New Year, new taxes?
Workers in New York will have to pay higher taxes to fund the massive universal childcare program backed by incoming Big Apple Mayor Zohran Mamdani and Gov. Kathy Hochul, according to a new study.
The report from the liberal think tank the Fiscal Policy Institute found that tax hikes on corporations and millionaires alone won’t cover the $8 billion annual statewide bill for the program.
Other income earners will need to chip in, likely with a payroll-tax hike, to finance the pledged childcare for kids ages 6 months and up, said the labor-backed group.
“It is neither economically nor fiscally realistic to expect that the full $8 billion cost of statewide childcare can come from only the richest New Yorkers,” the Fiscal Policy Institute report released Wednesday said.
The socialist Mamdani — who takes his oath of office moments after midnight Jan. 1 — has said delivering “no-cost” childcare for city kids ages 6 weeks to 5 years will be one of his top priorities during his first year in office.
The lefty pol has also vowed to quickly deliver on his big-ticket campaign promises such as offering city-run grocery stores, free buses and freezing rents — a slate of socialist freebies and other agenda items that are expected to cost more than $10 billion.
He’s proposed paying for his $6 billion childcare program by raising taxes on corporations and the top 1% of income earners, generating an estimated $9 billion combined.
But the head of one of the city’s top business advocacy groups said taxes are already too high and that City Hall and Albany should pare back spending to foot the childcare bill instead.
Raising taxes on nearly all income earners would only worsen the affordability crisis — which both Mamdani and Hochul, who is running for re-election next year, have made their top issue.
“While it would be great to offer families free childcare, the first place to look for revenue is spending cuts that free up city and state resources for this important purpose,” said Kathryn Wylde, CEO of the Partnership for The City of New York.
The FPI proposed a new 0.43% childcare payroll tax should be imposed on wage earners making more than $25,000 a year to help fund the program for kids starting at 6 months.
The payroll tax would generate $3.6 billion, the group said.
It backed soaking the rich and corporations, as well.
A 25% surcharge on corporate taxes would generate $2.2 billion, a 1% income tax increase on incomes over $1 million in New York City would yield $1.5 billion, while a 0.43% tax on investments would produce another $700 million, the FPI report said.
The proposal is modeled after the payroll mobility tax that Hochul and the state Legislature approved last year to help fund the Metropolitan Transportation Authority, FPI authors Nathan Gusdorf and Andrew Perry said.
New York also already uses a payroll tax to fund its Paid Family Leave program by raising nearly $1 billion per year, the report said.
The FPI proposal recommends expanding and broadening that tax to finance universal child care.
The current tax covers the first $93,500 of a taxpayer’s earnings. FPI’s proposal removes the earnings cap so the tax rate applies to all earnings, while exempting it for those earning less than $25,000 a year and cutting it in half for those making between $25,000 and $50,000.
The group argued that a modest payroll tax across the board was fair, given the thousands of parents who would benefit from the fully subsidized childcare.
“It is preferable for almost everyone to pay a small annual tax to fund universal childcare provision and avoid the cost spike of high tuition costs in the years in which they need childcare,” FPI said.
New York City is further along than the rest of the state in providing early childhood education and care, with pre-kindergarten classes available to 3- and 4-year-olds.
Hochul, who will be seeking a second, four-year term in 2026, is expected to lay out the details of her universal childcare plan in her Jan. 13 “State of the State” policy address.
“Governor Hochul remains focused on making New York the best and most affordable place to raise a family,” a rep said in a statement when asked about FPI’s tax proposals.
“As NY’s first mom-governor, no one has done more to support and expand child care statewide than Governor Hochul and she looks forward to working with state and local partners to build on that progress and put NY on a path to universal child care.”
Wylde predicted that a payroll tax would be politically unpopular if it hits nearly all income earners, making it unlikely.
“This sounds fair, but it overlooks the political reality that people support tax increases that do not apply to them, so I doubt this approach will fly,” she said of the FPI proposal.
“It also ignores the fact that high earners who live in New York City and its suburbs already pay a disproportionately large share of state taxes, with more than half their earned income going to the government,” Wylde added.
“This situation is unsustainable, as demonstrated by New York’s declining share of America’s millionaires.”
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