UPDATE: New York Governor Kathy Hochul has just announced a significant policy shift, proposing to eliminate state income tax on tips starting in the 2027 fiscal year. This move mirrors one of former President Donald Trump‘s signature policies, aimed at making life more affordable for hardworking New Yorkers.
Hochul, who is actively campaigning for re-election this November, stated, “I’m kicking the new year off with a proposal of no state income tax on tips.” This proposal follows last year’s legislation that reduced income tax for middle-class taxpayers and increased the child tax credit to $1,000 for children under four and $500 for those ages four to sixteen. Hochul’s office described this as the largest increase in the child tax credit’s history, surpassing the previous maximum of $330 per child.
This latest announcement is particularly crucial as it comes amid a wave of criticism from Republicans who have long targeted high-tax blue states like New York. Nassau County Executive Bruce Blakeman, a Republican challenger to Hochul, remarked, “I see Kathy Hochul is doing a U-turn on taxing tips,” adding that her proposal appears to be a response to his stance against taxing gratuities.
Restaurant workers have voiced their frustration over the previous lack of action on this issue, with many expressing disappointment that Hochul did not adopt the no-tax-on-tips policy sooner. Zoe Kalodimos, a waitress at Embassy Diner in Bethpage, Long Island, revealed, “I lose up to $1,000 a month in take-home pay due to taxes from tips.” She emphasized how critical this income is for her livelihood, stating, “It’s like losing money, especially when everything’s so expensive in life right now.”
The move to align state policy with federal law is expected to resonate strongly with service industry workers, particularly as Hochul’s re-election campaign heats up. The recent outcry from workers highlights the growing importance of this policy shift, as many voted for Trump in the past due to similar tax relief measures.
While Hochul’s announcement marks a significant policy change, it raises questions about her stance on tax increases for higher-income individuals. Following the election of Mayor Zohran Mamdani in June, there have been discussions about potentially raising taxes on wealthier New Yorkers to fund his initiatives, despite Hochul previously committing to not raise taxes.
New York currently has one of the highest income tax rates for upper-tier earners in the nation, with middle-class taxpayers facing rates on incomes between approximately $14,000 and $80,000. In contrast, several states, including Florida, Texas, and Tennessee, have no state income tax at all.
As Hochul’s proposal gains traction, it remains to be seen how this will impact her re-election campaign and the broader conversation around taxation in the state. Her decision to adopt the no-tax-on-tips provision demonstrates her responsiveness to constituents’ needs, positioning her as a candidate focused on affordability.
Expect more developments as this story unfolds, with potential implications for the upcoming elections and the service industry across New York.
