Hochul’s ‘Inflation Relief’ Backfires, Leaves New Yorkers Owing More in Taxes

What was promoted as relief for New Yorkers now comes with an unwelcome catch: residents will owe federal taxes on the “inflation-busting” rebate checks issued by the state.

The payments, up to $400 per household, began going out on September 26th to 8.2 million homes across New York. They were intended to ease the burden of inflation, but as it turns out the rebates must be reported as taxable income on next year’s federal tax filings.

The refunds, based on 2023 income tax returns, provide $400 for joint filers earning under $150,000 and $300 for those earning between $150,000 and $300,000. Single filers also qualify under adjusted thresholds. But the checks, while free of any immediate state or federal deductions, will add to filers’ taxable income for 2025. That leaves residents responsible for calculating what they owe when filing next year.

According to estimates, the impact varies by tax bracket. For example, households in the 10% bracket could owe about $40 on a $400 check while those in the 22% bracket could owe $88. For the $300 rebates, households earning up to $206,700 would owe $66 and those in the 24% bracket could pay $72.

Tim Ruffinen, communications director for the New York State Division of Budget, defended the program, saying the government remained “laser focused” on affordability with “tangible initiatives.” He added that officials believed the impact of federal taxation would be minimal.

Critics argue otherwise. Nathan Gusdorf, executive director of the Fiscal Policy Institute, said, “We already thought that this was not an effective use of state funds. Just to compound how unfortunate this is, it’s now unnecessarily increasing total taxes paid to the federal government.”

E.J. McMahon, a former deputy tax commissioner under Governor George Pataki, was even sharper in his criticism. He told The Gothamist that Governor Kathy Hochul could have structured the aid differently by offering a tax credit program, which would have reduced state taxes without triggering federal tax liabilities.

“There’s an obvious political motive here, except this has been done before, in New York in particular, and it never pays off,” McMahon said. “By choosing this manner of sending money to people, the governor is basically generating $200 million in added revenue for a federal government she’s otherwise castigating for cutting her aid.”

The news has left many New Yorkers frustrated, feeling that what was touted as direct relief comes with a catch.

Hochul’s ‘Inflation Relief’ Backfires, Leaves New Yorkers Owing More in Taxes