Gov. Kathy Hochul says she’s reached a “general agreement” on a New York state budget — but major policy proposals still aren’t settled, including Democrats’ plan to tax pieds-à-terre in New York City.
The Democratic governor said Thursday that she has had productive talks with leaders in New York City, but it’s proven tricky to determine a method for assessing the high-value second residences that she and Mayor Zohran Mamdani seek to tax.
As a result, basic details like the rate of taxation or exactly how many housing units will be affected still aren’t settled, the governor and her aides said.
What was supposed to be a victory lap instead laid bare the difficulty of taxing wealthy individuals who employ accountants and lawyers to minimize their bills.
“They have certainly managed the tax system at all levels to their benefit,” said James Parrott, a left-leaning economist and senior adviser at the New School’s Center for New York City Affairs.
Assembly Speaker Carl Heastie, a Bronx Democrat, said he had “no details” about the tax. He criticized Hochul for prematurely announcing a budget agreement.
“Even on the policies that she put out there today, some of these things are still incomplete,” he said.
Heastie and Senate Majority Leader Andrea Stewart-Cousins had both supported a tax on pieds-à-terre before Hochul said she wanted to tax residences worth more than $5 million whose owners live outside the city. The plan would capture Russian oligarchs who own property in the five boroughs, as well as President Donald Trump, who has a gold-plated triplex on Fifth Avenue, Hochul said.
Parrott, who sat on a commission convened by former Mayor Bill de Blasio to examine the city’s property tax system, said these kinds of properties are generally assessed at a lower value than they sell for.
Hochul described the city’s current property tax system as “bizarre” and said she was trying to find a new way of determining the values at which to apply the new tax. The goal remains to raise $500 million for New York City, she said.
“Properties that are worth $200 million, for example, could be assessed at $7 million,” she said. “We’re looking at the difference between what is currently assessed but also market value.”
James Whelan, president of the Real Estate Board of New York, said the difficulty should give state lawmakers pause. “Poorly designed or hastily implemented taxes risks reducing, rather than increasing, overall revenue for the city, state and the MTA by discouraging investment and transactions,” he said.
Mamdani said he will propose an executive budget on Tuesday. He’s relying on the state to help fill a $5.4 billion deficit, and said that he was satisfied things are moving in the right direction.
“A lot of those conversations are ongoing, and we've said time and again that we're confident in that [pied-à-terre] tax's ability to raise half a billion dollars a year, which will be critical in putting the city back on that firm financial footing,” the Democratic mayor said.
Progressive groups cheered Heastie and said the still-unfinalized budget provided an opportunity to push for income tax hikes and more spending.
Hochul acknowledged that there is no agreement on whether New York taxpayers will pick up the tab for nearly 500,000 people set to lose state-backed health insurance because of a federal law passed last summer.
“We have yet to see details on how New York will close the budget gaps of cities across the state, raise progressive revenue, or stop New Yorkers from losing their healthcare coverage,” Working Families Party co-Director Jasmine Gripper said in a statement.
Fiscal watchdogs said Hochul’s announced $268 billion price tag was too high.
“The governor provided a smattering of details on state finances — but to be clear, we have yet to see a budget,” Citizens Budget Commission President Andrew Rein said. “What we do know is that the budget is bigger, but not likely better for fiscal stability.”
In addition to the question of extending healthcare coverage, another major unsettled variable has to do with sweetening pension benefits for public employees hired after the Tier VI retirement law passed in 2012.
Unions are seeking changes that would let people retire with a full pension at 55 instead of 63 and reduce their required contribution rates. Their plan has a $1.5 billion price tag, much of which would be borne by local governments to which the state is sending bailouts.
Hochul proposed moving the retirement age to 60 and reducing contribution rates by half a percentage point, according to three people familiar with her negotiations with legislators. That idea was rejected, two other people familiar with the talks said, and lawmakers are now trying to reach an agreement on pension sweeteners that will cost around $500 million.
The governor said she is trying to balance the ability to recruit public employees against additional costs.
“We are willing to look at this and make changes, but a much more scaled-back, monetarily, proposal,” she said. “We'll release those numbers as soon as it's absolutely done.”
