As our nation celebrates and reflects 250 years since its adoption of the Declaration of Independence, we’re doing the same here at ITEP while also reflecting on progressive tax success stories during this set of legislative sessions (on revenue, federal conformity, and tax credits).
Meanwhile, several states have moved to pass lingering budgets. Virginia created a novel energy consumption tax for data centers estimated to raise hundreds of millions of dollars a year and increased its standard deduction; New Hampshire created a new business-side tax credit for childcare. Elsewhere, Arizona froze its data center tax break, Georgia and Nebraska are facing stagnant budgets, and Wyoming’s property tax system has come to a halt over the constitutionality of its valuation growth cap.
Major State Tax Proposals and Developments
- VIRGINIA Gov. Abigail Spanberger signed the state’s two-year budget bill into law. It maintains nearly $2 billion in sales tax exemptions for data centers but also creates a first-of-its-kind energy consumption tax for data centers that is estimated to raise $600 million in annual revenue. The budget raises the standard deduction by $450 for single filers and $900 for joint filers, creates a regulated retail cannabis market, and allows localities to hold referendums to increase sales taxes to support major construction projects for schools. – MILES TRINIDAD
- MICHIGAN Gov. Gretchen Whitmer signed the state’s budget, which includes no new taxes. Whitmer’s original budget proposal included new taxes on smokeless nicotine products, sports betting, and online advertisers. Whitmer’s proposal was estimated to raise $800 million a year to help close the state’s federal funding lapse for Medicaid. – MILES TRINIDAD
- NEW HAMPSHIRE Gov. Kelly Ayotte signed legislation to create a new childcare tax credit for businesses. It allows businesses to claim up to a 50 percent credit against the business enterprise or business profits tax if they create or fund the creation of at least 12 new childcare slots. The total statewide annual credit is capped at $5 million. – MILES TRINIDAD
- PENNSYLVANIA Gov. Josh Shapiro signed the state’s budget after a politically divided legislature reached a bipartisan compromise. The final budget did not include some of Shapiro’s major policy priorities to raise revenue, s well as his other priorities to fund mass transit, expand affordable housing, or raise the minimum wage. – MILES TRINIDAD
State Roundup
- VIRGINIA Gov. Abigail Spanberger signed the state’s two-year budget bill into law. It maintains nearly $2 billion in sales tax exemptions for data centers but also creates a first-of-its-kind energy consumption tax for data centers that is estimated to raise $600 million in annual revenue. The budget raises the standard deduction by $450 for single filers and $900 for joint filers, creates a regulated retail cannabis market, and allows localities to hold referendums to increase sales taxes to support major construction projects for schools. – MILES TRINIDAD
- MICHIGAN Gov. Gretchen Whitmer signed the state’s budget, which includes no new taxes. Whitmer’s original budget proposal included new taxes on smokeless nicotine products, sports betting, and online advertisers. Whitmer’s proposal was estimated to raise $800 million a year to help close the state’s federal funding lapse for Medicaid. – MILES TRINIDAD
- NEW HAMPSHIRE Gov. Kelly Ayotte signed legislation to create a new childcare tax credit for businesses. It allows businesses to claim up to a 50 percent credit against the business enterprise or business profits tax if they create or fund the creation of at least 12 new childcare slots. The total statewide annual credit is capped at $5 million. – MILES TRINIDAD
- PENNSYLVANIA Gov. Josh Shapiro signed the state’s budget after a politically divided legislature reached a bipartisan compromise. The final budget did not include some of Shapiro’s major policy priorities to raise revenue, s well as his other priorities to fund mass transit, expand affordable housing, or raise the minimum wage. – MILES TRINIDAD
What We’re Reading
- The Center on Budget and Policy Priorities breaks down the threat to local services posed by property tax caps. These measures are variously structured, but all limit the growth of property taxes.
- ITEP’s Nick Johnson reports on the many states, a year later, have chosen not to double down on federal tax cuts to the rich. States can choose if they want to incorporate federal tax changes—and many instead have opted to protect their revenue.
- And ITEP’s Aidan Davis reviews both the 2026 state legislative sessions’ efforts to tax their richest residents and provide tax credits. Four states—Washington, Maine, Hawai’i, and Rhode Island—chose to raise revenue from their highest income residents. Although Washington’s shift is the most dramatic given its long-time regressive taxes, all four states will raise increased revenue from their millionaires. Meanwhile, six states—Rhode Island again in addition to Arizona, New Jersey, and Utah for the Child Tax Credit; plus Oregon and Washington for their Earned Income Tax Credits—expanded their tax credits targeted to support working families.
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