NYS budget offers lower tax rate for many, bigger child tax credit, rebate checks

ALBANY — Most New Yorkers will receive tax rebate checks of $150 to $400 this fall under a provision in the state budget that was passed by the State Legislature Thursday night.  

The deal between Gov. Kathy Hochul and the Democratic leaders of the Senate and Assembly majorities also includes a bigger child tax credit, a reduced tax rate for middle- and lower-income New Yorkers worth $1 billion, and free breakfast and lunch for all students regardless of family income.

Hochul said the total cuts will amount to almost $5,000 this year for a typical middle-income family.

The rebate checks take several forms:

• Taxpayers filing joint returns or qualified surviving spouses with gross incomes between $150,000 and $300,000 will get $300 checks.
• Those filing jointly with incomes up to $150,000 will get $400.
• Single filers or married taxpayers filing separate returns or qualified heads of households earning between $75,000 and $150,000 will get $150.
• Single filers with income up to $75,000 will get $200.

Hochul said the checks are less than she proposed in January because of cutbacks of about $400 million in the overall budget because of uncertain economic times ahead. The original proposal called for checks as much as $500.

The income tax break for lower- and middle-income filers totals $1 billion and sets the lowest rates for those filers in nearly 70 years, Hochul said. The changes include:

• Taxpayers making between $27,900 and $161,550 will see their tax rate drop to 5.4%, from 5.5%
• Taxpayers making between $161,550 and $323,200 will see their tax rate drop to 5.9%, from 6%.

Changes to tax credits include a doubling of the Child Tax Credit to income-eligible families, so that each child younger than 4-years-old would result in a $1,000 tax credit, while a $500 credit would be applied to each child 4 to 16 years old. Hochul’s original proposal would have tripled the tax credit.

Providing free breakfast and lunch for every student in public and nonpublic schools for kindergarten through 12th grade, would cost $340 million in the measure, but will save families an average of $1,600 per child, Hochul said.

"The free school lunch and breakfast plan is the biggest, most important thing in her initiative," said Michael Kink of the Strong Economy for All Coalition that advocates for lower- and middle-income New Yorkers.

On Monday, Hochul heard the needs of New Yorkers directly at an event on Long Island.

"Everything got so expensive and then COVID happened and I was laid off and it got tough," said Kamil Kolodziejczyk of Copiague. He said he was laid off during the pandemic and has started his own business, but it’s a struggle for him, his wife and their 3- and 5-year-old children.

The tax breaks for the middle class are funded in part by a budget provision that will extend a temporary, pandemic-era income tax on earners making more than $1 million a year that ranges from 9.6% to 10.9%. The temporary tax on the highest earners was created in the fiscal emergency created by the economic shutdown of the COVID-19 pandemic. It was supposed to expire in December 2027.

Patrick Orecki of the independent Citizens Budget Commission, however, said the tax breaks are part of unsustainable spending in the budget headed into a fiscal year that includes threats of billions of dollars in cuts from federal aid and a possible recession.

"Unfortunately, the expanded child tax credit, which will provide important relief, rests on an unsustainable budget," Orecki said. "The middle-class tax cut is spread so thin it provides very little relief for most. And sending small checks to nearly all New Yorkers is a highly ineffective use of $2 billion."

— With John Asbury

By Michael Gormley

michael.gormley@newsday.com@GormleyAlbany

Michael Gormley has worked for Newsday since 2013, covering state government, politics and issues. He has covered Albany since 2001.