Gov. Kathy Hochul (D-NY) is unveiling her $260 billion state budget on Tuesday, an ambitious proposal that includes a tax on nicotine products like Zyn but skips an income tax hike.
The budget proposal signals Hochul’s defiance of New York City Mayor Zohran Mamdani, who wants to tax the rich as part of his economic agenda. Hochul argued otherwise.
“I don’t believe in raising taxes for the sake of raising taxes,” she said last week. “What is served by that? We have high taxes already predating my time. We have enough revenues to do what we want to do and what we need to do to support our state. So, beyond that, I don’t see a justification.”
That said, Hochul intends to crack down on tobacco-free nicotine pouches, most notably including Zyn, by requiring a 75% excise tax. The same tax rate is applied to cigarettes and other tobacco products, which are currently taxed at $5.35 per pack.
It remains unclear at this time how much money New York would obtain from its proposed tax on Zyn.
The brand’s parent company, Philip Morris International, generated more than $1.88 billion in net revenue in 2024. While last year’s final sales haven’t been released yet, Forbes estimated at the start of 2025 that Zyn product sales would exceed $2.9 billion after the Food and Drug Administration approved the nicotine pouches for sale in the United States based on their lower health risks compared to traditional tobacco products.
New York Budget Director Blake Washington called Zyn a “gateway drug” in arguing that the nicotine product should be taxed.
“The state of New York pays for the fallout of bad public health decisions, so using Zyn, there’s symmetry in taxing those types of products,” Washington said this week. “It just gives us more resources to fund the interventions [and] have people not use them in the first place. If you tax people too much on their Zyn, maybe they’ll stop using it.”
Furthermore, the governor intends to extend the 7.25% corporate tax rate for another three years. The increased tax rate applies to corporations that make over $5 million in profits. It was originally implemented by former Gov. Andrew Cuomo and later renewed by Hochul.
Mamdani is expected to continue pressing Albany to raise income taxes on the wealthy, especially considering the state lost $10.3 billion in overall federal aid under the Trump administration. If the federal government continues pulling funding from New York, Hochul retains the option of raising taxes.
The federal funding cuts resulted in a $3 billion loss for the Essential Plan, a state-run health insurance program for adults who don’t qualify for Medicaid. Hochul’s plan raises Medicaid spending by 11.4%. Her budget office committed $38.2 billion to healthcare in the coming fiscal year.
The budget proposal is a sizable increase from the $254 billion budget in New York last year. The increase is driven by Hochul’s allocation of $4.5 billion toward the state’s child care programs. The funding includes $210 million to make pre-kindergarten accessible for 4-year-olds statewide. The money will also go toward a new “2-Care” preschool program for all 2-year-olds in New York City.
Hochul and Mamdani made a significant announcement together earlier this month about investing government resources in child care programs.
The progressive push for universal child care is led by Mamdani, a self-described democratic socialist with whom Hochul has allied herself. However, the alliance between the two may not last due to their political differences.
After Hochul’s annual State of the State address last week, Mamdani and his allies called on her to raise taxes. The mayor campaigned on taxing New Yorkers who earn more than $1 million per year to theoretically pay for universal child care.
Mamdani recently partnered with Ms. Rachel, a left-wing children’s entertainer on YouTube, to push his agenda by singing songs to toddlers about universal child care and free buses.
Before becoming mayor at the start of the year, Mamdani appointed Ms. Rachel to his inaugural committee. Ms. Rachel, whose real name is Rachel Griffin Accurso, has drawn criticism for her anti-Israel views — something she shares with New York City’s first Muslim mayor.
The $260 billion budget proposal will be considered by New York’s Democratic-controlled legislature for approval in the coming weeks.
Hochul faces a tough reelection bid this year, with Lt. Gov. Antonio Delgado (D-NY) running against her in the Democratic primary in June. From there, the victor will advance to the general election.
The Democratic governor started delivering her budget address at 1 p.m. Tuesday. A number of the proposals within the state budget were revealed in her recent State of the State address.