New York Governor Hochul Proposes No-State-Income-Tax-on-Tips for Tipped Workers

By Charlie McCarthy | Thursday, 01 January 2026 12:48 PM EST

New York Gov. Kathy Hochul announced on Thursday she will propose legislation to eliminate state income taxes on up to $25,000 of tipped income in tax year 2026 as part of the next fiscal year budget. The measure aligns with the federal “no tax on tips” policy backed by President Donald Trump and enacted nationally under his tax package.

In a release from her office, Hochul stated: “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.” The announcement follows weeks of criticism that Democratic-led states have been slow to adopt Trump’s tax relief agenda at the state level, potentially leaving working-class residents paying higher state taxes while federal burdens decrease.

The New York Post reported Republicans have targeted New York, Illinois, and California for delaying actions to ensure tipped workers receive immediate relief. Hochul has also faced pressure from service industry workers who emphasized that removing taxes on tips could provide financial breathing room amid high living costs. Bartender Rion Gallagher told the Post: “If we weren’t taxed on our tips, we’d be able to save more, we’d enjoy life a little more.”

Hochul’s office highlighted middle-class tax cuts taking effect Thursday, expanded child tax credits, and minimum wage increases statewide, including $17 an hour in New York City, Long Island, and Westchester. The proposal also follows national attention on the federal “no tax on tips” provision in Trump’s “One Big Beautiful Bill Act,” signed into law July 4.

ABC 13 in Rochester reported the federal policy allows certain workers to deduct qualified tips up to $25,000 annually from 2025 through 2028. Restaurant operators noted the change could help retain staff and rebuild an industry recovering from pandemic disruptions. A Rochester-area restaurant owner described it as “a great incentive” for hiring and keeping employees.

The move coincided with Treasury Secretary Scott Bessent’s social media criticism of Hochul and other Democratic governors as “Grinches Who Stole Christmas” for not swiftly adopting federal tax cuts. Hochul dismissed the remark, calling it a “Grinch fanfic.”

While conservatives questioned why it took pressure from working-class voters and Trump’s federal agenda for Albany to act, Hochul’s proposal signals growing support among Democrats for policies aligned with the president’s tax relief efforts.