Governor Hochul’s Political Gamble

One of the biggest cash windfalls for New Yorkers is on track to be distributed through Governor Kathy Hochul’s Money in Your Pockets program. Out of over 8.6 million New Yorkers, those earning below $150,000 a year are eligible for the tax refunds that total to three billion dollars. This initiative comes in accordance with increasing pressure on lawmakers to address the issues of affordability that weigh heavily on the minds of New Yorkers and Americans as a whole. This concern became evident during the 2024 elections. As Donald Trump swept all the swing states, he also made significant gains in New York, a traditionally strong blue state. While Harris ultimately won the state, he garnered 95,000 votes in New York City whereas Democrats lost half a million. According to the Pew Research Center, the primary driver of this red shift was major concern over the economy, and more specifically, inflation. 

During Governor Hochul’s 2025 State of the State speech in which she announced the Money in Your Pockets program, she lamented the rising prices of eggs, diapers, and hamburgers in addition to how this affects New Yorkers. She argued that inflation-driven spending caused the state to collect a higher revenue from consumption and use taxes. This is blatantly untrue, since data from the State Comptroller’s office tells a different story. According to tax revenue receipts, the rise in consumption and use tax revenue simply represented a return to pre-pandemic levels while inflation plays a negligible role. In the 2019-2020 fiscal year (before the COVID-19 pandemic) the consumption and use taxes generated $18 billion in revenue. Following lockdowns, reduction in travel, and other pandemic-related changes, spending drastically fell, lowering revenue from these taxes. Right after the COVID-19 lockdown, revenue dropped from $18 billion to $16.1 billion. By the 2021-2022 fiscal year, revenue returned to a level similar to that of FY 2019-2020, reaching $19 billion. This concrete data proves that Hochul’s belief of consumption tax revenues being driven by inflation is not true. 

The vast majority of the everyday products that Governor Hochul cited as examples of inflation, such as food products, diapers, drugs, certain beverages, and medicines, are already exempt from New York’s four percent sales tax. Hochul seemed to have forgotten this, which means the revenue from that tax could not have risen based on the rising costs of these goods during the inflation spike. The basis of the Money in Your Pockets program has no merit.

Moreover, this three billion dollar handout is unlikely to improve New York’s economic situation. While the stimulus package might provide a short-term boost in consumer spending, its inflationary effects caused by injecting money into the economy would make affordability gains insignificant in the long run. In other words, Hochul’s solution will only exacerbate the problem it is supposedly trying to fight. More spending from consumers pushes up demand for goods, which in turn raises the prices of those goods. A more effective way to spend the consumption and use tax revenue would be to invest it into programs that have a proven track record of improving the economy.

For example, New York’s road infrastructure has fallen into a state of decline. According to the New York State Department of Transportation, a third of the state’s road infrastructure—around 17,000 lane miles worth of pavement—is in fair or poor condition. According to the National Transportation Research Group, the resulting vehicle damage, traffic crashes and congestion-related delays cost New Yorkers $36.7 billion per year. Money that would be wasted on a short-term stimulus package could otherwise be used to boost the state’s road maintenance budget, which now stands at a mere two billion dollars. Investing in New York’s highway and road infrastructure will help New Yorkers and the state economy reap benefits far greater than those from any stimulus package. 

The state could also completely remove the consumption and use taxes—creating a permanent tax break for New Yorkers—instead of providing a short-term stimulus handout. A permanent removal of these taxes would reduce financial burdens on consumers and create more economic activity in addition to opportunities. Sales taxes are already regressive, meaning that they have a much larger effect on lower income spenders than higher income spenders. By cutting the sales tax, we could save millions of dollars for low-income earners in the long-run rather than just for a year. Other tax cut initiatives both create economic growth and are projected to remain debt neutral over the long term. For example, according to the Tax Foundation dynamic projection model, the Tax Cuts and Jobs Act (TCJA) will pay for itself by 2028 and remain debt neutral in the long-run.