Dissection of Gov. Hochul’s State of the State Address – Part 2

On page 16 Governor Hochul State of the State Address stated

“Slash Middle-Class Taxes Up to Five Percent, Reaching 67-Year Lows

The dollar doesn’t stretch as far as it used to, which is why Governor Hochul will fight to deliver significant tax relief to middle-class families—helping more workers hold on to more of their hardwon paychecks.

Governor Hochul’s tax cut will deliver over $1 billion in tax relief to more than 8.3 million taxpayers earning up to $323,200 per year in personal income for joint filers. By cutting rates across five of the State’s nine tax brackets, Governor Hochul is bringing tax rates down to their lowest level in decades.

When fully phased in, Governor Hochul’s middle-class tax plan will deliver hundreds of dollars in average savings to nearly 77% of filers. Governor Hochul’s tax cut will take effect in the current tax year and be reflected in the rates that taxpayers pay out of each paycheck to offer immediate relief, each and every payday, to hardworking families.”

Possible response:

New York maintains one of the highest combined state and local tax burdens in the United States, with residents paying an average of 12% of their income in these taxes. Despite the proposed state tax cuts, other taxes and fees have increased in recent years, including those on small businesses, sales taxes, wireless services, and gaming winnings. These additional financial obligations can offset the relief provided by the income tax reductions, leaving some middle-class families with a negligible net benefit.

While the intention behind Governor Hochul’s proposed middle-class tax cuts is to provide financial relief, critical analysis suggests that factors such as the federal SALT cap, New York’s overall high tax burden, potential reductions in public services, and concerns about economic sustainability may limit the effectiveness of this initiative. Consequently, some New Yorkers might not experience the anticipated benefits and could, in certain cases, face unintended disadvantages.

Critics also argue that the proposed tax cuts, along with other economic measures like cash rebates, may not be sustainable in the long term. Without detailed funding specifics, there is concern that these initiatives could lead to budget deficits, necessitating future tax increases or spending cuts that would ultimately burden the same taxpayers the current proposal aims to assist.

The implementation of significant tax cuts may lead to decreased state revenue, potentially resulting in reductions to essential public services such as education, healthcare, and infrastructure. Such cutbacks could disproportionately impact lower and middle-income residents who rely more heavily on these services, thereby negating the advantages of the tax relief.