The Good News: NY State Is So Flush with Cash, It Can Fund Universal Child Care

Mayor Mamdani campaigned on raising taxes on the wealthy and big business to fund universal child care, and polls of New Yorkers on this subject show broad public support to raise funds on millionaires to fund that goal, 65%-27%.  Governor Kathy Hochul endorsed him this fall, saying they shared much in common on issues of affordability even if she didn’t support his tax proposals.

Nonetheless, he sure moved the needle when the Governor held a press conference on January 8^th, 2026 with the new Mayor to announce the State would begin a major expansion of funding for Universal Child Care in the upcoming State budget .

The Governor submitted the State budget on January 20^th, 2026 for the coming fiscal year that starts in April, announcing the State would run a 2-year surplus of $5.9 billion, $2.4 billion in the current fiscal year and $3.5 billion for FY 2026-2027.

The State is suddenly so flush that the budget plan includes $1.7 billion for expansion of Universal Child Care, consisting of $1.2 billion for child care vouchers (day care) to end current waiting lists, and $561 million for universal Pre-K statewide and a major boost for + 3-K in New York City.

The State will provide the funds for NYC to initiate a pilot program for two-year-olds this year, supported with $500 million next year, and 30,000 seats for 2-year-olds in the City by 2030. Pilots for 2-K will also start in other parts of the State.

How is it that NYS Has the Money to Fund Universal Child Care?

I  wrote just a few weeks ago that universal child care in New York City was much closer than you think and that tax revenue was rising far more than anticipated. The current budget (supra) shows State income tax revenue will rise 11%, almost $7 billion, even after the $2 billion inflation refund checks sent out last fall to the State’s residents, and another $4 billion rise in income tax revenue in the budget to begin in April. This table, the most recent information available, shows the top 1% of New York taxpayers paid nearly 54% of the State’s income tax in 2021, coming off a stock market boom in 2021 similar to the one that just occurred in 2025, when the S&P 500 index rose 17%. The Top 1% line for 2021 in the table reads across to a liability column, which represents the percentage of income tax revenue provided by the top 1% of taxpayers, showing 2021 top 1% liability @ 53.6%.

If the top 1% of New York taxpayers (nearly $1 million a year in the table above) pay in the range of 50% of the State’s income tax liability, that means that about half the extra $11 billion coming in over 2025 and 2026, or $5.5 billion, is coming just from the top 1% of New York’s taxpayers, more than enough to fund the $ 1.7 billion universal child care expansion in the Governor’s budget, let alone other major investments like school aid and health care.

In 2025, Wall Street Produced a Fortune, and New York is Taxing It

State Comptroller Tom DiNapoli’s 2025 annual report on the NYC Securities industry showed that the industry’s profits in 2024 were the fourth highest on record, and in the first half of 2025 rose by another 30%, on target for total profits in 2025 of $60 billion, possibly the highest ever.

The Comptroller’s report says the industry produced more than 19% of the State’s total tax collections in 2024-2025, and the industry’s profitability was increasing in the current year. The State budget reports that financial industry bonuses to its employees increased 25% in 2025. The State is taxing these wealthy people.

At the time of adoption of this year’s State budget last May, the Governor and the Legislature enacted an extension until 2032 of higher income tax rates on the super-wealthy that was first enacted in 2021 under then Governor Cuomo (yes, Cuomo raised taxes on the wealthy). In 2021 the State had raised rates on incomes above $2.1 million from 8.85% to 9.65%, above $5 million to 10.3%, and above $25 million to 10.9%.  New York City taxpayers pay a separate 3.87% at those income levels. For those making between about $323,000 and $2.1 million, New York State’s rates for married filing joint are 6.85%.

The combined New York State and New York City rates (if you are a resident of the City) on the super-wealthy are about 13.5% for incomes above 2.1 million, a little over 14% for incomes above $5 million, and nearly 14.8% for incomes over $25 million, the highest in the nation for the super-wealthy. California’s 13.3% rate kicks in at $1.3 million for married filing joint, and New Jersey’s 10.75% kicks in at $1.5 million, meaning their income thresholds for the highest rates are lower than $2.1 million in New York. At an income of $1 million, a New York couple living outside NYC pays a top rate of 6.85%; inside NYC they pay a combined rate of 10.72%.

So, Should the State Allow the Mayor To Still Raise Taxes on the Wealthy?

In my article on Universal Child Care, I mentioned that Mayor Mamdani faces a $10 billion deficit in the City’s fiscal year 2026-2027 starting in July (and $2 billion in the current year). The amount may drop for the same reasons the State is suddenly flush with cash, but there will be challenges.

I suggested the State could meet the Mayor halfway on his demand for a tax increase on the wealthy, adding one point (rather than the Mayor’s proposed two points) to the City’s top rates for wealthy residents, and use those funds for deficit relief for several years before setting up a trust to start paying for child care ages 0 to 3. It will take several years to scale up the capacity to serve that population anyway, with the State already scaling up serving two-year-olds. In fact, bringing the threshold for the top rate to over $600,000 a year, rather than $ 1 million, would bring the top 5% of City taxpayers to the higher rate and could yield close to $2 ½ billion. The Governor’s budget may offer other avenues, like increased school aid, or retention of funds to provide for migrant shelter, to provide relief to the City’s budget.

Shortly after I published my article about how Universal Child Care is much closer than you think, State Comptroller Tom DiNapoli’s office produced a report on New York City’s programs for children under age 5. The report confirmed that child care in the City for children ages 3-4 was extensive, with a participation rate for DOE preschool and Agency for Children Services vouchers at 72%, which, combined with funding for unfilled seats, reached 86% coverage for those ages (See table below). The Governor’s 3-K funding for the City in the new budget should attain virtually universal care for ages 3 and 4 very soon. The table also shows current enrollment for infant and toddler programs under age 3, including vouchers, is about 32,000, about 13% of the population age 0-2 (See table below). This excludes about 10,000 age 0-2 children in the early intervention program for children with disabilities. The Governor’s plan for age 2 seeks 30,000 seats within five years, and the State and City can add vouchers as time goes on.

So, here’s my advice. The Governor’s budget, benefiting from huge increases in income tax revenue due to a good two years for the financial industry and for the wealthy from stock market gains, provides enough money to make very serious progress on universal child care. A modest increase in New York City’s income tax on the wealthy could help the City overcome its deficits and set aside the funds to complete Universal Child Care.

The Mayor could declare victory on a tax hike on millionaires to fund his program, even though the State is actually giving the City most of the money needed for the goal.

A little side note:

Taxes like sales taxes and property taxes can reverse or diminish the overall progressivity of a State’s tax structure, and NY is no exception when those types of taxes are included in who pays taxes. Nonetheless, the Institute for Taxation and Economic Policy, in its report, Who Pays? identifies only six states, including New York and the District of Columbia, whose tax structures reduce inequality. Florida has the most regressive tax structure in the nation.