State Tax Watch 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.
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Below are summaries of tax legislation discussed or approved in each state. Click on your state to jump to the summary.
Alabama
Details to come.
Alaska
- Gov. Mike Dunleavy released his budget proposal for the upcoming fiscal year. The state is looking at a $1.7 billion budget deficit.
- However, with no new sources of tax revenue being considered, the likeliest way to fill the gap will be to either cut the Permanent Fund Dividend or forgo renewing the temporary boost in education spending the Legislature authorized last year.
Arizona
- In her executive budget proposal, Gov. Katie Hobbs called for $10 million per year for six years to expand the State Low Income Housing Tax Credit.
Arkansas
- Lower tax rates pushed Arkansas' revenue down nearly 6% by the year's end compared to December 2023. The state cited corporate income tax rate cuts as the primary driver.
- Meanwhile, in her State of the State address, Gov. Sarah Huckabee Sanders announced her plan to eliminate the state’s 0.125% sales tax on groceries and discussed plans to use revenue from the state’s medical marijuana industry to fund nutrition programs.
California
- After two years of budget deficits, Gov. Gavin Newsom proposed a balanced budget. However, his plan would further pull from rainy day funds to finance new priorities.
- The state’s fiscal outlook has stabilized due to rising tax collections. Following several years of deficits, the state did not increase taxes.
Colorado
- Faced with a $700 million revenue shortfall, lawmakers are weighing spending cuts.
Connecticut
Details to come.
D.C.
Details to come.
Delaware
Details to come.
Florida
Details to come.
Georgia
- Gov. Brian Kemp has called to accelerate the state’s personal income tax cut by reducing the state’s 2025 flat rate from 5.29% to 5.19%.
- He also wants to issue another round of tax rebates to filers to the tune of $1 billion.
Hawaiʻi
- 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.
Idaho
- In his 2025 State of the State address, Gov. Brad Little committed to another round of income tax cuts — about $100 million— this year.
Illinois
- 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 are weighing what form those property tax cuts could potentially take.
Indiana
- Lawmakers are weighing options to reduce property taxes.
- Meanwhile, the state's income tax rate continues to be lowered over time per a legislative trigger.
Iowa
- Gov. Kim Reynolds identified property tax cuts as a focus for the 2025 legislative session, raising concerns from some lawmakers who are already worried about the budget due to an expected $1 billion reduction in revenue over a 24-month period from deep cuts to the state’s personal income tax.
Kansas
- Despite urged caution from Gov. Laura Kelly to ensure that cuts do not jeopardize the state budget, lawmakers are expected to prioritize property tax cuts this year. Gov. Kelly has come out in opposition of proposals to eliminate the state's corporate income tax, calling the plan a "non-starter."
- As of this year, the state's sales tax on groceries has been eliminated.
Kentucky
- Lawmakers have prioritized, and Gov. Andy Beshear reaffirmed support for, an additional cut to the state’s personal income tax from 4.0% to 3.5%. The House approved the cut and it now moves to the Senate for consideration. If passed, the cut would take effect in 2026.
Louisiana
- During a 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 gap between revenues and expected expenditures over the next two years, Gov. Janet Mills announced plans for a lean budget with targeted tax changes in the form of cigarette, cannabis, and casino tax increases in the coming year.
Maryland
- Gov. Wes Moore announced a tax plan to help close the state’s looming $3 billion deficit. The plan includes 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, improvements 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. The full proposal is estimated to raise $819 million.
- Moore is also planning to propose $2 billion in budget cuts.
Massachusetts
Details to come.
Michigan
- The state is expected to have a roughly $850 million surplus and to see growth in tax revenue over the next three years.
Minnesota
- Amidst a forecasted deficit, Gov. Tim Walz proposed sales tax changes. His proposal would reduce 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
- The House passed a tax package that would phase out the state’s personal income tax over 10 years for everyone except professions classified as “sex work.” The bill would also claw back state sales tax revenue that currently goes to municipalities and would, rather, allow municipalities to increase their local sales tax rates.
- Additionally, the state's sales tax on groceries would be lowered from 7% to 2.5%. Once fully phased in, the bill would cut $1.1 billion from annual state revenue – over 15 percent of the state general fund.
Missouri
- Legislative leaders are considering significant cuts to the state’s personal income tax, including exempting capital gains at the cost of about $300 million annually, with many hoping to eventually eliminate the income tax.
- However, some have called for cuts to property taxes instead.
Montana
- Gov. Greg Gianforte identified tax cuts as a key priority during his yearly address to the state. His plan, which would cut the top marginal income tax rate from 5.9% to 4.9% and increase the state EITC, came in addition to a call to lawmakers to fast-track his property tax proposal.
Nebraska
- Facing a $432 million shortfall over two years, Nebraska Republican Gov. Jim Pillen has proposed raising taxes on cigarettes, spirits, and fantasy sports, and adding new taxes on candy and soft drinks.
- He's also expressed interest in directing that revenue to property tax cuts through school aid changes and has proposed cutting millions from higher education.
Nevada
Details to come.
New Hampshire
Details to come.
New Jersey
- In his 2025 State of the State address, Gov. Phil Murphy announced that he will work with two lawmakers on a proposal to eliminate a "flaw" in the tax code that allows wealthy residents to benefit from the farmland assessment tax system and "avoid paying their fair share."
New Mexico
- An assessment of poverty in the state found that it has declined by more than a third since recent tax changes were implemented. Lawmakers hope to build on this progress with a bill to double the state Child Tax Credit for children under the age of six.
- They are also once again pursuing an increase to the state alcohol tax. The proposed legislation would raise wholesale taxes per drink and include a new tax on retailers.
New York
- Gov. Kathy Hochul’s state address unveiled a large income tax cut package. Hochul called for tax cuts for five of the nine tax brackets in the state, which would reduce state revenue by more than $1 billion and reach joint filers earning up to $323,200 a year.
- She also called for $300 “inflation rebate” checks and an expansion of the state’s Child Tax Credit, known as the Empire State Child Credit, that would increase the maximum credit to $1,000 per child under the age of 4 and $500 per child ages 4 to 16.
North Carolina
- In 2025, the income tax rate 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 percent.
- The legislature's fiscal research division projects a structural budget deficit by 2027 driven by the cumulative effect of the tax cuts on revenue.
North Dakota
- Gov. Kelly Armstrong announced a plan to eliminate property taxes for most homeowners within a decade. The plan would also establish a 3% annual cap on local property taxes and apply to all property types.
- Armstrong’s plan follows a failed ballot initiative in November that would have eliminated all property taxes based on assessed values.
Ohio
- Following a committee report identifying property tax reforms, property tax cuts are likely to be up for debate this legislative session.
Oklahoma
- Lawmakers are debating a bill that would immediately cut personal income taxes by $240 million and reduce the rate per a triggered reduction until the tax is ultimately eliminated.
Oregon
Details to come.
Pennsylvania
Details to come.
Rhode Island
- Faced with a $250 million revenue deficit, Gov. Dan McKee's budget includes the following proposals: the creation of a 10 percent tax on digital advertising; increased taxes on cigarettes and electric vehicles; and a 5% hotel tax on Airbnb rentals.
South Carolina
- Lawmakers are pushing for tax cuts in 2025 but disagree as to whether the focus should be on lowering the top personal income tax rate or reducing the sales tax rate through the elimination of sales tax exemptions.
South Dakota
- State lawmakers are weighing a plan that would raise the state sales tax rate from 4.2% to 5% and subsequently reduce the property tax levy for general education and special education to zero.
Tennessee
Details to come.
Texas
Details to come.
Utah
- Gov. Spencer Cox and state lawmakers aim to cut taxes for the fifth year in a row. The governor has his eye on eliminating the state’s tax on Social Security income, and a bill to reduce the state's flat income tax rates (both personal and corporate) from 4.55% to 4.45% has been introduced.
- Meanwhile, lawmakers have their eye on eliminating the state portion of the grocery tax. Unlike last year, the bill is not conditional on anything else being approved.
Vermont
- In the face of increased property taxes, Gov. Phil Scott's focus this year is on the state’s funding formula for education.
Virginia
- Gov. Glenn Youngkin’s state address reiterated his proposals to gradually phase out property taxes on cars and exempt tipped income from the state’s personal income tax.
Washington
- Before transitioning the governorship, Gov. Jay Inslee, in his final budget proposal, called for some new revenue via a 1% tax on wealth exceeding $100 million.
- Washington lawmakers, similarly, have expressed interest in the following revenue raisers: higher taxes on big corporations; lifting the limit on state and local property tax collections; and a new tax on residential properties sold for more than $3 million.
- Incoming Gov. Bob Ferguson has been more timid on revenue raisers, instead proposing $4 billion in spending cuts.
West Virginia
- Despite a $400 million deficit for 2026, Gov. Patrick Morrisey says he will push to cut taxes in collaboration with the Legislature.
Wisconsin
- Republican lawmakers in the state have expressed their desire to prioritize tax cuts, citing the state’s $4.5 billion surplus. Such cuts will likely be at odds with the priorities of Gov. Tony Evers.
Wyoming
- 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 reduce revenue in the state.