New York’s $252 Billion Budget Proposal Increases Medicaid Spending and Extends ‘Millionaire’s Tax’

For the second year in a row, New York Governor Kathy Hochul has introduced the largest budget in the state’s history.

A significant portion of the budget is allocated to Medicaid, with the state expected to invest $35.4 billion in the program for the upcoming fiscal year—an increase of $4.3 billion compared to the current year. Approximately 7 million New Yorkers are enrolled in Medicaid, an increase of 900,000 since pre-COVID days.

The proposed budget also encompasses a variety of initiatives recently pledged by Hochul, including $1 billion allocated for middle-class tax cuts, $3 billion for “inflation refund” checks, and $800 million dedicated to expanding the state’s child tax credit.

The tax cuts would benefit individuals earning less than $215,400 and married couples filing jointly with incomes under $323,200. Tax rates would see a reduction of 0.1 percent in 2025 and 0.2 percent in 2026.

Families earning less than $300,000 would receive $500 checks as part of the $3 billion “inflation refund” initiative, while individuals making less than $150,000 would get $300.

Related Stories

The augmented child tax credit aims to allocate a $1,000 credit per child for families with children under the age of four in 2025, while families with children aged 4 to 16 would be eligible for a $500 credit in 2026.

These initiatives have been made feasible by unexpectedly high tax revenues. The Hochul administration estimates a surplus of $3.5 billion by the close of Fiscal Year 2025 and projects a surplus of $1.8 billion for Fiscal Year 2026.

“We are investing more in New Yorkers because we have more resources available, and we’re doing it in a responsible manner,” Hochul stated during her budget presentation in Albany on Tuesday.

Highlighting that many families in New York are still facing challenges due to inflation and rising living costs, Hochul’s plan does not propose any new tax increases. Instead, it aims to extend the life of former Governor Andrew Cuomo’s “millionaire’s tax,” which raises the income tax rate to over 9 percent for individuals earning more than $1 million and couples earning over $2 million, for an additional five years.

Cuomo’s tax was implemented in 2021 and was set to expire in 2027; Hochul’s budget now extends it through 2032.

As anticipated, the proposal presented on Tuesday did not tackle the Metropolitan Transportation Authority’s (MTA) $33 billion revenue shortfall in its $68 billion five-year capital plan, which lawmakers turned down in December, agreeing that the shortfall cannot be resolved without new taxes or fees.

Looking ahead, the state’s budget predicts growing deficits, with projected gaps of $6.5 billion in Fiscal Year 2027, increasing to $9.8 billion in 2028 and $11 billion by 2029.

Additionally, with the inauguration of President Donald Trump, who might cut funding to blue states like New York and California, there is added fiscal uncertainty. New York is currently anticipating $90.8 billion in federal funding for Fiscal Year 2026.

“Let me clarify, federal-level changes will pose new challenges for our state and for programs that New Yorkers deeply care about,” Hochul expressed on Tuesday.