January 28, 2025

State Tax Watch 2025

Updated April 11, 2025

In 2025, many state lawmakers face substantial gaps between revenue and spending that will undoubtedly lead to some combination of tax increases or spending reductions. In states without forecasted deficits, state revenues are slowing; and that reduction will be even more dramatic in states that have deeply cut taxes in recent years.

Meanwhile, states are facing immense uncertainty around federal tax and budget decisions, many of which could threaten state budgets. Lawmakers have a choice: advance tax policy that improves equity and helps communities thrive, or push tax policies that disproportionately benefit the wealthy, drain funding for critical public services, and make it harder for working-class families to get ahead.

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 updated with the latest news and movement 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?

Below are summaries of tax legislation discussed or approved in each state. Click on your state to jump to the summary.

•	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

Lawmakers exempted overtime pay from state income tax in 2023, but the exemption expires in June of this year unless renewed. The policy has become increasingly expensive, blowing past its initial projected annual cost of $34 million and costing the state $230 million between January and September of 2024.

Alaska

The state anticipates a $1.7 billion budget deficit. Lawmakers have introduced proposed tax increases on the oil industry that include reducing the value of certain tax credits and applying corporate income taxes to privately held oil companies. A separate bill would levy a corporate income tax on some out-of-state businesses that operate as online retailers. Without sufficient new revenue, lawmakers may consider filling the gap by either cutting the Permanent Fund Dividend or forgoing the temporary boost in education spending that the legislature authorized last year.

Arizona

In her executive budget proposal, Gov. Katie Hobbs called for $10 million per year for six years to expand the State Low Income Housing Tax Credit.

Arkansas

Gov. Sarah Huckabee Sanders has unveiled her plan to eliminate the state’s .125 percent tax on groceries, which would cost the state roughly $11 million a year. She's also discussed a plan to use revenue from the state’s medical marijuana industry to fund nutrition programs. Meanwhile, the state's revenue is down from the previous year.

California

After two years of budget deficits, Gov. Gavin Newsom proposed a balanced budget. However, his plan would further pull from rainy day funds to finance new priorities. The state’s fiscal outlook has stabilized due to rising tax collections.

Colorado

Faced with a $700 million shortfall, lawmakers are weighing spending cuts. Property tax cuts are also being discussed as a high-priority issue.
Some legislative leaders are pursuing solutions to the “TABOR” policy that has stifled the state’s ability to fund shared priorities or improve tax fairness for over 30 years. Their strategy involves exempting some infrastructure funding from the spending cap, moving to a graduated income tax structure, and challenging TABOR itself in court.

Connecticut

Gov. Ned Lamont unveiled his budget, which includes an increase to the state’s property tax credit (from $300 to $350), a restructuring of hospital taxes, an increase to the biotech R&D credit, and elimination of the capital stock tax. His budget also aims to reform corporate taxes in a number of ways, including the removal of a harmful cap that allows companies to avoid taxes by shifting their profits into low-tax states.
Meanwhile, Democratic lawmakers have proposed phasing out the car tax over 5 years and a separate bill would create a 1.5% payroll tax paid by employers to ensure families pay no more than 7% of their household income on childcare. Republicans in the Senate released a tax plan that would cut the bottom two marginal income tax rates and cap municipalities' ability to increase annual property tax at 2%. Another proposal to create a $600 per-child refundable Child Tax Credit has garnered support of roughly 42 percent of the state’s legislators.

D.C.

The District is facing a more than $1 billion budget shortfall over the next three and a half years due to tax revenue reductions due to the ongoing layoffs of federal workers. The D.C. council’s chairman noted that raising taxes is not an option for him, but the mayor says nothing is off the table.

Delaware

Gov. Matt Meyer proposed a budget that includes three new tax brackets. The proposal, which would create brackets at $125,000, $250,000, and $500,000 with a new top rate of 6.95%, would ask more of the state’s wealthiest taxpayers and is estimated to raise $35.2 million in 2027.
The governor’s budget also includes fees on state parks and roads and tax increases on cigarettes and other tobacco products.
Meanwhile, after companies such as Meta and Tesla threatened to leave the state and incorporate elsewhere, lawmakers quickly passed legislation to overhaul the state’s corporate law, favoring controlling shareholders of large companies. The legislation, signed into law by the governor, will alter how companies can use independent directors to ensure the deals they’ve made will not be subject to court scrutiny and limit the records that shareholders can obtain from companies when investigating possible breaches of fiduciary duty.

Florida

Legislative leaders and Gov. Ron DeSantis are at odds over tax cut proposals this session. While the governor is pushing for additional property tax cuts, House leadership is considering legislation to lower the state’s sales tax from 6% to 5.25%.
In his state address, Gov. Ron DeSantis called for cuts to property taxes, the elimination of a tax on business rents, and multiple sales tax holidays. Separately, he has floated the idea of dramatically increasing the state’s homestead deduction which currently exempts the first $25,000 of a home’s value from all property taxes and the second $25,000 from non-school taxes. He also publicly supported the idea of eliminating all property taxes in the state. A proposal for eliminating property taxes would require 60% voter approval.

Georgia

Lawmakers have moved the following legislation to Gov. Brian Kemp: a bill to fast track the state’s phased-in personal income tax rate reductions and legislation to provide individual tax rebates. The income tax cut bill would lower the state’s flat rate from 5.39% to 5.19% starting July 1 – costing the state $869 million a year. The rebate legislation would provide a rebate of $250 to individuals and $500 to married couples for Georgians filing income taxes.
Additionally, the Senate unanimously passed a bill that would expand the state’s child care credit (child and dependent care credit) to 40% of the federal credit and would create a $250 nonrefundable Child Tax Credit for qualifying dependents under age 7.
Last year voters opted to create a property tax valuation cap that limits annual growth in assessments to the rate of inflation. It included an opt-out provision for municipalities, which many taxing districts – including two-thirds of school districts – across the state used to opt out of the cap fearing that the caps could lead to funding shortages. The legislature is now trying to force municipalities to abide by the cap by requiring them to hold another round of local referendums in 2027 to either opt out or be placed under the cap by state law.

Hawaiʻi

In his State of the State address, Gov. Josh Green touted recent income tax cuts that are estimated to cost the state $5.6 billion in lost revenue over seven years.

Idaho

Gov. Brad Little signed over $400 million in tax cuts into law. The bills cut the state’s personal and corporate income tax rates from 5.695% to 5.3%, remove capital gains tax from sales of gold bullion, expand the income tax exemption to military pension benefits, increase the state’s grocery tax credit, and reduce property tax revenue by $100 million a year.
The governor also signed into law a $50 million school voucher program that will direct state funds to residents choosing to send their children to private schools or homeschool. It will provide up to $5,000 per student for eligible expenses, including private school tuition. However, lawmakers have since rejected the Idaho Tax Commission budget because they’ve identified that the previously approved $50 million for private schools would cost $675,000 to implement.
Meanwhile, the state’s Child Tax Credit, which provides families with a $205 nonrefundable credit for children under 17, is set to expire at the start of 2026 after lawmakers ended the 2025 legislative session without taking action on reauthorizing the policy.

Illinois

Gov. JB Pritzker laid out his plan to close Illinois’ impending $3.2 billion deficit in his address to the state. The plan would raise $469 million in new revenue through adjusting tax rates on certain types of gambling, pausing a sales tax transfer to the road fund, and offering temporary amnesty for taxpayers making delinquent tax payments.
Meanwhile, following the state's nonbinding ballot initiative on whether the state should consider creating a 3% surtax on income over $1 million to fund property tax cuts, lawmakers are weighing what form those property tax cuts could potentially take.

Indiana

In his state address, Gov. Mike Braun focused heavily on property tax cuts, including a proposal to cap increases to 3% for all property types. This proposal was submitted in Senate Bill 1, but Senate lawmakers, concerned with the impact on local government, removed bill language that capped property tax assessments and increased the homestead standard deduction – two focal points of his proposal. 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. House members are now weighing a new property tax cut proposal that would phase out business personal property taxes while having municipalities decide whether to increase their local income tax rates.
Meanwhile, the state's income tax rate continues to be lowered over time per a legislative trigger. And, notably, the Senate unanimously passed a new tax credit --the $500 refundable tax credit for newborns that parents can claim the first year of an infant’s life would be available to families making under 720% of the federal poverty line.

Iowa

Gov. Kim Reynolds identified property tax cuts as a focus for the state’s 2025 legislative session. This raised concerns from some lawmakers already worried about the budget due to an expected $1 billion reduction in revenue over a 24-month-period from previous deep personal income tax cuts. Lawmakers are now debating a proposal to cap state property taxes used to fund schools. Although the measure initially backfills the revenue for local governments, the state has cut revenue enough that it may not be able to afford the continued expense.
Meanwhile, the Senate advanced a $1 billion cut to the state’s unemployment tax. And lawmakers are working to enshrine the state’s flat tax into the state constitution.

Kansas

In a showdown between the Gov. Laura Kelly and Republican lawmakers, Kelly vetoed Senate Bill 269 and the legislature overrode her veto. The legislation will ultimately, through legislative triggers, bring the state’s graduated individual and corporate income taxes to flat rates of 4%. Per the governor, the income tax cuts could cost the state up to $1.3 billion a year.
The income tax cuts were the major tax legislation passed, despite conversations focused on property tax cuts throughout session. Also, as of this year, the state's sales tax on groceries has been eliminated.

Kentucky

Gov. Andy Beshear signed legislation to cut the state’s income tax rate from 4% to 3.5%, effective in 2026. The measure, which will reduce annual revenue by roughly $700 million, was a top legislative priority for lawmakers this session and is part of a push to ultimately eliminate the state’s income tax.

Louisiana

The Supreme Court tossed out a lawsuit over the proposed Constitutional Amendment 2. The initial lawsuit claimed the amendment language, based on a 100-page legislative act, is misleading to voters. If passed, the amendment – which remains on the ballot – would constitutionally lower the maximum income tax rate in Louisiana from 4.75% to 3.75%.
During a special session in late 2024, the legislature approved Gov. Jeff Landry’s regressive tax package that replaced the state’s tiered personal income tax structure with a flat 3% rate and cut business taxes. The plan used sales tax increases to make up for a portion of the lost revenue.
Additional triggered tax cuts are underway, and could potentially go into effect in 2026.

Maine

Looking to fill a $450 million revenue shortfall over the next two years, Gov. Janet Mills announced plans for a "lean" budget with targeted tax changes in the form of cigarette excise tax, cannabis tax, and casino tax increases in the coming year.
Lawmakers, meanwhile, have proposed bills that would implement a local option sales tax on short-term property rentals, increase capital gains tax rates, double the state’s real estate transfer tax for properties sold for over $1 million, and reform income tax rates and brackets to promote greater equity. Lawmakers are also considering bills to increase the state's Homestead Property Tax Exemption and expand the state’s Dependent Exemption Tax Credit, their state Child Tax Credit, by allowing families with kids younger than 6 to receive an additional $300 per child.

Maryland

Lawmakers finalized a budget that includes $1.6 billion in tax and fee increases to help close the state’s $3.3 billion deficit. The overall progressive tax package includes two new brackets for high-income residents earning over $500,000 and $1 million a year, a 2% tax on capital gains for those earning over $350,000, a phaseout of the itemized deduction for those earning over $200,000, and tax increases on cannabis, sports wagering, and digital services.
Gov. Wes Moore’s budget plan initially included increasing income taxes on households earning over $500,000 and $1 million, levying a 1% capital gains tax surcharge, eliminating itemized deductions, doubling the standard deduction, improving to the state's Child Tax Credit, eliminating the state inheritance tax, reducing the corporate tax rate, and enacting water’s-edge combined reporting for corporate income. His full proposal was estimated to raise $819 million. Moore also proposed $2 billion in budget cuts.

Massachusetts

Gov. Maura Healey's newly released budget makes use of revenue from the state's new surcharge on high earners and includes a handful of revenue raising provisions that would cap the state charitable deduction, close a variety of tax loopholes, and extend existing sales and excise taxes to some products not currently subject to these taxes.

Michigan

In her budget proposal, Gov. Gretchen Whitmer included $208 million in additional taxes. The largest revenue raiser is an increase to landfill tipping fees for environmental initiatives. She also included a new tax on vape and nontobacco nicotine products.
The state is expected to have a roughly $850 million surplus and see growth in tax revenue over the next three years. The Republican-controlled House passed legislation that would reduce the state’s income tax rate from 4.25% to 4.05%.

Minnesota

Amidst a forecasted deficit, Gov. Tim Walz proposed sales tax changes. His proposal would reduce the state sales tax rate from 6.875% to 6.8% (a $95 million revenue loss) and couple that with an expansion to the sales tax base on previously exempt services, like tax preparation (raising $203 million annually). On net, the tax change would increase revenue by $108 million. Gov. Walz has also proposed increasing a surcharge on health maintenance organizations (HMOs) which would raise an additional $90 million.
Meanwhile, House members have unveiled the “Protect Medicaid, Not Millionaires” Act, which would create a personal income tax bracket on single filers with incomes over $1 million and married filers over $1.66 million that would adjust based on the revenue needed to compensate for lost federal funding for Medicaid.

Mississippi

Gov. Tate Reeves signed into law a tax cut bill that will, over time, fully eliminate the state’s individual income tax. The bill phases down the state’s personal income tax rate from 4% to 3% in 2030 and then further reduces the rate, ultimately to zero, using triggered reductions. The bill also reduces the state’s sales tax on groceries from 7% to 5% and increases the gas tax from 18.4 to 27.4 cents over three years. An ITEP analysis of the fully implemented legislation shows an annual revenue loss of nearly $2.7 billion (if in effect today), with the top 1% of Mississippians receiving an average tax cut of $41,420.
Separate legislation would increase the amount of tax credits that can be allocated toward private school vouchers from $9 million to $40 million annually by 2027.

Missouri

The Senate modified and approved a House proposal to fully exempt capital gains from the state’s income tax despite significant concerns about the measure’s cost. Senators also added more modest measures to exempt diapers and period products from the state’s sales tax, and an expansion of the state’s senior property tax circuit breaker. The capital gains exemption, which makes up most of the bill, would direct 80% of the tax cuts to the richest 5% and two-thirds of its tax cuts to the top 1%.
The previously considered House approved plan would have resulted in about $1.3 billion in tax cuts. Their plan would remove the state’s progressive income tax brackets in favor of a flat rate, then steadily cut that rate. The measure also exempts all capital gains income from taxation, eliminates the state’s Earned Income Tax Credit for working families, and includes provisions designed to induce donations to anti-abortion nonprofits.
In his state address, Gov. Mike Kehoe called for the elimination of the state's personal income tax.

Montana

Gov. Greg Gianforte identified 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% to 4.9% and increase the state EITC, came in addition to a call to lawmakers to fast-track his property tax proposal. The income tax components of his proposal has since been tabled in committee.
The income tax cut bills still under consideration include: an income tax credit for low- and middle-income families, a top rate cut from 5.9% to 5.4% and an expansion of the lower bracket (from $20,000 to $70,000 for individuals), and increasing the state’s bottom income tax bracket (to $100,000 for those filing as individuals).
Lawmakers continue to discuss property tax cuts. Both parties have received bipartisan support for their respective proposals. The governor’s bill would cut property taxes for resident homeowners and landlords by increasing them on second homes and short-term rentals. Competing bills would create a property tax credit for low- and middle-income residents (including renters) and modify the governor’s plan to specify a progressive rate structure for residential properties.
Meanwhile, 13 Republicans in the House joined all their Democratic colleagues to vote down a bill that would have offered tax credits for private school tuition.

Nebraska

Facing a $432 million shortfall over two years, Gov. Jim Pillen has proposed raising taxes on cigarettes, spirits, and fantasy sports, and adding new taxes on candy and soft drinks. He's also expressed interest in directing that revenue to property tax cuts through school aid changes and has proposed cutting millions from higher education.
Citing current budget troubles (created by misguided income tax cuts in recent years), lawmakers have shelved a bill designed to restore the “missing year” of property tax reductions created last summer when they revamped those policies and accidentally raised property taxes on most Nebraskans for one year.

Nevada

Lawmakers are working to identify ways to erase a $85 million deficit after Gov. Joe Lombardo recommended a two-year budget that did not include any offsetting revenue.

New Hampshire

Details to come.

New Jersey

In his budget proposal, Gov. Phil Murphy has proposed new tax provisions that would raise about $1 billion. Included is a roughly $320 million increase in taxes on the sale of mansions in the state. Most of the proposals are related to sales and excise taxes: expanding what is subject to the sales tax base; increasing rates on alcohol, cannabis, gambling, tobacco, and firearms; and creating a tax on warehouse truck traffic.

New Mexico

In a compromise agreement, the legislature agreed to replace the state's Working Families Tax Credit with a state Earned Income Tax Credit, which will expand eligibility and increase the rate from 25% to 34% of the federal credit. The package will also raise liquor taxes for a tribal alcohol alleviation fund, create a credit for foster parents and guardians, and remove medical services from the gross receipts tax. A new tax on oil that would have paid for these changes on an ongoing basis at a very low rate (0.28%) was scuttled late in the negotiations, so lawmakers will draw $113 million from reserves to fund the first-year cuts instead.
Earlier this year, an assessment of poverty in the state found that it has declined by more than a third since recent tax changes were implemented. Lawmakers worked to build on that progress with a bill to double the state Child Tax Credit for children under the age of six from roughly $600 to $1,200.

New York

Gov. Kathy Hochul’s state 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 more than $1 billion and reach joint filers earning up to $323,200 a year. She also called for $300 “inflation rebate” checks and an expansion of the state’s Empire State Child Credit, that would bump the credit to $1,000 per child under 4 and $500 for older children. The existing credit is set at just $330 per child, by comparison.
Meanwhile, key lawmakers and advocates for progressive revenue are pushing to increase taxes on high earners and profitable corporations.

North Carolina

Gov. Josh Stein’s budget proposal included a freeze to the state's personal income and corporate income tax rates cuts at current amounts, rather than allowing further scheduled reductions to occur. His plan would also scale back private school vouchers, replacing the child deduction with a refundable Child Tax Credit, and creating a refundable Earned Income Tax Credit set at 20% of the federal credit.
The income tax rate recently dropped one quarter of a percent, from 4.5% to 4.25% -- resulting in an estimated $1.25 billion annual revenue loss. An additional cut is scheduled for tax year 2026, bringing the state's flat income tax rate to 3.99%. The legislature's fiscal research division projects a structural budget deficit by 2027 driven by the cumulative effect of ongoing tax cuts.

North Dakota

A property tax bill supported by Gov. Kelly Armstrong received unanimous support from a Senate Committee hearing. The bill would give homeowners up to a $1,450 primary residence tax credit (up from $500), cap the amount of property taxes levied locally at a 3% annual increase, increase the income thresholds for seniors for the Homestead Tax Credit program by $10,000, and expand the renters credit from $400 to $600. Lawmakers are also considering legislation to increase the gas tax for the first time in 20 years as well as an electric vehicle fee.
Gov. Kelly Armstrong announced a plan to eliminate property taxes for most homeowners within a decade. Her plan would also establish a 3% annual cap on local property taxes and apply to all property types. Armstrong’s plan follows a failed ballot initiative in November that would have eliminated all property taxes based on assessed values. Other similar legislative proposals would eliminate income taxes for single filers earning up to $54,000 per year and joint filers earning up to $90,000 per year.
Meanwhile, the House of Representatives passed legislation that could create an education savings account allowing parents to access 50% of the statewide average per-pupil funding (about $4,000 per student) to be used on qualified expenses as long as the child is not enrolled in public school or homeschooled.

Ohio

Gov. Mike DeWine’s proposed budget would create a new young Child Tax Credit for children of working families. The refundable credit of up to $1,000, depending on earnings, would provide a boost to children under seven. The maximum credit is available to eligible children if their parents are employed on a full-time basis before it begins phasing out. His budget would also expand eligibility for publicly funded child care programs and raise taxes on tobacco, marijuana, and sports betting.
Meanwhile, conversations around property taxes cuts continue, following a committee report on property tax reforms.

Oklahoma

Gov. Kevin Stitt has repeatedly called for a individual income tax cut of 0.5% and eventual elimination of the tax. Legislators have expressed skepticism. While the governor insists the rate cut would cost about $200 million a year, it would actually result in roughly $600 million a year in forgone revenue.
The governor has also made the case for a business income tax cut. And lawmakers are debating a bill that would immediately cut personal income taxes and reduce the rate per a triggered reduction until the tax is ultimately eliminated. The state recently eliminated its sales tax on groceries and faces a tighter fiscal picture this year.

Oregon