State Rundown 4/9: A Progressive Pushback

Residents and state lawmakers across the country are pushing back against anti-tax measures and are looking for ways to protect revenue and advance proposals that would raise revenue in progressive ways. This comes at a time when federal policy brings significant risks for state tax revenue (for more on that, check out our new brief). 

Voters in Louisiana recently said “no” to constitutional amendments that would drastically reduce the state’s income tax cap by a full percentage point and further hamper state budget growth. Meanwhile, House members in Minnesota released a bill that would make up for potential lost Medicaid funding from the federal government by adding a new tax bracket for millionaires, and Maryland Gov. Wes Moore now has on his desk a budget that closes the deficit with several progressive income tax changes. Residents up north in Anchorage, Alaska also made their voices heard in a town hall meeting where they pushed for progressive tax solutions to support at-risk education spending. Finally, Colorado legislators are pursuing a better tax system by suing to nix the harmful effects of TABOR.

Major State Tax Proposals and Developments

• LOUISIANA voters overwhelmingly rejected four constitutional amendments, some of which would have rewritten large parts of the state’s budget and tax laws. Amendment 2 would have lowered the state’s constitutional cap on income taxes from 4.75 to 3.75 percent while also limiting state budget growth. Despite voter rejection of the measure, state lawmakers are already discussing how to repackage and revive the amendment this legislative session. – NEVA BUTKUS 

• MINNESOTA House members have unveiled the “Protect Medicaid, Not Millionaires” Act, which would create a personal income tax bracket on single filers with incomes over $1 million and married filers over $1.66 million that would adjust based on the revenue needed to compensate for lost federal funding for Medicaid. – NEVA BUTKUS 

• The MISSOURI Senate modified and approved a House proposal to fully exempt capital gains from the state’s income tax despite significant concerns about the measure’s cost. Senators also added more modest measures to exempt diapers and period products from the state’s sales tax, and an expansion of the state’s senior property tax circuit breaker. The capital gains exemption, which makes up most of the bill, would direct 80 percent of the tax cuts to the richest 5 percent and two-thirds of its tax cuts to the top 1 percent. – ELI BYERLY-DUKE 

• MARYLAND lawmakers passed a budget that includes $1.6 billion in tax and fee increases to help close the state’s $3.3 billion deficit. The overall progressive tax package includes two new brackets for high-income residents earning over $500,000 and $1 million a year, a 2 percent tax on capital gains for those earning over $350,000, a phaseout of the itemized deduction for those earning over $200,000, and tax increases on cannabis, sports wagering, and digital services. The bill now heads to Gov. Wes Moore’s desk. – MILES TRINIDAD 

State Roundup

• At a recent town hall in Anchorage, ALASKA, taxes and revenue took center stage. Many residents advocated for new taxes to help fund new education spending that may be at risk due to lagging budget projections. 

• Lawmakers in COLORADO have their sights set on the Taxpayer’s Bill of Rights (also known as TABOR) after a resolution passed out of the House Finance Committee that would challenge the constitutionality of the provision in state district court. TABOR, a constitutional amendment restricting growth in revenue collections to an arbitrary “population-plus-inflation” formula, has had significant negative effects on Colorado’s finances.  

• Legislative leaders and FLORIDA Gov. Ron DeSantis are at odds over tax cut proposals this session. While Gov. DeSantis is pushing for additional property tax cuts, House leadership is considering legislation to lower the state’s sales tax from 6 to 5.25 percent.  

• IDAHO‘s Child Tax Credit, which provides families with a $205 nonrefundable credit for children under 17, is set to expire at the start of 2026 after lawmakers ended the 2025 legislative session without taking action on reauthorizing the policy. 

• House members in INDIANA are weighing a new property tax cut proposal that would phase out business personal property taxes while having municipalities decide whether to increase their local income tax rates.  

• KANSAS lawmakers have failed to come to a compromise on a property tax cut plan. While Senate members pushed for a valuation cap of 3 percent, House members favored a rolling average to soften the blow to municipalities.  

• MAINE lawmakers are considering a bill that would expand the state’s Dependent Exemption Tax Credit, their state Child Tax Credit, by allowing families with kids younger than 6 to receive an additional $300 per child.  

• MAINE lawmakers are also considering a bill that would double the state’s real estate transfer tax for properties sold for over $1 million. 

• A bill backed by MONTANA Gov. Greg Gianforte that would cut the state’s top marginal income tax rate by a full percentage point over two years was tabled by the Senate Taxation Committee. 

• Gov. Henry McMaster of SOUTH CAROLINA and legislative leadership’s tax cut proposal is causing a stir after a state fiscal analysis showed 60 percent of South Carolinians would initially pay more under the legislation. This tax increase would result from the state moving from federal taxable income to adjusted gross income to calculate state tax liability. The legislation would also move the state from a progressive personal income tax structure to a 3.99 percent flat tax that would phase down to 2.49 percent over time.  

• UTAH Gov. Spencer Cox signed into law SB 71, which expands eligibility for the tax credit for Social Security benefits, and HB 106, which cuts the income tax from 4.55 percent to 4.5 percent and expands the Child Tax Credit to include children up to 5 years old. 

• The debate in WASHINGTON state continues as lawmakers and Gov. Bob Ferguson try to find a mix of revenues and funding cuts to balance the budget. Though Ferguson has said he would veto a financial assets tax of the size originally floated by both legislative houses, he indicated openness to a smaller version as a test, and to new progressive revenues in general. Other tax options on the table include a regressive Business & Occupations Tax increase, a progressive payroll tax, and allowing local property taxes to grow at a more reasonable rate. Gas tax and tobacco tax increases are also being discussed. 
• The WEST VIRGINIA legislature is considering a measure to divert the personal property tax payments of data centers from local governments to the state. Although the measure divides the money between several purposes, much of it would be deposited in a fund intended to finance income tax cuts. 

What We’re Reading

• A new ITEP brief identifies a range of federal policies – trade wars, deportations and anti-immigrant policy actions, federal employee layoffs and contract cancellations, cuts to IRS capacity to enforce tax law, and new income carveouts – that pose significant risks to state tax revenues.  

• Researchers at UCLA’s Lewis Center for Regional Studies suggest reforms to Los Angeles’ mansion tax, including making it a marginal tax. 

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