuals, most tax authority lies with the state legislature and the governor.
According to the source, Hochul is examining whether higher corporate taxes could help finance universal childcare, one of Mamdani’s signature priorities. However, despite pressure from progressive supporters, she is not considering increases to personal income taxes on wealthy residents.
Corporate Tax Rate Could Reach Nation’s Highest Levels
Mamdani has advocated lifting New York’s top state corporate tax rate from 7.25% to 11.5%, aligning with New Jersey’s rate. Combined with New York City’s business taxes, companies operating in the city could face an effective rate approaching 19%, the highest corporate tax burden in the United States.
Hochul, speaking earlier this year, emphasized her concern about maintaining competitiveness with nearby states—a stance echoed by business leaders. Kathy Wylde, president of the Partnership for New York City, warned that higher business taxes could accelerate corporate flight and ultimately raise costs for consumers.
Budget Gaps and Federal Funding Uncertainty
State budget officials have projected that stronger-than-expected Wall Street activity and personal income tax revenue could contribute $5.3 billion to the next fiscal year. Even so, New York faces a projected $4.2 billion deficit in FY 2027, with the full implications of federal budget cuts still unclear.
Budget Director Blake Washington reiterated this week that tax increases remain “a last resort,” citing the state’s currently stable fiscal position.
Next Steps
Hochul and Mamdani met Thursday to discuss childcare funding and long-term budget planning for fiscal 2027 and beyond. While Hochul supports the goal of statewide childcare expansion, she has cautioned that providing free childcare in New York City alone carries an estimated $7 billion annual price tag — a cost that would double if implemented statewide.
The governor has floated a staged rollout rather than an immediate, full-scale implementation.
Politico first reported that Hochul was reviewing potential corporate tax increases.
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