State Rundown 1/15: Tax Debates Heat Up Despite Winter Weather

While frigid temperatures are expected across a large swath of the country, major tax proposals are heating up in the states. Governors are giving their State of the State addresses and state lawmakers have begun to convene for 2025.

New York Gov. Kathy Hochul announced plans to expand the state’s Child Tax Credit earlier this year and has since announced nearly $1 billion in income tax cuts. Maryland Gov. Wes Moore unveiled a new tax proposal aimed at helping close the state’s looming revenue shortfall. The plan would increase taxes on the wealthy and cut taxes for many low- and middle-income households.

Meanwhile, lawmakers in Mississippi introduced misguided legislation that would phase out their personal income tax over time and reduce the state sales tax rate on groceries.  

Major State Tax Proposals and Developments

• MARYLAND Gov. Wes Moore announced a tax plan to help close the state’s looming $3 billion dollar deficit. The plan includes increasing income taxes on households earning over $500,000 and $1 million, levying a 1 percent capital gains tax surcharge, eliminating itemized deductions, doubling the standard deduction, 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. – MILES TRINIDAD 

• A bill in MISSISSIPPI would phase out the personal income tax and slash the state’s sales tax on groceries from 7 to 2.5 percent. The bill would also divert 1.5 percent of local sales tax collections to infrastructure (that currently flow to local governments) and allow municipalities to make up for that lost revenue by raising their own local sales taxes up to 1.5 percent. The total package would cost the state $1.1 billion a year once fully phased in.  – NEVA BUTKUS 

State of the State Addresses

• Gov. Sarah Huckabee Sanders of ARKANSAS announced plans to eliminate the state’s 0.125 percent tax on groceries. She also discussed plans to use revenue from the state’s medical marijuana industry to fund nutrition programs.  

• In his 2025 State of the State address, CONNECTICUT Gov. Ned Lamont briefly highlighted the state’s transportation committee and mentioned that gas tax revenues were not keeping pace with infrastructure goals. 

• MONTANA Gov. Greg Gianforte made 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 percent to 4.9 percent and increase the state ITC, came in addition to a call to lawmakers to fast-track his property tax proposal.   

• MISSOURI Gov. Mike Kehoe indicated his support for spending on police and private schools in his State of the State address. Those priorities were mentioned, in addition to tax cuts. However, he did not explicitly endorse any particular proposals. 

• NEW YORK Gov. Kathy Hochul’s 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 $1 billion and reach joint filers earning up to $323,200 a year.  She also called for the expansion of the state’s Empire State Child Tax Credit, and the creation of $300 “inflation rebate” checks. 

• OREGON Gov. Tina Kotek’s address focused on tackling the state’s housing and homelessness crisis, addressing its overtaxed behavioral health system, and improving education funding. 

• RHODE ISLAND Gov. Dan McKee highlighted that his budget would not include any “broad-based” tax increases despite the state facing a $250 million revenue deficit. McKee also voiced support for passing an assault weapons ban and working to increase resident’s per-capita income by $20,000 by 2030. 

• SOUTH DAKOTA Gov. Kristi Noem, who is currently nominated to be President-elect Donald Trump’s Secretary of Homeland Security, focused her address on her goals she wants to achieve at the federal level. Her speech touted her work while serving as governor for six years and was light on policy goals for South Dakota’s upcoming legislative session.  

• VIRGINIA Gov. Glenn Youngkin’s address reiterated his proposals to gradually phase out property taxes on cars and exempt tipped income from the state’s personal income tax.  

State Roundup

• Residents in Anchorage, ALASKA, will not vote on a sales tax proposal in the next municipal election after the Assembly postponed the plan. The proposal, a 3 percent city sales tax, may still find its way onto the ballot by the end of this year. 

• The KANSAS legislature has prioritized property tax cuts this year, although Gov. Laura Kelly has not expressed support for the idea.  

• The KENTUCKY House voted to reduce the state’s personal income tax from 4 percent to 3.5 percent. The measure must now be approved by the Senate. Gov. Andy Beshear has indicated his support. 

• MAINE Republicans announced they will not support a budget proposal that includes tax increases following the release of Gov. Janet Mills’ two-year budget. Mills’ plan proposes several excise tax increases. 

• MICHIGAN is expected to have a nearly $854 million surplus and see growth in tax revenue over the next three years. Republican leaders have called for using the surplus as a source for additional road funding, but fiscal experts caution that economic conditions could reduce future revenue growth. 

• An assessment of poverty in NEW MEXICO 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. 

• VERMONT Gov. Phil Scott said in his inaugural address that the state needs “more taxpayers, not more taxes” as the state’s decreasing population is leading to an increase in taxes on Vermont residents. Scott also focused on the state’s funding formula for education as the state sees increases in property taxes. 

• As the WYOMING legislature convenes, property tax cuts will be up for debate, with bills like Senate File 69 likely to garner consideration. The bill would provide a temporary 25 percent tax exemption on the first $2 million in value on residential properties and is estimated to cost over $220 million over two years. The exemption would expire in 2027. 

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