State Rundown 3/6: In the Shadow of Chaotic Federal Policymaking States Seek to Tax the Top, Cut Taxes
March 6, 2025
.ITEP Staff
March 6, 2025
Proposals from governors in both New Jersey and Wisconsin include provisions to tax high-income earners. Meanwhile, several major tax proposals are advancing in the great plains, with Iowa considering a major cut to unemployment taxes, North Dakota advancing new benefits for private schools, and Wyoming cutting property taxes.
The District of Columbia is facing a more than a $1 billion revenue shortfall over the next three years, compared to previous estimates, and a mild recession due in large part to the layoffs of federal workers.
Major State Tax Proposals and Developments
- In his budget proposal, NEW JERSEY Gov. Phil Murphy has proposed new tax provisions that would raise about $1 billion. Included is a roughly $320 million increase in taxes on the sale of mansions in the state. Most of the proposals are related to sales and excise taxes: expanding what is subject to the sales tax base; increasing rates on alcohol, cannabis, gambling, tobacco, and firearms; and creating a tax on warehouse truck traffic. – ELI BYERLY-DUKE
- WISCONSIN Gov. Tony Evers has proposed a handful of tax provisions. Among them is a new top income tax bracket on wealthy households; a new rate of 9.8 percent would be levied on households with income exceeding $1 million. He also proposed adding a cap on tax breaks for manufacturers, cuts to local property taxes, additional property tax cuts for veterans and seniors, exempting items of the state’s sales tax base, and exempting tips from state income tax. Republican lawmakers have indicated support for broad tax cuts but have not revealed a plan. – NEVA BUTKUS
- WYOMING Gov. Mark Gordon signed into law a property tax cut bill that provides a 25 percent exemption on the first $1 million of a single-family home’s fair market value. – MARCO GUZMAN
State of the State Addresses
- FLORIDA Gov. Ron DeSantis called for cuts to property taxes, the elimination of a tax on business rents, and multiple sales tax holidays – including a new sales tax holiday on marine fuel – during his state of the state address.
State Roundup
- Facing a bleak fiscal outlook, ALASKA lawmakers have introduced proposed tax increases on the oil industry that include reducing the value of certain tax credits and applying corporate income taxes to privately held oil companies. A separate bill would levy a corporate income tax on some out-of-state businesses that operate as online retailers.
- Gov. Sarah Huckabee Sanders of ARKANSAS unveiled her plan to eliminate the state’s .125 percent tax on groceries which would cost the state roughly $11 million annually.
- A CONNECTICUT bill would create a 1.5 percent payroll tax paid by employers to help families pay no more than 7 percent of their household income on childcare.
- The DISTRICT OF COLUMBIA‘s Chief Financial Officer Glenn Lee announced that the city is facing a more than $1 billion budget shortfall over the next three and a half years due to tax revenue reductions due to the current presidential administration’s layoffs of federal workers. The D.C. council’s chairman noted that raising taxes is not an option for him, but the mayor says nothing is off the table. Policy experts in the District make the case for revenue.
- IDAHO Gov. Brad Little will decide on a $253 million income tax cut bill that would cut the flat income tax rate from 5.695 percent to 5.3 percent, among other cuts. The governor also signed into law a $50 million program that will direct state funds to residents choosing to send their children to private school or homeschool.
- The IOWA state Senate advanced a $1 billion cut to the state’s unemployment tax. Governor Reynolds proposed the measure claiming the unemployment trust fund already has sufficient funds. The state, which recently cut unemployment benefits, is obligated to pay unemployment benefits when they increase dramatically during recession.
- Lawmakers in INDIANA have yet to come to a consensus regarding property tax cuts. Gov. Mike Braun’s property tax cut proposal was submitted in Senate Bill 1, but Senate lawmakers, concerned with the impact on local government, removed bill language that capped property tax assessments and increased the homestead standard deduction – two focal points of Gov. Braun’s proposal.
- MARYLAND lawmakers introduced legislation that would tax certain business-to-business transactions – such as lobbying, accounting, tax preparation services, and computer and IT services – that could generate up to $1 billion. The legislation comes as lawmakers try to solve a $3 billion deficit.
- Legislation in MISSISSIPPI would increase the amount of tax credits that can be allocated towards private school vouchers from $9 million to $40 million annually by 2027.
- MISSOURI lawmakers are considering a measure to fully match donations of up to $50,000 to anti-choice pregnancy crisis centers with tax credits. This would allow the majority of Missourians to choose not to pay taxes to the state and instead donate the money to pregnancy crisis centers. The qualifying gifts to anti-abortion groups include not just cash but also donations of corporate stock, aiding the wealthy and anti-abortion centers alike.
- Meanwhile, MISSOURI lawmakers have proposed exempting groceries from the state’s sales tax. The change would reduce revenue by $18.4 million annually, with a significant portion of the loss falling on local governments. As a result, the measure has attracted significant opposition from local governments.
- In MONTANA, a package of property tax bills – some that have received bipartisan support – have made their way from the House to the Senate and are now up for debate.
- The NORTH DAKOTA House of Representatives passed legislation that could create an education savings account allowing parents to access 50 percent of the statewide average per-pupil funding (about $4,000 per student) to be used on qualified expenses as long as the child is not enrolled in public school or homeschooled.
- Several TENNESSEE lawmakers have proposed eliminating the state’s sales tax on groceries, offset by closing major loopholes in the state’s corporate tax structure by adopting worldwide combined reporting.
- After some debate, UTAH is no longer expected to fully eliminate tax on Social Security benefits for seniors due to lacking sufficient funds to cover the cost. Lawmakers, however, still hope to increase the exemption cap for Social Security income.
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