Hochul Wants Tax Hike that Will Drive Even More Businesses Out of New York

New York’s already-strained business environment may become even more hostile as Governor Kathy Hochul is now considering raising corporate taxes to deal with a looming budget gap, according to a person familiar with internal discussions. The possibility has alarmed business owners and fiscal analysts who argue that a tax increase would accelerate the ongoing exodus of employers fleeing the state’s high-cost economy.

The governor’s office has not announced any formal plan, but the source said Hochul’s team is preparing for major financial uncertainty due to expected federal cuts.

“The state is on strong financial footing today but much of the budget outcome at the start of next year is going to be largely dependent on what the federal government does and we're watching that closely and trying to plan accordingly,” the source explained to Reuters.

Even so, companies across New York are bracing for the possibility that Hochul could move toward adopting one of the steepest corporate tax increases in modern state history. The source did not specify a target rate, but New York City Mayor-elect Zohran Mamdani has pushed publicly for raising the top state corporate tax rate from 7.25% to 11.5%, a proposal widely criticized by business groups as economically destructive.

The state is staring down a $34.3 billion budget deficit through the 2029 fiscal year. The situation has deteriorated rapidly, with the New York State Comptroller warning that the combined effects of the deficit and federal decisions have pushed New York into conditions “not seen since the 2009 economic crisis.” Despite that, the governor has repeatedly insisted she is not in crisis mode. Her own budget director, Blake Washington, told reporters recently that New York was in “a good spot financially,” adding that a tax increase was “the last thing on my mind.”

Yet Hochul met for 90 minutes with Mamdani on Thursday and the readout of the meeting underscored just how volatile the state’s fiscal and political landscape has become. Their discussion included federal threats, budget pressure, and concerns about Washington’s posture toward New York. The readout stated, “The Governor and the Mayor-elect discussed the possibility that the federal government would surge ICE and/or National Guard to New York City.”

Hochul and Mamdani also agreed, according to the summary, that such a federal deployment “would not improve public safety.” The readout added that state officials briefed Mamdani on preparedness measures if the federal government targets New York.

Adding another layer of unpredictability, President Donald Trump - who endorsed former Democratic Governor Andrew Cuomo’s run for mayor years earlier - has stated he will likely deny significant federal aid to New York “other than the very minimum as required” following Mamdani’s election. With federal support in question, critics say Hochul is now poised to lean heavily on state businesses to fill the growing financial hole.

Although Mamdani campaigned on a sweeping affordability agenda that included raising taxes on corporations and the wealthy, his spokesperson did not respond to a request for comment on whether he is actively pushing Hochul to adopt the corporate tax increase.

New York already ranks among the least competitive business climates in the nation and employers warn that an additional tax burden would push more companies and jobs out of the state. With population declining, fewer taxpayers, and rising operating costs, economists say the state may be approaching a breaking point—all under Hochul's leadership.

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Hochul Wants Tax Hike that Will Drive Even More Businesses Out of New York