State Rundown 2/6: Tax Proposals in the Spotlight
February 6, 2025
.ITEP Staff
February 6, 2025
Tax changes have been proposed or are nearing the finish line in many states. Kentucky is poised to enact an income tax cut as a bill heads to the governor’s desk. In Pennsylvania, Gov. Josh Shapiro’s budget proposal called to accelerate existing corporate tax cuts while closing corporate tax loopholes by enacting combined reporting.
Ohio Gov. Mike DeWine proposed a new credit for children of working parents. And Virginia Democrats countered Gov. Glenn Youngkin’s proposed tax cuts with a plan of their own that includes an increase to the state’s Earned Income Tax Credit (EITC) and a one-time, nonrefundable tax rebate.
Major State Tax Proposals and Developments
- KENTUCKY lawmakers have passed legislation to cut the state’s income tax from 4 to 3.5 percent. The measure will reduce revenue by about $700 million. Gov. Andy Beshear, who has expressed support, is expected to sign. – ELI BYERLY-DUKE
- In PENNSYLVANIA Gov. Josh Shapiro’s budget address he identified a plan to raise additional revenue through two new sources: legalizing recreational marijuana and regulating slot-like skill games. Shapiro also called for 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 percent by 2029, two years earlier than currently scheduled. – MILES TRINIDAD
- OHIO Gov. Mike DeWine’s proposed budget would create a new $1,000 child tax credit that would be 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. – MILES TRINIDAD
- VIRGINIA Democrats rejected Gov. Glenn Youngkin’s tax cut plan and instead proposed a $1 billion tax rebate, with individual filers set to receive $200 and joint filers $400. They also propose boosting Virginia’s EITC to a fully refundable 20 percent of the federal credit and increasing funding for education, housing, and health care. – MILES TRINIDAD
State of the State Addresses
- Gov. Kay Ivey of ALABAMA touted the state’s voucher program and using tax dollars on private education and homeschooling as the reason behind education gains.
- MISSISSIPPI Gov. Tate Reeves highlighted the “Build Up Mississippi Act” which would phase out the state’s personal income tax over 10 years. The legislation would also increase general sales and fuel taxes, while lowering the state’s sales tax on groceries.
- Gov. Kevin Stitt of OKLAHOMA repeated his call to cut the state’s business income tax and individual income tax with the goal of eventual elimination. However, legislative leaders have not yet committed their support.
- TEXAS Gov. Greg Abbott pushed for additional property tax cuts to the tune of $10 billion, as well as teacher pay raises and support for private school vouchers.
- SOUTH CAROLINA Gov. Henry McMaster said he would prioritize additional personal income tax cuts, proposing an income tax rate cut from 6.2 to 6 percent and called for additional cuts until the tax is eliminated.
State Roundup
- Republicans in the CONNECTICUT Senate unveiled a tax plan that would cut the bottom two marginal income tax rates and cap municipalities’ ability to increase annual property tax at 2 percent. Supporters claim the proposal would cut taxes by $700 million, though the plan relies on one-time funds and a two-year state employee wage freeze.
- Gov. Ron DeSantis of FLORIDA proposed a “Second Amendment Summer” sales tax holiday that would make firearms, ammunition, and accessories sales tax exempt from Memorial Day to July 4. The sales tax holiday is expected to cost the state $8 million.
- GEORGIA 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.
- The IDAHO House passed an income tax proposal that would cut the personal and corporate tax rate from 5.695 percent to 5.3 percent, at an estimated cost of $253 million.
- MARYLAND completed a four-month pilot program to establish a new transportation funding source based on a mileage-based user fee (MBUF) as revenue from the existing fuel tax continues to decline. On average, the program found that drivers would have paid the same amount under a MBUF as they would under a fuel tax but found that many rural households have less efficient vehicles that would pay more in fuel taxes.
- MISSOURI lawmakers are debating the impact of eliminating the state’s income tax, which would necessitate deep budget cuts and likely dramatic tax increases for Missourians with modest incomes.
- NORTH CAROLINA lawmakers introduced legislation that would eliminate state income taxes for tips and overtime and provide a tax deduction up to $2,500 for bonus pay.
- The WYOMING Senate passed a property tax bill that would cut property taxes by 50 percent for two years.
What We’re Reading
- ITEP’s local policy analyst Rita Jefferson has published a brief about how local income taxes can offer new revenue streams to municipalities and school districts across the country.
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