State Rundown 3/12: Last-Minute Tax Cut Mayhem and New Progressive Revenue Raisers
March 12, 2025
.ITEP Staff
March 12, 2025
A bevy of tax cut proposals sprung to life this week while others were signed into law. In Kentucky, lawmakers are working to make it easier for the legislature to enact income and business tax cuts. The governor in Idaho signed into law a personal and corporate income tax cut. South Dakota lawmakers in both houses have passed a bill that will cap property taxes, among other things. And the Utah legislature has approved a tax plan that will, among other things, cut their income tax rate and expand eligibility for their nonrefundable Child Tax Credit.
Meanwhile, proposals from both the Assembly and Senate in New York would raise the state’s top income tax rates and extend temporary increases to the state’s corporate franchise tax. Each of their budget plans also prioritize enhancements to the state’s Empire State Child Tax Credit.
Major State Tax Proposals and Developments
- IDAHO Gov. Brad Little signed into law a bill that cuts the state’s personal and corporate income tax rates from 5.695 to 5.3 percent, removes capital gains tax from sales of gold bullion, and expands the income tax exemption to military pension benefits. The bill is expected to reduce general fund revenue by $253 million a year. – MARCO GUZMAN
- KENTUCKY lawmakers introduced a last-minute overhaul of the law that automatically reduce the state’s income tax rate. Among other things, the bill dramatically speeds up the process for which that takes place. The measure, which passed the House with no public assessment of its fiscal impact, contains numerous other changes to the state tax code, some involving tax benefits to corporations. – ELI BYERLY-DUKE
- The UTAH legislature approved a tax cut package, which includes cutting the state income tax rate from 4.55 to 4.5 percent; expanding their nonrefundable Child Tax Credit to include 5 year olds (the existing credit is provided to children ages 1 to 4); enacting a tax credit for employer-provided child care; and expanding eligibility for the Social Security tax credit by increasing the income thresholds from $75,000 to $90,000. – MARCO GUZMAN
- As the NEW YORK legislature works to finalize a spending plan by April 1, legislators are proposing to raise the state’s top income tax rates and extend the temporary corporate franchise tax. To varying degrees, they also backed Gov. Kathy Hochul’s tax cuts for the middle class (via rebates and credit improvements). The Assembly’s plan would create new rates of 10.75 percent for income between $10 million and $25 million, 11.75 percent on income between $25 million and $100 million, and 12 percent on income above $100 million. The Senate would create new rates of 10.8 percent for income above $5 million and $10 million and 11.4 percent for income above $25 million. — DYLAN GRUNDMAN O’NEILL
- The SOUTH DAKOTA House and Senate have passed a property tax bill that would cap countywide residential assessment growth at 3 percent annually for five years. It would also annually cap the amount local governments can increase tax collections, exempt some home improvements worth less than 40 percent of a home’s value from assessments changes, and expand eligibility for disabled and elderly people for property tax cut programs. – MILES TRINIDAD
State Roundup
- Both income and sales tax legislation are being considered in ALABAMA. One measure would accelerate the cut to sales taxes on groceries, which is currently being reduced when certain triggers are met. Additionally, there is a bill to increase the amount and thresholds for the state’s standard deduction and dependent exemption.
- Democrats in COLORADO have proposed two ballot measures to fund a $50 million deficit in a program that provides free school meals to students. The main revenue raising measure would reduce the deduction addback threshold for filers with incomes over $300,000 from $12,000 to $1,000 for single filers and $2,000 for joint filers.
- The IDAHO Senate approved two additional bills that could further reduce revenues. The first would increase the state’s grocery tax credit from $120 (with an additional $20 boost for seniors) to $155 for all filers, while the other bill would commit $100 million between two funds to help cut property taxes.
- The commissioner of Parke County, INDIANA noted his 16,000-resident community would stand to lose $1.7 million annually by 2028 under Gov. Braun’s property tax cut plan. As the House and Senate weigh concerns over unsustainable hits to local government coffers, lawmakers are having trouble reaching consensus on a property tax cut plan.
- A proposal out of MAINE would allow municipalities to impose a local option sales tax of 2 percent on short-term lodging.
- The MARYLAND House held a committee hearing on legislation that would create a 2-cents-per-ounce tax on sugary drinks, syrups, and powders. The bill would raise an estimated $500 million a year for healthy school lunches, child care scholarships, and addressing the state’s budget deficit.
- Meanwhile, the MARYLAND Senate held a hearing on legislation that would create a 6 percent tax on businesses that collect and monetize consumer data. The bill would raise an estimated $342 million a year and fund resources for privacy protection and enforcement. If the bill succeeds, Maryland would be the first state to develop a central data broker registry and impose a tax on gross income on data brokers.
- Some MISSISSIPPI lawmakers are concerned about the effects of replacing income tax revenue with additional sales and excise tax revenue on senior residents.
- The MISSOURI House continues to debate a measure to fully exempt capital gains from the state’s income tax. The change would overwhelmingly benefit wealthy Missourians, at a significant cost to state revenue. The bill pits income from wealth against income from work – taxing the salaries and wages that most Missourians earn at a higher rate. After passing the Senate, the bill was debated in the House but has yet to receive a vote.
What We’re Reading
A new ITEP policy brief breaks down a recent proposal in Missouri to match donations of corporate stock to anti-abortion pregnancy resource centers. The state already provides donors a credit worth 70 percent of their donation, but some lawmakers have now proposed full state-funded reimbursement of donations. In the event Missourians donate corporate stock, the tax savings would be worth more the donation itself. That means that “giving” stock worth $50,000 could provide investors federal and state tax cuts worth about $56,000. If passed, the measure is sure to increase donations to anti-abortion centers at a significant cost to the state.
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