New York Gov. Kathy Hochul on Thursday announced she will propose no-tax-on-tips legislation for the next fiscal year.
In a release issued by her office, Hochul, a Democrat, said she plans to include in her upcoming fiscal year 2027 budget a proposal to eliminate state income taxes on up to $25,000 of tipped income in tax year 2026 — aligning New York with the federal “no tax on tips” approach backed by President Donald Trump and enacted nationally as part of his sweeping 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 hard working New Yorkers,” Hochul said.
The announcement came after weeks of criticism that deep-blue states were slow-walking Trump’s tax-relief agenda at the state level, potentially leaving working-class residents paying higher state taxes even as federal tax burdens fall, the New York Post reported.
The newspaper noted that Republicans have hammered New York, Illinois, and California for failing to move quickly to ensure tipped workers would see immediate relief at the state level.
Hochul, who is expected to seek reelection this year, has also faced pressure from service-industry workers who said removing taxes on tips could provide meaningful breathing room amid high living costs.
“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,” bartender Rion Gallagher told the Post in comments published last week.
In her press release, Hochul argued her proposal is part of a broader affordability push she says has returned more than $9 billion to New York households since she took office.
Her office highlighted middle-class tax cuts taking effect Thursday, a sweeping expansion of the child tax credit, and minimum wage statewide hikes, including an increase to $17 an hour in New York City, Long Island, and Westchester.
The move also follows national attention on the federal “no tax on tips” provision included in Trump’s “One Big Beautiful Bill Act,” signed into law July 4.
ABC 13 in Rochester, New York, reported the federal policy allows certain workers to deduct qualified tips up to $25,000 annually from 2025 through 2028, benefiting everyone from servers and bartenders to hairdressers and housekeepers.
Restaurant operators told the station the proposal could help retain workers and rebuild an industry still recovering from COVID-era disruptions.
A Rochester-area restaurant owner said the change could be a “great incentive” for hiring and keeping staff, while workers noted that even modest tax relief can make a major difference for families living paycheck to paycheck.
The governor’s announcement also arrives after Treasury Secretary Scott Bessent used X to blast Hochul and other Democrat governors as “Grinches Who Stole Christmas” for not conforming quickly to Trump’s tax cuts at the state level.
Hochul fired back at the criticism, mocking the post as “Grinch fanfic.”
While Hochul is now moving toward adopting a no-tax-on-tips policy, conservatives say the bigger question is why it took pressure from working-class voters, and the success of Trump’s federal agenda, for Albany Democrats to act.
Either way, the governor’s proposal signals that even in blue New York, Trump-backed tax relief is becoming too popular to ignore.
