Hochul Rejects NYC Tax Plan

NEW YORK, NY— Gov. Kathy Hochul on Tuesday rejected a request from Mayor Zohran Mamdani and City Council Speaker Julie Menin to modify a tax credit they say could help close a $5.4 billion city budget deficit, escalating tensions between City Hall and Albany over how to raise revenue.

Mamdani and Menin proposed changes to the pass-through entity tax, known as PTET, which allows certain business owners to deduct state and local taxes at the federal level. The credit was created after the 2017 federal tax law limited those deductions.

The Mayor and Speaker said reducing the credit could generate about $1 billion annually for New York City.

Hochul dismissed the idea.

“That’s why it’s not happening,” she said at an unrelated event outside Albany. “We’re not changing PTET.”

She said the proposal would function as a personal tax increase and pushed back on the city’s framing of the budget dispute.

“What you’re doing is independent of our budget process,” Hochul said. “We don’t have to be done in order for you to do yours. We’re on different timetables.”

Cities typically finalize budgets after the state sets its aid levels, which influence local spending plans. Hochul said the state has already provided significant support.

“I think it’s crystal clear that we already have helped them,” she said, pointing to $4 billion in state assistance and a new tax on luxury second homes in New York City.

At City Hall, Mamdani and Menin announced they would extend the city’s budget deadline from May 1 to May 12 as negotiations continue.

“A crisis of this scale cannot be solved without state action,” Mamdani said. “Speaker Menin and I have already identified meaningful savings and we will continue that work carefully, deliberately and without cutting the services that New Yorkers rely on. But we cannot do it alone.”

Menin and Mamdani framed the PTET proposal as part of a broader push for additional revenue from high earners and corporations.

“We cannot close this deficit with savings alone, we need new revenue, and we need a structural reset with the state,” Mamdani said.

The PTET adjustment would reduce the current 100 percent credit to 75 percent, effectively increasing taxes paid by certain pass-through businesses.

Hochul, who is running for reelection, urged city leaders to focus on spending.

“They need to do what every other city has had to do,” she said, referencing cost containment and rising expenses.

Mamdani has also floated delaying some education spending mandates and is contesting legal pressure to expand rental assistance programs as part of broader budget balancing efforts.