State Tax Watch 2025

Updated July 29, 2025

In 2025, many state lawmakers face substantial gaps between revenue and spending that will undoubtedly lead to some combination of tax increases or spending reductions. In states without forecasted deficits, state revenues are slowing; and that reduction will be even more dramatic in states that have deeply cut taxes in recent years.

Meanwhile, states are facing immense uncertainty around federal tax and budget decisions, many of which could threaten state budgets. Lawmakers have a choice: advance tax policy that improves equity and helps communities thrive, or push tax policies that disproportionately benefit the wealthy, drain funding for critical public services, and make it harder for working-class families to get ahead.

ITEP tracks tax discussions in legislatures across the country and uses our unique data capacity to analyze the revenue, distributional, and racial and ethnic impacts of many of these proposals. This page is updated with the latest news and movement from each state.

You can also get weekly updates by signing up for our State Rundown newsletter.

To learn more about state taxes across the country, read our latest edition of Who Pays?

Below are summaries of tax legislation discussed or approved in each state. Click on your state to jump to the summary.

•	Alabama
•	Alaska
•	Arizona
•	Arkansas
•	California
•	Colorado
•	Connecticut
•	Delaware
•	District of Columbia
•	Florida
•	Georgia
•	Hawaiʻi
•	Idaho

•	Illinois
•	Indiana
•	Iowa
•	Kansas
•	Kentucky
•	Louisiana
•	Maine
•	Maryland
•	Massachusetts
•	Michigan
•	Minnesota
•	Mississippi
•	Missouri

•	Montana
•	Nebraska
•	Nevada
•	New Hampshire
•	New Jersey
•	New Mexico
•	New York
•	North Carolina
•	North Dakota
•	Ohio
•	Oklahoma
•	Oregon
•	Pennsylvania

•	Rhode Island
•	South Carolina
•	South Dakota
•	Tennessee
•	Texas
•	Utah
•	Vermont
•	Virginia
•	Washington
•	West Virginia
•	Wisconsin
•	Wyoming

Alabama

Gov. Kay Ivey signed into law a measure cutting the state’s sales tax on groceries from 3% to 2%. The cut speeds up a reduction in effect under current law. The measure will cost the state about $122 million per year.
Meanwhile, lawmakers exempted overtime pay from state income tax in 2023, but the exemption expired in June of 2025. The policy has become increasingly expensive, blowing past its initial projected annual cost of $34 million and costing the state $230 million between January and September of 2024.

Alaska

Faced with a $1.5 billion deficit, lawmakers have explored tax increases.
A revenue-raising bill (Senate Bill 113), which clarifies that businesses with at least 50 percent of online sales of goods or services in or to the state must pay state tax, is currently with Gov. Mike Dunleavy awaiting action. Meanwhile, the legislature overrode his veto of House Bill 57, a bipartisan measure to help fund education in the state.

Arizona

Gov. Katie Hobbs signed the $17.6 billion state budget, which did not include major tax policy changes. It did, however, include full funding for the universal school voucher program, pay raises for police and firefighters, and increased state funds for subsidized child care and public education.
While there has been no mention of a special session, a document provided by the Joint Legislative Budget Committee outlined potential impacts of the federal spending bill on the state budget, revealing a revenue reduction of $381 million in fiscal year 2026.

Arkansas

Gov. Sarah Sanders signed legislation to fully eliminate the state’s 0.125% state sales tax on groceries. Meanwhile, universal school vouchers opened up to all students this year. The revenue loss associated with that policy are yet to be fully realized.

California

No major tax policy changes passed during the 2025 regular session, although the state did increase funding for its Film Tax Credit.

Colorado

Gov. Jared Polis signed the state’s $43.9 billion budget under tightening fiscal conditions -- Medicaid premiums increased 5.7% while the TABOR cap only allowed state revenue to grow by 3.6%. To achieve a balanced budget, lawmakers, among other cuts, overruled an amendment to continue a property tax cut program.
A special session, however, may still be imminent to manage the fallout caused by the signing of the federal spending bill.

Connecticut

Gov. Ned Lamont signed the state's budget into law, which includes a $250 per family boost to EITC-eligible filers with dependents. Also included was the extension of the 10% corporate income tax surcharge on companies with at least $100 million in annual gross income or that are taxable members of a combined group.
In his original proposed budget, the governor included an increase to the state’s property tax credit (from $300 to $350), a restructuring of hospital taxes, an increase to the biotech R&D credit, and elimination of the capital stock tax. His budget also aimed to reform corporate taxes in a number of ways, including the removal of a harmful cap that allows companies to avoid taxes by shifting their profits into low-tax states.

D.C.

The District of Columbia is facing a budget shortfall of more than $1 billion over the next three and a half years due to tax revenue reductions from the ongoing 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.
Mayor Muriel Bowser’s 2026 budget, which has largely received initial approval by the council, includes: cancelling a recently passed and planned Child Tax Credit and scheduled sales tax increase, slightly reducing the payroll tax for universal paid leave from 0.75% to 0.72%, and cutting District Medicaid eligibility and TANF benefits.
Meanwhile, a councilmember has proposed a capital gains surcharge as a new progressive revenue raiser.

Delaware

Gov. Matt Meyer approved the state's budget, which includes fee hikes for the Department of Transportation totaling $107 million. The higher fees include learner's permits, name changes, car registrations, and electric vehicle purchases.
The final budget did not include a proposal from Gov. Meyer to create new tax brackets at $125,000, $250,000, and $500,000 with a new top rate of 6.95%, which would ask more of the state’s wealthiest taxpayers and is estimated to raise $35.2 million in 2027. It also did not include his proposal to increase the cigarette tax.
After companies such as Meta and Tesla threatened to leave the state and incorporate elsewhere, lawmakers quickly passed legislation to overhaul the state’s corporate law, favoring controlling shareholders of large companies. The new law will alter how companies can use independent directors to ensure the deals they’ve made will not be subject to court scrutiny and limit the records that shareholders can obtain from companies when investigating possible breaches of fiduciary duty.

Florida

Following months of discussion of property and sales tax cuts, lawmakers have reached a compromise. The result: Florida businesses will no longer pay the state’s sales tax on commercial leases, resulting in an annual state revenue loss of $905 million.
Lawmakers also passed a menu of sales tax holidays that will reduce revenue by an additional $331 million per year. Lawmakers also renewed their commitment to reducing property taxes in 2026 after budget concerns and disagreements largely stalled conversations this year.
Leading up to this decision, competing proposals were at play. The centerpiece of the House plan focused on reducing the state’s general sales tax rate from 6% to 5.25% and would reduce other sales tax rates by 0.75% as well. Senate leaders prioritized exempting clothing items and shoes that cost $75 or less from the sales tax, reducing the business rent tax, and enacting more sales tax holidays. Gov. Ron DeSantis, meanwhile, pushed for a $1,000 property tax rebate.
House lawmakers created a committee to craft a constitutional amendment addressing property taxes for the 2026 legislative session. Policies for consideration include requiring municipalities to hold referendums on property taxes, creating new homestead exemptions of $500,000 for homeowners and $1 million for seniors, and capping assessment increases, among other policies.

Georgia

Gov. Brian Kemp signed legislation to fast-track the state’s phased-in personal income tax rate reductions and legislation to provide individual tax rebates.
The first bill lowers the state’s flat rate from 5.39% to 5.19% starting July 1, at the cost of roughly $880 million a year. The state’s income tax rate is expected to hit 4.99% in 2027. The second would provide a rebate of $250 to individuals and $500 to married couples for Georgians filing income taxes. Additional legislation that would expand the state’s Child and Dependent Care Credit and create a nonrefundable Child Tax Credit awaits the governor’s signature.
Meanwhile, the governor is warning state agencies to prepare for tight budgets as the implications of the federal megabill continue to be realized.
Last year, voters opted to create a property tax valuation cap that limits annual growth in assessments to the rate of inflation. It included an opt-out provision for municipalities, which many taxing districts – including two-thirds of school districts – across the state used to opt out of the cap fearing that the caps could lead to funding shortages. The legislature is now trying to force municipalities to abide by the cap by requiring them to hold another round of local referendums in 2027 to either opt out or be placed under the cap by state law.

Hawaiʻi

The legislature passed a bill that would increase its transient accommodation tax (TAT) from 13.25% to 14%, which is expected to raise $100 million for disaster mitigation to prevent wildfires, flooding, and coastal erosion.
In his State of the State address, Gov. Josh Green touted recent income tax cuts that are estimated to cost the state $5.6 billion in lost revenue over seven years.
Lawmakers have passed several tax bills ahead of the late-conference committee process. Tax policies to watch include: an increase to the state hotel room tax; a new cruise ship tax of $20 per passenger per port entry; an increase to the current state vehicle weight tax; a measure to allow gambling in the state and tax sports betting companies at 10%. Senate leadership tabled a bill that would have increased the maximum tax rate for the state capital gains tax from 7.25% to 9%.

Idaho

Gov. Brad Little signed over $400 million in tax cuts into law. The bills cut the state’s personal and corporate income tax rates from 5.695% to 5.3%, remove capital gains tax from sales of gold bullion, expand the income tax exemption to military pension benefits, increase the state’s grocery tax credit, and reduce property tax revenue by $100 million a year.
The governor also signed into law a $50 million school voucher program that will direct state funds to residents choosing to send their children to private schools or homeschool. It will provide up to $5,000 per student for eligible expenses, including private school tuition. However, lawmakers have since rejected the Idaho Tax Commission budget because they’ve identified that the previously approved $50 million for private schools would cost $675,000 to implement.
Meanwhile, the state’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.

Illinois

Lawmakers ended session with $1 billion in new tax revenue. Key elements of the tax changes include increased taxes on nicotine products (cigarette taxes will increase by $1/pack, while taxes on chewing tobacco, vapes, and nicotine patches will increase from 15% to 45%), a new per-wage tax on online sports betting, and a 50% Global Intangible Low-Tax Income or GILTI tax on profits moved offshore. The plan also amends state law to tax sales from any corporation that does business in the state and not solely businesses with a physical presence in Illinois.
Earlier this year, Gov. JB Pritzker laid out his plan to close Illinois’ impending $3.2 billion deficit in his address to the state. His plan would have raise $469 million in new revenue through adjusting tax rates on certain types of gambling, pausing a sales tax transfer to the road fund, and offering temporary amnesty for taxpayers making delinquent tax payments.
Meanwhile, following the state's nonbinding ballot initiative on whether the state should consider creating a 3% surtax on income over $1 million to fund property tax cuts, lawmakers continue to weigh what form those property tax cuts could take. Advocates in the state released a bold set of progressive tax proposals that could raise billions for shared priorities. The options include cracking down on corporate tax avoidance through Worldwide Combined Reporting and other means, raising existing progressive taxes such as the corporate income tax and estate tax, and creating new taxes such as a “mark-to-market” wealth tax on billionaires and a Capital Gains Excise Tax modeled after the highly successful version in Washington.

Indiana

Despite having wrapped legislative session, lawmakers are considering implementing tolls to make up for lagging gas tax revenue and needed funding for infrastructure. Overall revenues are also down as the state is projecting a $2 billion shortfall for the next state budget.
The agreed upon changes, to date, include a $2 increase to cigarette and tobacco excise taxes and a higher business personal property tax exemption, which was set to increase from $80,000 to $1 million in 2025 but is now delayed until 2026 and will increase to $2 million. Indiana also passed a massive property and local income tax bill into law. Among other things, it creates a credit of up to $300 for homeowners and will result in $1.5 billion in lost local revenue over three years. The bill caps local income tax rates for all counties at 2.9% (down from 3.75%) and allows locals to levy a tax of up to 1.2%, within that county total, without the approval of county officials. Numerous Republicans, including the state’s lieutenant governor, disapproved of the bill's complexity and called for a veto as many proposals – including a proposal to make traditional schools share property taxes with charters – were crammed into the bill. Others expressed concern over the clear cost shift to locals and the lack of assistance for Indiana’s more than half a million renters.
Meanwhile, the state's income tax rate continues to be lowered over time per a legislative trigger. And, notably, the Senate unanimously passed a new tax credit --the $500 refundable tax credit for newborns that parents can claim the first year of an infant’s life would be available to families making under 720% of the federal poverty line. The credit did not make it into the final budget agreement.

Iowa

Lawmakers did not ultimately pass any comprehensive property tax reform packages this legislative session but say it will be a priority in 2026.
The Senate initially approved a constitutional referendum to require a two-thirds vote from the legislature for future income tax increases. Iowa constitutional referendums must be approved by the legislature in two consecutive sessions. As the measure was approved in 2024, all that remains for the initiative to appear on the 2026 ballot is approval by the Iowa State House. The Senate also advanced a $1 billion cut to the state’s unemployment tax. And lawmakers are working to enshrine the state’s flat tax into the state constitution.
Gov. Kim Reynolds identified property tax cuts as a focus for the state’s 2025 legislative session. This raised concerns from some lawmakers already worried about the budget due to an expected $1 billion reduction in revenue over a 24-month-period from previous deep personal income tax cuts. Lawmakers are now debating a proposal to cap state property taxes used to fund schools. Although the measure initially backfills the revenue for local governments, the state has cut revenue enough that it may not be able to afford the continued expense.

Kansas

In a showdown between Gov. Laura Kelly and Republican lawmakers, Gov. Kelly vetoed Senate Bill 269, and the legislature overrode her veto. Upon vetoing, Gov. Kelly stated that the triggers could be hit regardless of the economy or budget considerations which leaves Kansas in a vulnerable position similar to that under Gov. Sam Brownback. The legislation will ultimately, through legislative triggers, bring the state’s graduated individual and corporate income taxes to flat rates of 4%. Per the governor, the income tax cuts could cost the state up to $1.3 billion a year.
Lawmakers also passed changes to the state’s low-income housing tax credit after initial legislation sought to eliminate the program. The program subsidizes the building of affordable housing through $25 million in tax credits a year. The compromise legislation will keep the credits until 2028 but lower the yearly maximum from $25 million to $8.8 million.
Also, as of this year, the state's sales tax on groceries has been eliminated.

Kentucky

Gov. Andy Beshear signed legislation to cut the state’s income tax rate from 4% to 3.5%, effective in 2026. The measure, which will reduce annual revenue by roughly $700 million, was a top legislative priority for lawmakers this session and is part of a push to ultimately eliminate the state’s income tax.
Lawmakers have since introduced an overhaul of the law that automatically reduces the state’s income tax rate. Among other things, the bill dramatically speeds up the process for which that takes place. The measure, which passed the House with no public assessment of its fiscal impact, contains numerous other changes to the state tax code, some involving tax benefits to corporations.

Louisiana

Earlier this year, voters overwhelmingly rejected four constitutional amendments, some of which would have rewritten large parts of the state's budget and tax laws. Amendment 2, specifically, would have lowered the state’s constitutional cap on income taxes from 4.75% to 3.75% while also limiting state budget growth.
Lawmakers responded with efforts to move multiple tax cut bills to reduce the state’s general sales tax rate from 5% to 4.75%, reduce the state’s flat personal income tax rate from 3% to 2.75% and double the standard deduction for seniors, and eliminate the state’s Revenue Stabilization Fund. The state Senate rejected the measures which would have increased the state’s shortfall to $1.2 billion by 2028. The Senate Finance Committee also scaled back the governor’s proposed expansion of LA GATOR, the new private school voucher program.
During special session in late 2024, the legislature approved Gov. Jeff Landry’s regressive tax package that replaced the state’s tiered personal income tax structure with a flat 3% rate and cut business taxes. The plan used sales tax increases to make up for a portion of the lost revenue. Additional triggered tax cuts are underway and could potentially go into effect in 2026.

Maine

Looking to fill a $450 million revenue shortfall over the next two years, Gov. Janet Mills announced plans for a "lean" budget with targeted tax changes in the form of cigarette excise tax, cannabis tax, and casino tax increases in the coming year.
Lawmakers, meanwhile, have proposed bills that would implement a local option sales tax on short-term property rentals, increase capital gains tax rates, double the state’s real estate transfer tax for properties sold for over $1 million, and reform income tax rates and brackets to promote greater equity. Lawmakers are also considering bills to increase the state's Homestead Property Tax Exemption and 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.
The Senate President has since unveiled a package of eight tax bills that include progressive measures like doubling the state Child Tax Credit, lowering the cost of certain groceries, and raising taxes on high-cost luxury items like private jet charters and yacht rentals.

Maryland

Lawmakers finalized 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% 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.
Gov. Wes Moore’s budget plan initially included increasing income taxes on households earning over $500,000 and $1 million, levying a 1% capital gains tax surcharge, eliminating itemized deductions, doubling the standard deduction, improving to the state's Child Tax Credit, eliminating the state inheritance tax, reducing the corporate tax rate, and enacting water’s-edge combined reporting for corporate income. His full proposal was estimated to raise $819 million. Moore also proposed $2 billion in budget cuts.

Massachusetts

Massachusetts has not yet passed any major tax policy legislation. Gov. Maura Healey's proposed budget makes use of revenue from the state's new surcharge on high earners and includes a handful of revenue-raising provisions that would cap the state charitable deduction, close a variety of tax loopholes, and extend existing sales and excise taxes to some products not currently subject to these taxes.
A majority of lawmakers in both the House and Senate support legislation that would build off federal Global Intangible Low-Tax Income (GILTI) provisions and increase the share of excess foreign profits that the state taxes. The proposal is estimated to raise roughly $400 million a year.

Michigan

In her budget proposal, Gov. Gretchen Whitmer included $208 million in additional taxes. The largest revenue raiser an increase to landfill tipping fees for environmental initiatives. She also included a new tax on vape and non-tobacco nicotine products.
The state is expected to have a roughly $850 million surplus and experience growth in tax revenue over the next three years. The Republican-controlled House passed legislation that would reduce the state’s income tax rate from 4.25% to 4.05%.
Meanwhile, a push is underway to put a proposal on the November 2026 ballot to change the state’s constitutional flat tax (currently 4.25%) to create a 5 percentage point surcharge on income exceeding $500,000 for single filers and $1 million for joint filers. The proposal is estimated to raise $1.7 billion annually to fund public K-12 schools.

Minnesota

Lawmakers passed the state budget during a one-day special session as the state anticipates a deficit in coming years. The legislation makes cuts to health care programs for undocumented immigrants and raises taxes on cannabis and electric vehicles. Lawmakers also approved closing tax exemptions on electricity for data centers.
Other proposals considered this year, but that did not make it over the finish line include a $100 “baby bonus” for newborns that would be added to the state’s Child Tax Credit, an increase to the state’s groundbreaking tax on investment income exceeding $1 million, from 1% to 1.5%, which would raise around $74 million from the state’s wealthiest residents, and a new tax on social media corporations collecting data on Minnesotans that would be the first of its kind and would raise around $100 million per year. House members also 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 $1.67 million that would adjust based on the revenue needed to compensate for lost federal funding for Medicaid.
Amidst their forecasted deficit, Gov. Tim Walz initially proposed sales tax changes. His plan would have reduced the state sales tax rate from 6.875% to 6.8% (a $95 million revenue loss) and couple that with an expansion to the sales tax base on previously exempt services, like tax preparation (raising $203 million annually). On net, the tax change would increase revenue by $108 million. Gov. Walz has also proposed increasing a surcharge on health maintenance organizations (HMOs) which would raise an additional $90 million.

Mississippi

Gov. Tate Reeves signed into law a tax cut bill that will, over time, fully eliminate the state’s individual income tax. The bill phases down the state’s personal income tax rate from 4% to 3% in 2030 and then further reduces the rate, ultimately to zero, using triggered reductions.
The bill also reduces the state’s sales tax on groceries from 7% to 5% and increases the gas tax from 18.4 to 27.4 cents over three years. An ITEP analysis of the fully implemented legislation shows an annual revenue loss of nearly $2.7 billion (if in effect today), with the top 1% of Mississippians receiving an average tax cut of $41,420.
Separate legislation would increase the amount of tax credits that can be allocated toward private school vouchers from $9 million to $40 million annually by 2027.

Missouri

Gov. Mike Kehoe has signed legislation to fully exempt capital gains from the state’s income tax despite significant concerns over the measure’s cost. The capital gains exemption, which makes up most of the bill, would alone direct 80% of the tax cuts to the richest 5% of taxpayers and two-thirds of its tax cuts to the top 1%. The tax package also expands the state’s senior property tax circuit breaker and provides sales tax exemptions for diapers or period products.
The governor also signed into law a $1.5 billion stadium financing bill. The measure will set aside tax revenue generated by major Kansas City sports teams to finance improvements to their stadiums. Additionally, the measure capped the growth in property tax bills in 75 of the state’s 87 counties at 5%.
In his state address, the governor called for the elimination of the state's personal income tax.

Montana

Gov. Greg Gianforte signed into law a tax cut (HB 337) that will go into effect over the next two years. The changes include cutting the top marginal income tax rate from 5.9 to 5.4% (5.65% in the first year), bracket changes for capital gains and the personal income tax, and doubling the state Earned Income Tax Credit from 10 to 20%.
The governor also signed into law two property tax bills that will lower the rates on primary residences, long-term rentals, and small commercial properties, but raise them on second homes and those worth more than four times the statewide median value.
Per state estimates, Montana could see a revenue loss of $114.2 million if they retain conformity with the federal tax code and the changes resulting from the passage of the Trump megabill.

Nebraska

Budget negotiations wrapped up this session without major tax changes. The revenue shortfall was plugged with funding cuts and funds from reserve accounts. Lawmakers created a new school finance commission that will include representatives of multiple stakeholder communities – lawmakers, the governor’s office, the education and property tax commissioners, educators, and private citizens – and will work on an ongoing basis to suggest improvements to the school finance system.
They also voted to allow tax-free college savings accounts (529 plans) to be used for private and religious K-12 schools, circumventing voters’ rejection of previous attempts to funnel public dollars to private schools.
Meanwhile, anti-tax interests that attempted several times in recent years to replace most of the state’s revenue system with a large and harshly regressive consumption tax are back again. This year, they're leaving out the consumption tax and proposing a ballot measure to eliminate and ban property, income, and inheritance taxes with no replacement for the billions of dollars of funding those taxes generate for shared priorities in the state.

Nevada

Lawmakers failed to enact property tax reforms again this year. The state's property taxes are low and uneven due to a unique and unfair depreciation scheme. The proposed changes were recommended by a property tax reform study lawmakers themselves commissioned. An effort to expand the state's film tax credit also failed. And the state's structural budget shortfall and underfunded services remain unaddressed.

New Hampshire

Gov. Kelly Ayotte signed the state's budget bills, which include several fee increases in the face of lower-than-projected business revenues. Some proposed fee increases include driver's license fees, vehicle registrations, development and business fees, and agricultural produce registrations.
Meanwhile, Gov. Kelly Ayotte signed legislation that allows high-income households to access the state’s school voucher program, which provides families at least $4,182 per year in state funding to use for nonpublic school expenses. The program was previously limited to those making less than 350% of the poverty level, or $112,525 for a family of four.

New Jersey

This year, New Jersey passed an expansion of their mansion tax. The existing real estate transfer tax on properties over $1 million has been expanded, with increasing rates maxing out at 3.5% on the value of homes over $3.5 million.
Initially, in his budget proposal, Gov. Phil Murphy proposed new tax provisions that would raise about $1 billion. That included a roughly $320 million increase in taxes on the sale of mansions in the state. Most of the proposals were 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.

New Mexico

Gov. Michelle Lujan Grisham vetoed a tax package that would have, among other things, replaced the state's Working Families Tax Credit with an Earned Income Tax Credit more closely tied to the federal version and increased the liquor excise tax by 20%. The governor cited an insufficient source of revenue to pay for the reforms as a reason to forgo signing the bill.
Earlier this year, an assessment of poverty in the state found that it has declined by more than a third since recent tax changes were implemented. Lawmakers worked to build on that progress with a bill to double the state Child Tax Credit for children under the age of six from roughly $600 to $1,200 and enhance the state's EITC.

New York

Lawmakers reached a budget agreement. The package includes: an expanded, fully refundable Child Tax Credit amounting to $500 for older children and $1,000 for young children, income tax rate cuts on the lowest few tax brackets (which are targeted to low- and middle-income families thanks to New York’s “rate recapture” provision), cuts to a payroll tax for transportation needs, and $2 billion in one-time rebates of up to $400 per family.
The legislation largely aligns with the tax proposals in Gov. Kathy Hochul’s state address.
Lawmakers are also considering a bill, called the “RECOURSE Act,” that would allow the state to withhold money from the federal government in response to the Trump administration's unlawful withholding of federal dollars.

North Carolina

Revenue projections have been reduced for the next three years, citing concerns of an economic slowdown and tariffs from federal trade policy. For fiscal years 2025-26 and 2026-27, the revenue projections have been reduced by $218 million and $222 respectively.
Against that backdrop, competing tax cut proposals now exist in the House and Senate. The Senate passed a budget that speeds up existing cuts and would further reduce the state’s individual income tax rate to 1.99% through revenue triggers between 2029 and 2036. The House proposal would increase the state’s standard deduction, allow a deduction for tipped income, and reinstate a back-to-school sales tax holiday. Their plan could also delay future automatic cuts to the personal income tax by increasing the revenue targets needed to trigger the cuts in tax years 2027-2034.
In contrast, Gov. Josh Stein’s budget proposal included a freeze to the state's personal income and corporate income tax rate cuts at current amounts, rather than allowing further scheduled reductions to occur. His plan would also scale back private school vouchers, replace the child deduction with a refundable Child Tax Credit and create a refundable Earned Income Tax Credit set at 20% of the federal credit.
The income tax rate recently dropped one quarter of a percent, from 4.5% to 4.25% -- resulting in an estimated $1.25 billion annual revenue loss. An additional cut is scheduled for tax year 2026, bringing the state's flat income tax rate to 3.99% (with further cuts scheduled). The legislature's fiscal research division projects a structural budget deficit by 2027 driven by the cumulative effect of ongoing tax cuts.

North Dakota

The Legislature passed a major property tax bill, backed by Gov. Kelly Armstrong, that provides a $1,600 primary residence credit and caps annual property tax increases at 3%. It also caps how much school districts can raise property taxes. The bill will result in $473 million in property tax cuts for 2025-27. Lawmakers dropped a gas tax increase, which was initially being considered.
Meanwhile, both legislative branches agreed to legislation that would establish an Education Savings Account for private school students. The bill, which is estimated to reduce revenue by $20 million in the first year, would provide private school vouchers of up to $4,000 per year (amounts would vary depending on household income).

Ohio

Gov. Mike DeWine signed the state’s budget into law. The new budget includes a 2.75% flat tax, reducing the top tax rate of 3.5% for those earning over $100,000. The tax change is estimated to cost the state $1.1 billion a year. DeWine also issued several line-item vetoes on property taxes.
One provision would have limited how much cash school districts could hold from year to year and mandated property tax cuts to make up for cash that was not spent. Another provision would have empowered county lawmakers to reduce local property taxes at will, including levies approved by voters. The House voted to override Gov. Mike DeWine’s veto of a provision in the state budget that removes local authority to put replacement property tax levies and emergency levies on the ballot. The override now moves to the Ohio Senate for consideration.
An organization pushing for a ballot measure to eliminate property taxes said that it likely will not have enough signatures to meet the November ballot deadline. However, the group will continue to collect signatures to get the petition on the ballot next year. Meanwhile, Gov. DeWine promised to convene another group to examine property taxes.

Oklahoma

Gov. Kevin Stitt signed a 0.25% reduction of the state’s personal income tax into law. The bill then implements a series of triggered cuts that will eventually lead to the elimination of the tax. Although the initial cost is $350 million, the bill puts the state budget on an autopilot of continual decline.
The new law will reduce the number of income tax brackets from six to three, cut the top rate from 4.75% to 4.5% in the first year, and then ratchet the tax down to zero, over time, in increments of 0.25% using revenue triggers. The combined impact of these cuts would cost billions in funding for shared priorities while skewing in favor of the state’s richest residents with over one-third of the cut would flowing to the richest 5% in the state.
Gov. Stitt, earlier this session, repeatedly called for an individual income tax cut of 0.5% and eventual elimination of the tax. The governor has also made the case for a business income tax cut.
The state recently eliminated its sales tax on groceries.

Oregon

Gov. Tina Kotek suggested that she might call a special session to keep the state’s transportation fully functioning after the five-month regular session ended without passing any new transportation funding.
The state's Joint Committee on Transportation Reinvestment Committee is seeking an additional $1.3 billion in new funding to improve state infrastructure. They introduced a transportation package that includes new tax increases. The proposal creates a new transfer tax and calls for increases to the gas tax, payroll tax, privilege tax, vehicle use tax, and registration fees.
Earlier this year, Democrats introduced a transportation budget framework that would raise $1.9 billion every two years through new taxes and fees to address transportation funding needs. The framework would increase the state’s 40-cent gas tax by 20 cents over six years and increase the weight-mile tax by 16.9%. In addition, vehicle registration fees would increase across the board by $66, vehicle title fees would increase by $90, and a 3% tax would be levied on tire sales.

Pennsylvania

Gov. Josh Shapiro unveiled a plan to raise additional revenue through two new sources: legalizing recreational marijuana and regulating slot-like skill games. Shapiro also called on lawmakers to adopt combined reporting to prevent companies from avoiding taxes by shifting profits to different states, while also lowering the corporate net income tax more quickly to reach 4.99% by 2029, two years earlier than currently scheduled.
Meanwhile, a proposal to legalize recreational cannabis advanced out of the House Health Committee.

Rhode Island

Gov. Dan McKee signed the state's annual budget, which creates a new tax on non-owner-occupied homes valued above $1 million that would fund low-income housing tax credit redemptions. The plan also includes a two-cent increase in its gas tax—which is expected to generate $15 million—extends hotel taxes to short-term rentals, doubles the local hotel tax rate, and levies additional fees and tolls.
Lawmakers rejected a handful of proposals that may be revisited down the road, including a digital advertising tax, a cigarette tax increase, and a proposed millionaire's tax on high earners.

South Carolina

Lawmakers wrapped their legislative session without major movement on taxes, but the House sent an income tax cut bill to the Senate in the waning days of the session to ensure those conversations continue early next year.
The House of Representatives approved a bill that could lead to the elimination of the state’s income tax. The plan would reduce the top marginal tax rate from 6.2% to 5.39% and tax income under $30,000 at 1.99%. If revenues allow, however, the two rates would be combined into one flat rate of 1.99% that would be further reduced until the tax is eliminated.
That proposal follows a plan by Gov. Henry McMaster and legislative leaders to collapse the state’s three brackets to a flat 3.99% personal income tax rate starting in 2026. The rate then had the potential to trigger down to 2.49%, totaling $2.7 billion in lost revenue. A major component of the would have shifted the starting point for South Carolina’s tax returns from federal taxable income to federal adjusted gross income, meaning home mortgage interest, property taxes, and certain deductions and exemptions will be added back to a household’s income and taxed. Backlash to that legislation revolved around it raising taxes on most South Carolinians.
Earlier this year, Gov. McMaster announced his prioritization of additional personal income tax cuts, proposing an income tax rate cut from 6.2% to 6%, while calling for additional cuts until the tax is eliminated.

South Dakota

Gov. Larry Rhoden signed a property tax bill that will cap countywide residential assessment growth at 3% annually for five years. It will also annually cap the amount local governments can increase tax collections, exempt some home improvements worth less than 40% of a home’s value from assessment changes, and expand eligibility for disabled and elderly people for property tax cut programs.
Lawmakers were initially weighing but opted against cutting property taxes and making up the revenue with a sales tax rate increase. An early plan would have raised the state sales tax rate and subsequently reduced the property tax levy for general education and special education to zero.

Tennessee

Tennessee did not pass major tax legislation in 2025. However, there was some controversy about the state immediately removing data required by transparency provisions of last year's large corporate tax cut.
Gov. Bill Lee's proposed budget with no major tax changes comes a year after the state provided businesses with a $1.5 billion tax cut. Several 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. The proposal on the latter has been tabled for this legislative session.
Meanwhile, a Senate committee advanced a bill to raise about $16 million via a tax on vaping products in the state. The measure would also require vaping stores to register with the state.

Texas

Gov. Greg Abbott signed the legislature’s property tax cut package into law. It includes increases to the homestead and senior property tax exemptions. Businesses will now also receive a $125,000 business personal property exemption. The package total cost is $10 billion. In total, the biennial budget includes $51 billion in extended and new property tax cuts – partially paid for by the state’s budget surplus.
Meanwhile, the state is poised to pass a $1 billion education savings account bill that would provide private school vouchers after years of bipartisan pushback by Democrats and rural Republicans whose districts have few, if any, private schools.
In his state address, Gov. Abbott pushed for billions in additional property tax cuts, as well as teacher pay raises, and support for private school vouchers. He's also expressed interest in making it harder for local governments to raise property taxes by requiring a two-thirds majority vote.

Utah

Gov. Spencer Cox signed HB 106 and SB 71 into law, resulting in the fifth year in a row of income tax cuts in Utah. The package includes cutting the state personal and corporate income tax rates from 4.55% to 4.5%, expanding their nonrefundable Child Tax Credit to include 5 year olds (the existing credit is provided to children ages 1 to 4); enacting a tax credit for employer-provided child care; and expanding eligibility for the Social Security tax credit by increasing the income thresholds from $75,000 to $90,000.
Gov. Spencer Cox vetoed a bill that would have diverted property tax revenues from local public school funds to the state general fund.

Vermont

Lawmakers passed legislation that would increase age eligibility of the state’s Child Tax Credit from five to six years old, expand the Earned Income Tax Credit for workers without children in the home from 38% of the federal credit to 100%, increase the phaseout threshold for exempting Social Security and military retirement income, and create a refundable $250 tax credit for veterans earning up to $30,000. The bill now moves to the governor’s desk.
Meanwhile, the Senate has advanced a property tax rate bill that is expected to increase the average education tax bill by 1.1%, a modest rise compared to last year's 13.8% increase, but the bill relies on using surplus funds to reduce the increase in the rates. Lawmakers also continue to weigh changes to the state’s funding formula for education.

Virginia

Gov. Glenn Youngkin signed the state's budget, which will increase the state's refundable EITC from 15 to 20% and increase the standard deduction by $250 for single filers and $500 for joint filers. The budget also provides a one-time rebate of $200 for single taxpayers and $400 for joint filers.

Washington

State lawmakers opted to address the state deficit with a combination of budget cuts and revenue raisers. Gov. Bob Ferguson has since signed the legislature’s budget and tax package with only peripheral vetoes.
The package fills the state’s $16 billion biennial budget shortfall with about $4 billion of new revenue and $12 billion of funding cuts and transfers. The revenue measures include an increase to the state’s progressive Capital Gains Excise Tax and estate tax changes, but most of the revenue comes from regressive consumption tax increases including changes to the state’s Business & Occupations Tax. Gov. Ferguson also signed a gas tax increase to continue funding infrastructure needs.
A tax on the financial assets of the wealthy that was removed from this year’s package will live to see another day as its many proponents expressed their support and held a symbolic vote in its favor on the final day of session.

West Virginia

Faced with a deficit in 2025, the legislature passed a reduced budget without major tax policy changes. However, the legislature did pass a collection of tax incentives for the development of data centers.

Wisconsin

The legislature passed a budget that Gov. Tony Evers quickly signed. It included about $1.4 billion in tax cuts over the two-year budget. Specifically, the state’s second-highest bracket was significantly expanded. The state also moved from a targeted $5,000 exemption on retirement income for low- and moderate-income retirees to a flat $24,000 exemption for seniors 67 and older, regardless of income. This agreement follows disagreements over funds for education funding.
Earlier this year, Gov. Evers proposed a handful of tax provisions. Among them is a new top income tax bracket on wealthy households; a new rate of 9.8% 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 in the state have expressed their desire to prioritize tax cuts, citing the state’s $4.5 billion surplus.

Wyoming

Gov. Mark Gordon has signed multiple tax bills into law. A bill that provides $10.5 million for the state’s property tax refund program for 2025 and another that provides a property tax cut via a 25% exemption on the first $1 million of a single-family home's fair market value.
Meanwhile, Wyoming's Secretary of State announced a ballot initiative to cut property taxes by 50% for certain homeowners. The proposal will appear on the 2026 general election ballot. The state already lost $13 million in education funding when a 4% property tax cap on residential property was approved, and it is not yet known how much this citizen-led initiative will further reduce revenue in the state. Separately, a state senator put forward a proposal to amend the state constitution to do away with language relating to the property tax and to leave the responsibility of keeping or eliminating the tax up to the legislature.
Gov. Gordon has expressed concern over how the legislature will satisfy the need to fund education given an expanded private school education savings program. The state’s education system was recently found to have been constitutionally underfunded.