NEW YORK — New York Governor Kathy Hochul announced on Thursday she will include a proposal to eliminate state income taxes on up to $25,000 of tipped income in the upcoming fiscal year 2027 budget.
In her office release, Hochul, a Democrat, stated the measure aligns with the federal “no tax on tips” approach backed by former President Donald Trump and enacted nationally as part of his tax package. “I’m kicking the new year off with a proposal of no state income tax on tips, continuing my efforts to make New York more affordable for hardworking New Yorkers,” she said.
The announcement follows weeks of criticism that Democratic-led states have been slow to adopt Trump’s tax-relief agenda at the state level, potentially leaving working-class residents paying higher state taxes while federal burdens decrease. The New York Post reported Republicans have targeted New York, Illinois, and California for delayed action on tipped worker relief.
Service industry workers praised the move, with bartender Rion Gallagher noting: “If we weren’t taxed on our tips, we’d be able to save more, we’d enjoy life a little more, maybe we wouldn’t have to pick up that extra shift.” Hochul highlighted her broader affordability efforts, which she claims have returned over $9 billion to New York households since taking office.
The federal policy allowing workers to deduct qualified tips up to $25,000 annually from 2025 through 2028 was signed into law in July 2024. Restaurant operators stated the change could help retain staff and rebuild industries recovering from pandemic disruptions.
Treasury Secretary Scott Bessent recently criticized Hochul and other Democratic governors on social media as “Grinches Who Stole Christmas” for not swiftly adopting Trump’s tax cuts, prompting Hochul to label the comments a “Grinch fanfic.”
