State Tax Watch 2025
Updated February 13, 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 |
| • | 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
- Lawmakers exempted overtime pay from state income tax in 2023, but the exemption expires in June of this year unless renewed. 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
- The state is looking at a $1.7 billion budget deficit. But with no sources of new 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. 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.
Colorado
- Faced with a $700 million revenue shortfall, lawmakers are weighing spending cuts.
Connecticut
- Gov. Ned Lamont unveiled his budget, which includes 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. He also included a proposal to reform combined reporting rules to eliminate a provision that caps the amount a company’s taxes can be raised at $2.5 million.
- Meanwhile, Democratic lawmakers have proposed phasing out the car tax over 5 years and Republicans in the Senate released a tax plan that would cut the bottom two marginal income tax rates and cap municipalities' ability to increase annual property tax at 2%.
D.C.
Details to come.
Delaware
Details to come.
Florida
- Gov. Ron DeSantis is again pushing for property tax cuts, floating the idea of dramatically increasing the state’s homestead deduction which currently exempts the first $25,000 of a home’s value from all property taxes and the second $25,000 from non-school taxes. He also proposed a sales tax holiday that would make firearms, ammunition, and accessories exempt from sales taxes Memorial Day through July 4.
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. Meanwhile, Lt. Gov. Burt Jones is throwing his support behind a $250 income tax credit for children under 7 and an expansion to the state’s child and dependent care credit to reduce the cost of child care.
- School districts across the state are opting out of capping home value growth for property tax assessments, fearing the caps could lead to funding shortages. Lawmakers and voters approved a measure in November that caps home value growth but allows local governments to opt out by certain date.
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
- The House passed a personal and corporate tax cut that would drop the rate of both from 5.695% to 5.3% at an estimated cost of $253 million. In his 2025 State of the State address, Gov. Brad Little committed to another round of income tax cuts, his to the tune of $100 million this year.
- Lawmakers continue to debate proposals to increase the state grocery credit (from $120 to $155) at the cost of $50 million and cut property taxes to the tune of $100 million, $50 million of which is one-time spending, that will go to school districts and a homeowner property tax relief fund.
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
- In his state address Gov. Mike Braun focused heavily on property taxes, including a proposal to cap increases to 3% for all property types. Meanwhile, lawmakers are weighing options to reduce property taxes. And 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
- 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.
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 budget gap 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.
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, 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. The full proposal is estimated to raise $819 million. Moore is also planning to propose $2 billion in budget cuts.
- Meanwhile, the state weighs whether to move forward with a new transportation revenue source using a mileage-based user fee.
Massachusetts
- Gov. Maura Healey's newly released budget makes use of revenue from the state's new surcharge on high earners and proposes including candy in the state’s sales tax base.
Michigan
- The state is expected to have a roughly $850 million surplus and 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
- A House passed a tax package, backed by Gov. Tate Reeves, 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 allow municipalities to increase their local sales tax rates instead. Additionally, sales taxes on groceries would be lowered from 7% to 2.5% and a 5% fuel tax would be enacted. Once fully phased in, the bill would cut $1.1 billion from annual state revenue – over 15% of the state general fund.
- Meanwhile, Senate leaders unveiled a competing plan which would bring the state’s flat income tax rate from 4.4% to 2.99% by 2030 while dropping the sales tax on groceries from 7% to 5% immediately. The plan would also include a phased-in 9 cent gas tax increase. The Senate Finance Chairman anticipates the plan will cost upwards of $300 million a year.
Missouri
- In his state address, Gov. Mike Kehoe called for the elimination of the state's personal income tax. His plan did not include specifics. Meanwhile, 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 tax. However, some have called for cuts to property taxes instead.
Montana
- Gov. Greg Gianforte identified tax cuts 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, 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
- Lawmakers are working to identify ways to erase a $85 million deficit after Gov. Joe Lombardo recommended a two-year budget that did not include any offsetting revenue.
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 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. Meanwhile, advocates for progressive revenue are pushing to increase taxes on high earners and profitable corporations.
North Carolina
- A flurry of tax-related proposals have been introduced to date. For example, lawmakers have introduced legislation to exempt tips and overtime pay from the state income tax.
- 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%. The legislature's fiscal research division projects a structural budget deficit by 2027 driven by the cumulative effect of ongoing tax cuts.
North Dakota
- Lawmakers advanced a bill out of committee that would cap property tax increases for local governments at 3% each year and increase the primary residence tax credit from $500 to $1,450. The bill would also eliminate income taxes for single filers earning up to $54,000 per year and joint filers earning up to $90,000 per year.
- Gov. Kelly Armstrong announced a plan to eliminate property taxes for most homeowners within a decade. Her 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
- Gov. Mike DeWine’s proposed budget would create a new $1,000 child tax credit available to children under seven if their parents are employed on a full-time basis. His budget would also expand eligibility for publicly funded child care programs and raise taxes on tobacco, marijuana, and sports betting.
Oklahoma
- Gov. Kevin Stitt has repeatedly called for a individual income tax cut of 0.5% and eventual elimination of the tax. Legislators have expressed skepticism. While the governor insists the rate cut would cost about $200 million a year, it would actually result in roughly $600 million a year in forgone revenue.
- The governor has also made the case for a business income tax cut. And lawmakers are debating a bill that would immediately cut personal income taxes and reduce the rate per a triggered reduction until the tax is ultimately eliminated. The state recently eliminated its sales tax on groceries and faces a tighter fiscal picture this year.
Oregon
Details to come.
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.
Rhode Island
- Faced with a $250 million revenue deficit, Gov. Dan McKee's budget includes the following proposals: the creation of a 10% tax on digital advertising; increased taxes on cigarettes and electric vehicles; and a 5% hotel tax on Airbnb rentals.
South Carolina
- Gov. Henry McMaster announced he would prioritize 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. Throughout the statehouse, lawmakers are pushing for tax cuts 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
- Lawmakers are reconsidering efforts to cut property taxes and make up the revenue with a sales tax rate increase. Gov. Larry Rhoden said that the proposal to eliminate property taxes on single-family homes and offset the cost by increasing the sales tax rate from 4.2% to 5% is no longer the leading solution as the legislature has shifted its focus and will seek to reduce spending rather than increase taxes. Initially state lawmakers were weighing a plan that would raise the state sales tax rate and subsequently reduce the property tax levy for general education and special education to zero.
Tennessee
- Governor Gov. Bill Lee proposed a budget without major tax changes. This comes a year after the state provided businesses with a $1.5 billion tax cut.
Texas
- In his state address, Gov. Greg 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. The state's Lt. Gov. Dan Patrick supports an increase to the state property tax exemption. His proposal would raise the exemption from $100,000 to $140,000 for most homeowners and $150,000 for seniors.
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. 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. Meanwhile, introduced legislation would expand the state's nonrefundable Child Tax Credit to include all children under 6.
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 is aiming to gradually phase out property taxes on cars and exempt tipped income from the state’s personal income tax. Meanwhile, Democratic lawmakers proposed a nonrefundable $1 billion tax rebate, with individual filers set to receive $200 and joint filers $400. They would also like to boost Virginia’s EITC to a fully refundable 20% of the federal credit and increase funding for education, housing, and health care.
Washington
- Before transitioning the governorship, Gov. Jay Inslee, in his final budget proposal, called for new revenue via a 1% tax on wealth exceeding $100 million. Washington lawmakers 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, 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 appear to be at odds with the priorities of Gov. Tony Evers which he's outlined as prioritizing Wisconsin children through a series of investments.
Wyoming
- The Senate passed a property tax bill that would cut property taxes by 50% for two years. 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 percent 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.