This op-ed was first published by Governing.
Last summer President Donald Trump and his congressional allies enacted a deeply unpopular package of tax and spending cuts that will funnel more than $1 trillion over the next decade to multinational corporations and America’s wealthiest elite. The package makes historically sharp cuts that will take away many families’ health care and food assistance while also adding $4 trillion to our national debt.
In the wake of such federal recklessness, attention is now turning to the states, which face large added costs and significant budget risks due to the new federal law. State lawmakers don’t have to take this sitting down. Quite the contrary: They now have an enormous opportunity to start getting our country back on track by protecting and raising their own resources to improve the lives of everyday Americans.
Some states are already sensibly taking action. In Illinois, Pennsylvania, the District of Columbia and elsewhere, policymakers have taken steps to prevent certain corporate tax breaks in the new federal law from carrying over to their own tax codes. And in states including California, Colorado, Rhode Island and Washington, leaders are discussing proposals to more effectively tax high incomes and generational wealth from some of the same people Republicans just flooded with riches.
Other states should move quickly to follow this lead: An overwhelming majority of the public believes that wealthy people and corporations don’t pay their fair share in taxes.
There are straightforward steps states should take.
First, they need to protect their existing revenue by not mimicking the tax cuts in the new federal law. By “decoupling” their tax codes from specific changes to the federal tax code, state lawmakers can avoid using state tax dollars to fund giveaways for venture capitalists and huge multinational corporations, to name a few — giveaways that largely (or even entirely) benefit other states’ residents and economies.
Second, states can enact revenue-raising measures to help balance out what we recently saw unfold federally. They can lean into policies like millionaires taxes and clamping down on corporate tax avoidance. They can also consider more cutting-edge policies that tax income from wealth or target big polluters to combat climate change. Bold revenue-raising measures are essential both to fill new funding gaps emerging from the new federal law and better support long-needed state investments like child care and education.
Several states offer compelling models for how new and higher taxes on the wealthy can advance both equity and prosperity. Massachusetts’ higher tax on incomes over $1 million, for instance, has delivered billions of dollars for investments in transportation and public education. Minnesota’s new surcharge on windfall profits from investment income is helping fuel new investments like universal free school meals and replacement of lead pipes. And in Maine, Montana, New Jersey and Rhode Island, lawmakers recently approved measures to raise revenues from high-income homeowners to support stronger funding for affordable housing and other services.
Finally, states should act now to reverse prior state tax cuts. More than half the states are bleeding revenue due to income tax reductions they themselves approved before the federal cuts were passed. Ongoing phased-in tax cuts should be paused, and states should roll back some of the deep cuts they already made, as Hawaii is considering. These rollbacks have precedent — most notably in Kansas, where a bipartisan group of lawmakers overturned the disastrous Brownback “tax experiment” of the mid-2010s, which hammered schools, health programs and other vital services.
The massive tax giveaways of the One Big Beautiful Bill Act are out of step with what the American people want and need. States have a wide-open lane to move policy back toward the public’s will. By centering revenues and making bold, cost-effective investments, states can build a brighter future that helps ensure good public schools, affordable health care, modern infrastructure and climate resiliency for all Americans for generations to come.
