Both sides of the 'Big Bill': How the federal budget impacts New York
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ALBANY, N.Y. (NEXSTAR) — A sweeping federal budget law—dubbed the "One Big Beautiful Bill" by supporters and the "Big Ugly Bill" by its critics—continues to fuel debate in New York, with state leaders warning of severe consequences for healthcare and food assistance programs. Signed into law by President Donald Trump on July 4, the legislation ultimately passed the House by a slim 218 to 214 margin, with all of New York's Republican representatives voting in favor.
The OBBB extends many tax cuts from the 2017 Tax Cuts and Jobs Act that were set to expire at the end of 2025 and introduces new provisions that proponents say will boost the economy, protect jobs, and provide tax relief for families. But opponents say those cuts disproportionately benefit the wealthy, imposing serious economic burdens on—while reducing services in—New York, especially its social safety net.
Supporters in New York—primarily Republican members of Congress—championed tax relief and investments in national security and the economy. Congressmember Nick Langworthy said that the bill protects 405,000 full-time jobs in New York, and will increase take-home pay by up to $11,700. He and the White House promoted numbers from the Council of Economic Advisers, finding that the bill will raise wages in New York by $4,400 to $8,000 over the next four years.
He added that about 5% of the state's workers could benefit from eliminating taxes on tips, and 22% of workers who regularly work overtime could see gains from the new no-tax-on-overtime rule. Langworthy also argued that about 3.3 million seniors in New York could benefit from removing taxes on Social Security income.
A key provision for New York's Republican caucus has been the increase in the State and Local Tax deduction, the SALT cap. Previously limited to $10,000, that restriction rises to $40,000 for households earning up to $500,000 for five years under OBBB, starting with tax year 2025. Congressmember Nick LaLota celebrated "real tax relief for local families," noting that households in his district earning $250,000 could now keep almost "$5,000 more per year thanks to the SALT fix."
LaLota also argued that the bill "starts to close the Medicaid provider tax loophole that allowed states to inflate federal reimbursements—ending a long-running budget gimmick that will help stabilize the program in the long run." Thats the Managed Care Organization or MCO tax. He said that programs like Medicaid and SNAP should "provide a safety net for Americans in need, and help able-bodied adults work toward independence."
Congressmember Claudia Tenney said she likes that the bill "preserves the advanced manufacturing investment credit, sending a strong message that America is committed to tech leadership and job creation." She also pointed to positive economic indicators, including 147,000 jobs added in June and falling unemployment, predicting that "America’s economy will soar even more" once the bill is fully in effect.
According to Congressmember Andrew Garbarino, the bill will safeguard essential programs and strengthen our national security. He claimed that the bill won't cut Medicaid for pregnant women, children, seniors, people with disabilities, or poor families. Instead, he said, "These targeted reforms are designed to protect benefits for those who truly need them while eliminating waste, fraud, and abuse that threaten the program long term."
Congressmember Mike Lawler has made the case that making TCJA cuts for small businesses permanent and cutting regulations will "help them reinvest, hire, and grow."
Other Republican lawmakers underscored the bill's national security investments. Congressmember Nicole Malliotakis said the law will "modernize air traffic control, upgrade our military and Coast Guard capabilities, [and] enhance American shipbuilding, border security, and homeland defense."
And Congressmember Elise Stefanik credited the bill with delivering an "increased number of border officials" to address the "Northern Border national security crisis."
More specific benefits touted by Republicans include:
- No taxes on car loan interest
- Extension of the 199A pass-through deduction for small businesses, potentially benefiting 312,000 companies in New York
- Enhanced Opportunity Zones, creating around 69,000 jobs and 22,000 housing units in New York
- $50 billion for a national Rural Transformation Fund for rural and community hospitals
- $46.55 billion for border infrastructure and wall systems
- $10 billion for a State Border Security Reinforcement Fund
But New York's Democratic leaders and independent fiscal watchdogs contend the OBBBA will have a negative impact. New York's healthcare system faces an estimated impact of almost $13 billion per year from the OBBBA, according to Governor Kathy Hochul's office. That includes 1.5 million New Yorkers losing health insurance and over 300,000 households losing some or all of their Supplemental Nutrition Assistance Program benefits.
On Friday, Hochul said the bill represents a "horrible assault on every American in our values," particularly impacting healthcare and food assistance. She warned that cuts would lead to rural hospital closures, affecting everyone regardless of Medicaid status.
The Fiscal Policy Institute, a state tax and budget think tank, estimates the OBBBA will directly cost New York about $10 billion per year, and $13 billion more from the indirect effects of a destabilized health system. FPI Director Nathan Gusdorf explained on Thursday that, while past federal funding reductions were temporary, the current situation represents a long-term problem requiring long-term solutions.
Currently, the single major area of concern may be the Essential Plan, a Medicaid-like health insurance program for low-income individuals. In New York, it's federally funded to the tune of $750 million, covering 1.6 million.
The OBBB makes non-citizens ineligible for the federal funding that supports this plan. According to the New York State Department of Health, this change will cost New York about $2.7 billion per year. Effective January 1, 2026, it would force about 500,000 individuals into state-funded Medicaid. DOH said that another 224,000 Essential Plan enrollees will lose coverage.
OBBB also does eliminate the state's ability to collect proceeds from the MCO tax. This will cost New York $350 million in the current fiscal year (ending March 2026) and about $2.5 billion over the following two fiscal years.
New requirements for Medicaid recipients, set to take effect January 1, 2027, will make able-bodied adults demonstrate 80 hours a month of "community engagement"—paid employment, education programs, or community volunteering—to maintain their benefits. The state estimates this could lead to 1.2 million people losing Medicaid.
On Tuesday, New York Senate President Pro Tempore and Majority Leader Andrea Stewart-Cousins spoke at a press event organized by the Democratic Legislative Campaign Committee. She said the work requirements "push tens of thousands of New Yorkers off food assistance, including veterans, young people aging out of foster care, and people facing housing insecurity. Not because they're unwilling to work, but because they'll be buried in paperwork and red tape."
"What we're facing is not just another partisan budget out of Washington," Stewart-Cousins said. "It's an assault on working families, and the burden is falling squarely on the states to clean it up."
"Every single New York Republican in Congress, every single one of them voted yes," said the Senate majority Leader. "They chose their party over their people."
Stewart-Cousins called the budget bill "an assault on working families, and the burden is falling squarely on the states to clean it up." She said it is "jeopardizing everything from hospitals, nursing homes, addiction services, and maternal care."
At FPI's Thursday briefing to discuss New York's financial response to the federal budget, Gusdorf said the extended TCJA tax cuts represent a "multigenerational strategy of deficit financing tax cuts" that will cost $4.5 trillion over the next decade.
The FPI's analysis of the OBBB showed that the benefits of included tax cuts disproportionately favor the rich. Of about $570 billion in tax cuts for 2027, almost $400 billion will benefit the top 20% of households, which are those that earn over $150,000. New York households earning over $1 million a year could see an average annual benefit of $80,000.
He pointed out that the federal tax cuts for high-income New Yorkers create "fiscal space" for the state to modestly raise taxes on upper brackets. The state could offset funding shortfalls without significantly increasing the overall tax burden on its residents, Gusdorf suggested. Increasing personal income taxes by 1% on those earning over $250,000 would generate $5 billion per year, and imposing a 1% sales tax on services could yield $5 billion or $6 billion more. New York currently only applies that 1% sales tax to goods.
The OBBB also mandates that states contribute to the cost of SNAP benefits for the first time in the program's history. According to FPI, New York could face new, additional annual costs of up to $1.4 billion, depending on its payment error rate. The federal share of SNAP administrative costs will also drop from 50% to 25% starting in October 2026, increasing costs to the state by about $36 million per year and to counties and New York City by about $168 million per year.
On Wednesday, the Citizens Budget Commission also examined our fiscal position in the wake of OBBB, concluding that neither state nor New York City are prepared for federal cuts or a potential recession. The CBC noted that the state's $254 billion budget relies on the feds over a third of its funding, primarily for health care programs. CBC also reported that the state's rainy day reserves are at $14 billion—$7 billion less than last year.
The CBC's Vice President for Research, Ana Champeny, also pointed out that New York and local municipal governments already collect the most taxes per capita nationwide. Even before accounting for the full impact of federal cuts, CBC predicted that the state's structural budget gap will grow to $22 billion.
The CBC also highlighted how the city relies on the federal government for 70% of the New York City Housing Authority's revenue, making it particularly vulnerable to reductions in federal housing grants.
On Friday, Hochul again condemned the OBBB, saying it benefits the richest of the rich and "screws everybody else." She also condemned the Republicans who voted for it, alleging they "voted against the interest of their districts," showing a lack of courage.
"Medicaid is a lifeline," Hochul said, pointing out that "one third of all New Yorkers benefit from this program. Half of all children benefit from this program." Besides direct cuts to programs, she also decried the potential loss of tens of thousands of health care jobs.
Congressmember Pat Ryan echoed the governor and FPI on Friday, calling it a "Big Ugly Betrayal" that "irresponsibly adds nearly $4 trillion to the national debt."
But New York State Assembly Minority Leader Will Barclay pushed right back, directly challenging the narrative of cuts and arguing that New York’s $125.8 billion Medicaid program "has clearly drifted too far away from the original intent" and has "snowballed into an avalanche of government bloat and excess."
He contended that the "unchecked growth of Medicaid has been driven by spending decisions from Albany," roasting Democrats over the state's $254 billion budget. Ultimately, Barclay argued that the OBBB has forced New York into fiscal responsibility.
According to Barclay, it is "entirely appropriate to verify eligibility and meet criteria for participation in a program funded by taxpayers," and there is "nothing unfair about setting basic expectations to ensure that capable, qualified individuals are part of the workforce rather than enabling an over-reliance on public assistance." He also criticized Hochul’s approach, calling her press events a "scare-tactic road show" that ignores OBBB's "wildly popular provisions."
Below, you can find analyses from the CBC and FPI: