Full Breakdown
NYC Leaders Seek PTET Credit Cut to Bridge $5.4 B Deficit; Governor Hochul Rejects Proposal
5/2/2026, 7:48:13 AM
The Budget Gap and PTET Proposal
Mayor Zohran Mamdani and City Council Speaker Julie Menin announced a joint request that the New York State Legislature reduce New York City’s Pass-Through Entity Tax (PTET) credit from a full 100 percent rebate to 75 percent. The city estimates the change would generate roughly $1 billion in additional revenue, a figure they say is needed to address a projected $5.4 billion deficit for the 2027 fiscal year. The request was made as the state budget remains nearly a month overdue, prompting the city to extend its executive-budget deadline from May 1 to May 12.
Background & Context
The PTET was created after the 2017 federal Tax Cuts and Jobs Act capped the state-and-local tax (SALT) deduction at $10,000. By allowing pass-through businesses (S-corporations and LLCs) to pay a city-level tax that is fully rebated to owners, the credit restores the lost federal deduction. The city argues the credit now functions as a “tax cut for the rich.” State lawmakers have previously floated similar credit reductions in non-binding budget proposals, citing potential revenue of $700 million (Senate) and $900 million (Assembly).
Data & Statistics
- City deficit: $5.4 billion (2027).
- PTET-cut revenue estimate: ? $1 billion (city).
- State aid already pledged: $4 billion (including $1.5 billion direct assistance, $1.2 billion for child-care, and a proposed $500 million pied-à-terre tax on luxury second homes).
- Fiscal contribution: NYC provides 55.6 % of state revenue but receives only 41.7 % of state expenditures.
- PTET benefit distribution: > 95 % of credits go to filers earning >$1 million; > 80 % to those earning >$5 million (city statements). The Fiscal Policy Institute estimates 91 % of PTET savings accrue to millionaires.
Official Statements & Responses
Mayor Mamdani emphasized that “a crisis of this scale cannot be solved without state action.” Speaker Menin framed the request as a bid for “fair-share” funding, noting the city’s disproportionate contribution to state coffers. Governor Kathy Hochul responded, “It’s not happening. We’re not changing PTET,” and urged the city to “look at your expenses,” citing existing state assistance. A Hochul spokesperson reiterated the governor’s position, adding that the state has already provided “fairly unrestricted” money and that the city must “identify savings.”
Criticism & Opposition
Business groups, including the New York State Dental Association, warned that cutting the PTET credit would raise costs for small medical practices and other professionals. Partnership for NYC President Steven Fulop called the proposal “sheer blind stupidity,” arguing it would harm firms already operating in a fragile economy. Republican U.S. Representative Mike Lawler labeled the plan a broken promise not to raise taxes, while Citizens Budget Commission President Andrew Rein argued the budget gap should be closed by “right-sizing spending,” not by new taxes.
Conflicting Reports & Gaps
- Revenue projections vary: city cites $1 billion, Senate Democrats cite $700 million, Assembly Democrats cite $900 million.
- Benefit-share figures differ (city’s > 95 % vs Fiscal Policy Institute’s 91 %).
- Menin described the PTET reduction as a “short-term” measure; Mamdani offered no timeline, leaving the duration of the change unclear.
Verbatim Quotes
- “A crisis of this scale cannot be solved without state action,” — Zohran Mamdani, Mayor of New York City
- “It’s not happening … we’re not changing PTET,” — Kathy Hochul, Governor of New York
- “New York City must get the resources it needs to succeed, and we are aligned on that point.” — Julie Menin, City Council Speaker
- “The PTET is essentially a loophole that allows high-income earners to reduce their federal tax burden,” — Zohran Mamdani, Mayor of New York City
- “We are partners in delivering a responsible budget for New Yorkers, and we’re committed to closing the gap,” — Julie Menin, City Council Speaker
What’s Next
The city’s budget extender now sets a May 12 deadline for the mayor’s executive budget, contingent on the state’s final budget. Legislative committees are reviewing PTET-reduction language, and the governor’s office continues to promote the pied-à-terre surcharge as an alternative revenue source. Negotiations are expected to continue through the state’s own budget-approval process, which remains pending.
