State Tax Watch 2026

Recent policy changes at the federal level are coloring states’ 2026 legislative sessions in major ways. As the federal government retreats from its funding responsibilities in areas like health care access, feeding impoverished families, and safeguarding communities from climate disasters, it’s increasingly falling on states to pick up the tab. At the same time, the federal government has deeply cut taxes for the rich and large corporations even as the American public consistently says that these groups are paying too little in tax. Over the next decade more than $1 trillion in tax cuts will flow to the top 1 percent of families as a result of the new federal tax law enacted last year.

This context, coupled with underlying economic anxiety, has states carefully assessing their tax structures as they seek to balance their budgets.

For state lawmakers, 2026 brings tax policy decision points on:

Whether to piggyback on the tax cuts in the federal government’s 2025 tax and spending bill, or whether to chart their own course.

Whether to continue a path of repeated state tax cuts, spending cuts, and underfunding of core state investments like education, healthcare, and childcare.

Or, whether to shift course with new and bold revenue-raising measures that can claw back some of the unpopular federal cuts flowing to very high-income people.

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 frequently updated with the latest tax news 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? or watch our webinar on the state tax policy decisions that need to be made in the wake of the new federal law.

•	Alabama
•	Alaska
•	Arizona
•	Arkansas
•	California
•	Colorado
•	Connecticut
•	Delaware
•	District of Columbia
•	Florida
•	Georgia
•	Hawaiʻi
•	Idaho

•	Illinois
•	Indiana
•	Iowa
•	Kansas
•	Kentucky
•	Louisiana
•	Maine
•	Maryland
•	Massachusetts
•	Michigan
•	Minnesota
•	Mississippi
•	Missouri

•	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

In her final State of the State address, Gov. Kay Ivey called to expand the state’s school voucher program, known as the CHOOSE Act, from $100 million to $250 million per year.

Alaska

In his annual address, Gov. Mike Dunleavy announced that he would not support raising revenue without cuts to spending. Details of his fiscal plan include a major tax swap from profitable corporations to working-class families through proposed elimination of the state’s corporate income tax by 2031 and the creation of a seasonal sales tax of 2 percent (October through March) and 4 percent (April through September), beginning in 2027 and ending in 2034. He’s also discussed new limits on government spending, oil tax changes, and a new formula for the Permanent Fund Dividend payments, or PFD.

Arizona

Gov. Katie Hobbs vetoed a budget bill backed by the legislature that would have fully conformed to the 2025 federal tax law. The governor, meanwhile, is in favor of conforming to fewer of the federal tax cuts. The governor has also called for eliminating the state’s data center tax exemption. In an interesting twist, the tax forms for this year’s filing season do not match the state’s current tax system, possibly resulting in those filing now having to file amended returns.

Arkansas

Arkansas’ legislative session does not begin until April. The state is not facing a revenue shortfall, and some are attributing this to the state not passing a major tax cut in 2025 for the first time in years. However, the state’s school voucher program (expected to result in $326 million in lost revenue this fiscal year) and plans for a new 3,000-bed prison are expected to make other budget priorities difficult – especially when compounded with the fallout from federal funding for SNAP, Medicaid, and disaster relief.

California

Multiple ballot initiatives are likely to be considered this year, including an effort to implement a one-time 5 percent tax on the wealth of the state’s billionaires to cover cuts to Medicare included in the new federal tax and spending law. The measure would tax those with a net worth above $1 billion and is opposed by Gov. Gavin Newsom. Meanwhile, the state’s top tax rates are up for renewal under Prop 55. And cities across the state are weighing local revenue-raising measures.
The state also passed its tax conformity package, opting to conform to the federal tax code as of 1/1/2025 and update individual provisions intentionally.

Colorado

In his address to the state, Gov. Jared Polis asked lawmakers to come together to cut the state income tax rate. This annoucement comes as lawmakers continue to weigh how to address the state’s shortfall, driven by tax and spending cuts under last year’s federal law. Meanwhile, officials have approved a graduated-rate income tax ballot iniative and reveue raiser that is expected to appear on this November’s ballot.
In special session last year, Colorado passed a package intended to protect state revenue. It tightened rules for corporations in a variety of ways and critically included decoupling from the Foreign-Derived Deduction Eligible Income (FDDEI) deduction. Also, before the federal law passed, lawmakers decoupled from the ‘no tax on overtime’ provision. Lawmakers are expected to revisit other conformity provisions during the state’s 2026 legislative session.

Connecticut

Lawmakers are considering tax increases on the very wealthy—who will receive a windfall from the new federal tax law—to help fund increased benefits for middle- and low-income households. Plans, to date, include a 1.75 percent capital gains surcharge on those whose incomes exceed $1 million ($2 million for couples) and a mansion tax of two mills on properties assessed between $3 million and $5 million. House Republicans, meanwhile, have proposed increasing the state property tax credit from $300 to $1,000. Other issues likely at play include a push for a state Child Tax Credit and focus on protecting revenue via changes to estate tax conformity.

D.C.

Ahead of 2026, the D.C. Council voted to decouple from most costly and harmful tax provisions in the federal tax and spending law. The District decoupled from both business and personal income tax exemptions, including a full decoupling from the Qualified Small Business Stock (QSBS) exclusion – a clear giveaway to multimillionaire and billionaire venture capitalists. In an amendment, the Council voted to use the revenue saved to reinstate and expand the District’s Child Tax Credit to $1,000 per child and to speed up the increase to their Earned Income Tax Credit from 85 percent to 100 percent of the federal credit. Given that this was emergency legislation, lawmakers will need to come back and make it permanent.
However, Congress introduced a resolution to repeal that tax bill. If passed into law, the resolution—which would upend D.C.’s ability to self-govern, plan its budget, and administer a working tax system—could cost the city nearly $700 million over the next 5 years, and eliminate changes to the Child Tax Credit and Earned Income Tax Credit. It now moves to the full Senate for a vote.

Delaware

In special session in late-2025, the state decoupled from corporate provisions in the new federal tax law, at an estimated savings of $328 million through 2028. Those decisions will be revisited in 2030. Gov. Matt Meyer said that because Delaware’s tax code mirrors federal law, the cuts included in the Trump megabill would provide “massive corporate giveaways.” State lawmakers are likely to revisit revenue raising conversations this legislative session.
Meanwhile, Gov. Meyer’s budget proposal includes an increase to cigarette taxes by $1.50 to raise an additional $18.9 million and an increase to business formation fees that would raise $81 million.

Florida

Faced with a $1.5 billion (and growing) revenue shortfall, lawmakers are weighing a range of property tax cut proposals. Gov. Ron DeSantis had been making the case for eliminating property taxes, but the legislature’s response has been tepid. Of the proposals being considered is a phase out of non-school property taxes for homestead owners over ten years by gradually increasing the state homestead exemption until 2037, at which point non-school property taxes would be eliminated. Another would limit annual property tax rate increases to 3 percent or inflation for homesteads and lower the assessment increase limit from 15 to 10 percent.
Meanwhile, counties across the state, especially rural communities, have expressed deep concern over these proposals and their impact on ability to fund vital services. Any change would need 60 percent voter approval at the ballot.

Georgia

In his state address, Gov. Brian Kemp called for another accelerated cut to the state’s personal and corporate income tax rates, which are currently only phasing down if the state meets certain economic and revenue benchmarks. The proposal would bring the state’s income tax rate from 5.19 to 4.99 percent. Gov. Kemp also called for a fourth round of tax rebates of $250 for single filers and $500 for married filers. Leading up to this announcement, a legislative committee was exploring options to fully eliminate the state’s income tax, a major funding source for key priorities that currently raises $16 billion annually.
Meanwhile, lawmakers are debating competing property tax proposals. The Senate is pushing a bill that would prevent local governments and school districts from opting out of a statewide homestead tax exemption that caps annual property tax increases to inflation. The statewide homestead exemption was passed in 2024 but allowed municipalities to opt out, and many chose to do so citing their need for the revenue to fund public services. And the House is pursuing an even more extreme proposal to phaseout all homestead property taxes by 2032.

Hawaiʻi

Gov. Josh Green and state lawmakers are expected to make revenue a central focus in the upcoming legislative session as the state faces a projected $3 billion revenue shortfall caused by federal policies and an anticipated economic slowdown. Among the options to address the shortfall, lawmakers are considering a pause on some of the income tax cuts that were passed in 2024 and scheduled to phase in through 2031, which were estimated to cost the state $7 billion over the next six years. To that end, Gov. Josh Green called on the state legislature to pause for three years scheduled tax cuts, which is estimated to save about $1.8 billion as the state is expected to face a revenue shortfall. In addition to using the funds to address the shortfall, Gov. Green also proposed using $600 million of the revenue towards food security and childcare needs.
Meanwhile, lawmakers are exploring additional revenue raising options beyond freezing existing cuts, including closing the state’s existing capital gains tax loophole, strengthening the state’s conveyance tax, and a wealth proceeds tax.

Idaho

In his state address, Gov. Brad Little touted the state’s income tax cuts over the past 5 years. He also, relatedly, discussed the state’s lagging revenue forecast and his recommendation for spending cuts. Specifically that state agencies extend their 3 percent budget cuts into fiscal year 2027. Lawmakers are now exploring the need to increase those budget cuts to 4 or 5 percent. Meanwhile, the state opted to allow their nonrefundable Child Tax Credit to expire on January 1, 2026. And eliminated a $30 million program that benefitted public school families and is rolling out its new $50 million private school voucher program, which is spurring pushback from public schools and litigation.
On the conformity front, a bill that would tie the state to nearly all of the tax changes under the federal tax and spending law passed through the House. The bill is expected to cost the state $155 million this fiscal year.

Illinois

In late 2025, lawmakers decoupled from the bonus depreciation deduction in OBBBA and adjusted language to ensure the state remain conformed to the new definition of Global Intangible Low Tax Income, now known as Net Controlled Foreign Corporation Tested Income (NCTI). These two measures will help close the state’s $200 million deficit for fiscal year 2026. Meanwhile, lawmakers are expected to consider revenue raising measures.

Indiana

Lawmakers are working to determine how to address federal tax conformity measures in the state. Most recently, the Senate passed a conformity bill to address the state’s tax code in the context of the Trump tax law. The legislation would temporarily couple to the federal tips and overtime exemption for 2026 and reduce state revenue by $250 million. The bill would also permanently couple to the adoption tax credit expansion, among other changes.
Meanwhile, public schools in are feeling the impact of property tax legislation, passed in 2025, that decreased taxable assessed values.

Iowa

Lawmakers, focused on property tax cuts, have proposed measures to overhaul the state’s property tax system. Among them are plans to impose strict caps on the growth of property tax bills—regardless of the real growth in a property’s value, creating separate classes of property for residential rentals and property occupied by owners. These property tax cut conversations follow years of deep income tax cuts and ongoing conversations around stricter constitutional limitations via the ballot.

Kansas

Faced with stagnating revenue, lawmakers are expected to revisit and consider property tax cuts. That push follows deep personal and corporate income tax cuts passed in 2025 when ITEP identified Kansas as one of the top 5 states in to provide the biggest tax cuts to millionaires. Potential revenue raisers are also being weighed by public service advocates.

Kentucky

Per existing law, the state’s income tax continues to be reduced when meeting specific metrics. The income tax rate was reduced from 4 to 3.5 percent in 2026, with an annual associated revenue loss of $700 million. This year lawmakers may yet consider another stand-alone cut, whether or not legislative triggers are met. Budget cuts are also on the table and under discussion. Meanwhile, Gov. Andy Beshear is pushing for roughly $100 million to fund a state Pre-K program over the next two years.

Louisiana

Faced with a revenue shortfall starting in fiscal year 2028, the state is heading into a nonfiscal session. Recent major tax changes (a new flat rate income tax, elimination of the state’s corporate franchise tax, and a sales tax increase) continue to play out. Meanwhile, the state’s largest utility company is seeking a $237 million property tax exemption over 10 years to pay for the infrastructure needed to power Meta’s data center in Richland Parish.

Maine

Gov. Janet Mills released her supplemental budget proposal, which includes $300 one-time payments for residents with incomes below $75,000 and limited conformity to the federal tax bill. The conformity recommendations, adopted on a temporary basis, include the expanded standard deduction, research and development changes, and charitable contributions for nonitemizers. The state will not couple to certain expensing and depreciation provisions, and have committed to not incorporating the “no tax on tips” and “no tax on overtime” provisions into the state tax code. Conformity decisions will likely be revisited.
Meanwhile, efforts continue on corporate accountability, revenue raisers, and stronger tax credits.

Maryland

Faced with a $1.5 billion deficit, Gov. Wes Moore’s proposed budget includes no new taxes or fees and aims to address the shortfall with spending cuts. The budget also proposes conforming to some of the 2025 federal tax law’s business tax provisions – such as allowing companies to immediately deduct eligible research expenses and deducting business interest – while also decoupling from new depreciation allowance for production property and replacing a federal calculation for bonus depreciation benefits with a state-specific calculation. Meanwhile, efforts continue on corporate accountability, revenue raisers, and stronger tax credits.

Massachusetts

This year lawmakers are expected to consider corporate accountability and revenue options, while taking action to address federal conformity. Regarding conformity, state estimates reveal that the new federal tax law will reduce state revenues by more than $460 million, alongside dramatic cuts to federal health care spending and economic upheaval from tariffs. Gov. Maura Healey has proposed conforming to federal tax cuts for businesses over a period of five years. The measures, which mostly benefit large businesses, will additionally cost the state about $660 million if fully adopted.
Meanwhile, there is a push for a statewide ballot initiative that would lower the state’s tax rate by one percentage point.

Michigan

In her budget recommendation, Gov. Gretchen Whitmer included a continued phase out of Michigan’s retirement tax and taxes on Social Security income; elimination of tax on tips and overtime pay until 2028; and a 10 percent property tax refund for eligible seniors. Her budget also proposes a new sales tax holiday on school supplies. However, the state may face constraints due to a $900 million revenue shortfall. To close some of that shortfall, Whitmer proposed tax increases on cigarettes, tobacco, vaping products, and gaming.
This year Michiganders may have the chance (pending ballot signatures) to vote to create a 5 percentage-point surcharge on income over $1m (for joint filers). The measure, if approved, is estimated to raise $1.7 billion annually to fund public K-12 schools.

Minnesota

In the face of federal interference and a heavy ICE presence, lawmakers are considering federal tax conformity, revenue raisers, and a persistent but ill-advised proposal to eliminate taxes on Social Security income.

Mississippi

Senators struck down a voucher expansion bill in committee despite support from the House and Gov. Tate Reeves. The state was identified by ITEP as one of the top 5 states in 2025 to provide the biggest tax cuts to millionaires via a scheduled reduction in the state’s income tax until it is fully eliminated.

Missouri

Gov. Mike Kehoe proposed a statewide ballot initiative to overturn a prior measure and authorize the legislature to expand the state’s sales tax base, with the ultimate aim of eliminating the personal income tax. The governor has offered few details about what additional goods and services he wants to tax to offset even part of the state’s personal income tax revenue, which makes up nearly two-thirds of the general fund. This follows the state being identified as one of the top 5 states in 2025 to provide the biggest tax cuts to millionaires via a full elimination of the state tax on capital gains income.
Meanwhile, a competing proposal would require that, starting in tax year 2030, sales tax rates be reduced in order to cap revenue at the real median of the prior three fiscal years. In effect, this would compel the state and localities (it exempts only the cannabis tax) to cut rates to maintain constant real receipts. But, when sales tax receipts decline during recessions this measure will also compel cuts, creating over time a decline in sales tax revenue and reliance.

Montana

No regular session in even-numbered years. In 2027, lawmakers will take up federal conformity and likely weigh additional property and income tax cut proposals. Lawmakers continue to also debate the creation of statewide sales tax, that would be coupled with property tax cuts.

Nebraska

In his address to the state, Gov. Jim Pillen outlined a tentative goal to reduce property taxes by $170 million. The state is faced with a nearly $500 million revenue shortfall created largely by income tax cuts for high-income households that are still phasing in. In response, Gov. Jim Pillen and his allies have called to slash services to balance the budget.

Nevada

No regular session in even-numbered years. Late last year, as part of a special session, lawmakers opted not to massively expand the state’s film tax credits, showing their responsiveness to concerns about subsidizing the movie industry at the potential cost of cuts to schools and other services.

New Hampshire

In Gov. Kelly Ayotte’s state address, she acknowledged recent increases in property taxes in the state. However, she did not propose any specific solution and rejected proposals to increase or create new revenue streams. Instead, she warned against adopting any form of income tax.
Meanwhile, lawmakers are considering a handful of revenue raising proposals, including a tax on second homes and that are unoccupied for six months of the year. Business tax cuts remain part of the debate, as do local property tax caps.For instance, a bill passed by the House to reduce the state’s Business Enterprise Tax, or BET, at the estimated cost of $26 million annually.

New Jersey

Faced with an estimated $1.5 billion revenue shortfall next year, lawmakers are considering revenue-raising proposals. A coalition is organizing to ensure the state’s wealthiest residents and big corporations pay their fair share with a proposal to raise $1 billion with new and higher tax rates on those with incomes over $2 million, $5 million, and $10 million, with rates set at 12 percent, 13 percent, and 14 percent, respectively. Meanwhile, conversations around property tax cuts continue.

New Mexico

In her state address, Gov. Michelle Lujan Grisham called for eliminating gross receipts tax on medical services and asked the legislature to approve $150 million in tax credits to help support industries like quantum computing and fusion technology. Otherwise, the state may revisit recent conversations about alcohol and gas tax increases. And will likely debate and determine next steps on federal conformity.

New York

Gov. Kathy Hochul’s executive budget and state address contained little new on the tax front. Progressive tax policies enacted during previous administrations, combined with a surging stock market, have created reserves that allow the budget to remain in balance in the short-term while funding the first two years of a major child care expansion (alongside New York City Mayor Zohran Mamdani) as well as other priorities. Other tax items include extending a temporary corporate surcharge, opting in to the federal “no tax on tips” tax cuts, and enhancing the state’s child and dependent care credit. The budget also raises about $1.4 billion a year by decoupling from some of last year’s federal business tax breaks. And there are ongoing campaigns in the state to raise additional progressive revenue.
Meanwhile, in NYC, Mayor Mamdani won the mayorship campaigning on affordability issues. His proposals would tax the city’s wealthiest people and corporations to pay for universal childcare and free buses.

North Carolina

The state continues to operate without a balanced budget. State revenues are not keeping pace with current projected spending, resulting in a $3.5 billion projected revenue shortfall in less than 3 years. However, continuing a decade-long tax-cutting spree, both individual and corporate income tax rates continue to be reduced, with the corporate income tax expected to be fully eliminated by 2030. Public support for rolling back tax cuts, a millionaires tax, and mansion tax are building support as residents face steeply reduced public services.

North Dakota

Lawmakers are considering a gas tax increase and an increased electric vehicle fee to fund transportation infrastructure. In 2025, the state passed a major property tax package that provides a primary residence tax credit and caps annual property tax increases at 3 percent. It also caps how much school districts can raise in property taxes. Meanwhile, two measures will go before voters this year: a supermajority threshold to pass constitutional measures (by the legislature and citizen-initiated ballot petitions) and a single-subject rule for citizen-initiated petitions.

Ohio

Gov. Mike DeWine signed five property tax bills aimed at limiting property tax growth by capping increases to inflation, expanding county authority to reduce excessive levies, and giving auditors more control over valuations. These measures were enacted to limit property tax increases while lawmakers continue to resist a citizen-led initiative to abolish property taxes entirely. Before these property tax cuts were enacted, the state was identified by ITEP as one of the top 5 states in 2025 to provide the biggest tax cuts to millionaires as a result of cuts to the state’s income tax.
Conversations around cuts to the property tax continue, ranging from extreme repeal proposals to more tailored, and cost-effective circuit breakers. Gov. Mike DeWine warned that eliminating property taxes – an idea being pushed via a ballot effort – could require raising the state sales tax to 17 to 20 percent, which he says would be harmful to families, businesses, and low-income residents.

Oklahoma

In his state address, Gov. Kevin Stitt called for multiple new ballot measures. Along with unspecified changes to the state’s Medicaid expansion, eliminating legalized medical cannabis, and a cap to state spending, the governor called for a cap on state property tax growth. He did not lay out specifics.
Meanwhile, lawmakers are debating property tax cuts. Although some lawmakers have proposed exempting homesteads from the property tax—at the cost of $4 to $5 billion—no clear plan has been proposed to sustain the state’s education system. The state’s Senate Majority Leader has criticized a proposed ballot initiative that aims to eliminate property taxes on most homesteads, claiming the measure is unaffordable and would require enormous increases in property taxes paid by farms, businesses, and renters. Before lawmakers pivoted to property tax cuts, the state was identified by ITEP as one of the top 5 states in 2025 to provide the biggest tax cuts to millionaires via a new law that will gradually reduce the state’s income tax until it is fully eliminated.

Oregon

Gov. Tina Kotek called for the repeal of a $4.3 billion transportation funding package after a referendum effort froze its planned increases to the state gas tax, vehicle title and registration fees, and a payroll tax. The freeze is in effect until voters can cast their ballots on the issue in November (or possibly sooner, in the May primary election). With the new funding blocked, Gov. Kotek has asked lawmakers to redirect existing funds to avoid layoffs and fund core programs but warning that broader tax decisions will need to be revisited in 2027 to create a long-term funding plan.
Meanwhile, the Senate is preparing to vote on a bill that would partially disconnect the state from several federal tax provisions – including the new federal deduction for auto loans, the Qualified Small Business Stock exclusion (QSBS), and the bonus depreciation deduction for businesses – in order to recapture lost revenue and address a projected $650 million budget gap. The bill would also increase the state’s EITC by 5 percentage points – from 12 to 17 percent for those with a child under age 3, and from 9 to 14 percent for other eligible individuals – and create a new job creation tax credit for corporations.

Pennsylvania

Late last year, the state enacted a budget that included a refundable Earned Income Tax Credit equal to 10 percent of the federal credit and a continuation of the phased-down reduction to the state’s corporate income tax from 7.99 to 7.49 percent. Lawmakers also passed legislation, saving more than $1 billion annually, decoupling the state from major corporate tax provisions under the federal tax bill. Decoupling occurred for provisions related to domestic research and experimental expenditures, limitations on interest expense, and deductions for qualified production property.
In his budget proposal, Gov. Josh Shapiro called on lawmakers to enact combined reporting for corporate income to close a tax loophole that allows multi-state corporations to shift profits to other states to avoid taxes. Gov. Shapiro also called on lawmakers to tax and regulate slot-like skill games and legalize marijuana.

Rhode Island

In his proposed budget for 2027, Gov. Dan McKee included a 3-percentage point income tax surcharge for millionaires, estimated to raise about $135.5 million a year. This comes as the state faces a budget deficit exceeding roughly $100 million and steep federal reductions in Medicaid, food assistance, and other programs, as cited by the governor regarding the need. However, cutting in the opposite direction – both on revenue and progressivity – Gov. McKee said the increase should be paired with business tax cuts and tax subsidies for senior citizens, specifically his proposal to eliminate taxes on Social Security income. The governor’s budget also includes a new refundable Child Tax Credit that is mostly paid for by eliminating exemptions for dependents.
In 2025, the state decoupled from the federal treatment of domestic research and experimental expenditures under the new federal tax law. This allows the state to not follow the federal government’s lead on allowing businesses to accelerate expensing of domestic research and other expenditures in 2025. The change also would have allowed small businesses to do so retroactively up to tax year 2022.

South Carolina

The Senate Finance Committee advanced legislation previously passed by the House in 2025 that would collapse the state’s personal income tax rates into a 1.99 percent flat rate, then enact triggers to bring that down until the personal income tax is eliminated. Additionally, the Senate committee passed property tax legislation that would triple the homestead exemption for senior, blind, and disabled homeowners from $50,000 to $150,000. Meanwhile, lawmakers are assessing the impact of the federal tax and spending law in their state, estimating that it could reduce state revenue by $500 million in the coming fiscal year.
In his final State of the State address, Gov. Henry McMaster called upon the legislature to further reduce personal income taxes while simultaneously calling for an additional $1.1 billion in new infrastructure spending to keep up with the state’s population growth.

South Dakota

Gov. Larry Rhoden introduced legislation that would allow counties to vote on substituting their property tax share with a half-cent sales tax. The legislation comes as lawmakers, and a dedicated legislative tax force, continue to debate property tax cuts. Gov. Rhoden has come out against the recommendations of the task force, arguing that most are not feasible. Meanwhile, the senate passed legislation that would require a local election to be held if a school board decides to exceed property tax limitations imposed by the state. The legislation targets school district decisions to raise more revenue by opting out of current state-imposed property tax limitations.
Legislative leaders have also introduced legislation that would permanently keep the state’s sales tax rate at 4.2 percent. The previous rate of 4.5 percent was reduced to 4.2 percent in 2023 with a planned expiration date of June 30, 2027. The permanent sales tax reduction would cost the state an estimated $111 million annually.

Tennessee

Conversations over deeper corporate tax cuts continue as lawmakers weigh taxes on vaping products. Some lawmakers have proposed exempting groceries from the state sales tax. Many bills to this end have been filed, one of which would fund grocery exemption by closing corporate loopholes and another by cutting spending on private school vouchers.

Texas

Gov. Greg Abbott and Lt. Gov. Dan Patrick are at odds over their property tax cut proposals. While Abbott proposed full elimination of school taxes on homesteads and a 3 percent assessment cap, Patrick has proposed an additional increase to the state’s homestead exemption from $140,000 to $180,000 with a $240,000 exemption for seniors and disabled homeowners. Patrick has also proposed lowering the age of the senior exemption and senior property tax freeze from 65 to 55 years. Patrick has come out against Abbott’s plan, citing concerns that it would skyrocket sales taxes. While Patrick’s plan would likely be less of a hit to local government, it would still significantly lower revenue collections.

Utah

Despite funding and revenue concerns, legislative leaders have advanced another personal and corporate income tax cut (from 4.5 to 4.45 percent), even as Gov. Spencer Cox refrained from including one in his budget. The governor has expressed interest in exploring a digital advertising tax.

Vermont

Gov. Phil Scott continues to make the case for property tax cuts and education reform. He proposed restructuring school districts and overhauling the statewide funding model to curb property tax increases. In his budget address, Gov. Scott proposed using state tax revenue to provide $105 million to lower local property taxes, estimated to cut the projected average 12 percent increase by half.

Virginia

Lawmakers in the state are developing legislation to reshape the state’s revenue landscape and raise needed revenue. Proposals include a millionaires tax and a new 3.8 percent tax on net investment income, among others.

Washington

Gov. Bob Ferguson recently announced, and then reiterated in his address to the state, his support for a proposed tax on residents with incomes exceeding $1 million to raise at least $3 billion in new revenue and to help bring equity to the state’s tax system. His recommendation also includes increases and eligibility enhancements to the state’s Working Families Tax Credit as well as business tax cuts. He identified K-12 education investments as a priority. Other competing revenue proposals are also circulating.

West Virginia

Gov. Jim Morissey has claimed that the state can afford to cut taxes again this year and indicated his support for once again reducing the state income tax. Meanwhile, lawmakers are debating a measure to let data centers avoid paying nearly any taxes for a decade, leading to controversy over the approach to proposed tax breaks for data centers and tech firms.

Wisconsin

Tax policy negotiations between lawmakers and Gov. Tony Evers continue. Although the two sides have not reached an agreement, the governor has expressed openness to some version of property tax cuts proposed by the legislature. Meanwhile, among other conformity measures, lawmakers are considering opting in to a state tax cut on tips, mirroring changes made at the federal level.

Wyoming

Lawmakers revisit proposals for property tax “reform” with bills to eliminate taxes on residential property and a companion bill to increase the sales tax by 2 percentage points, among others. A package of those and other proposals passed the legislature’s Joint Revenue Committee. Meanwhile, the State Board of Equalization is challenging a tax cap on residential property that lawmakers approved in 2024 as a way to cut property taxes while staying within the parameters of the state constitution.