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.
House lawmakers passed a $1,000 deduction on overtime income. An amendment on the floor added a two-month sales tax holiday on groceries. In total, the bill is expected to cost $83.4 million. Alabama lawmakers let their previous, broader overtime exemption expire after it blew through initial fiscal estimates and ended up costing the state around $350 million.

Alaska

In his annual address, Gov. Mike Dunleavy announced that he would not support raising revenue without spending cuts. Details of his fiscal plan include a major tax swap from profitable corporations to working class families through the proposed elimination of the state’s corporate income tax by 2031 and the creation of a seasonal sales tax of 2% (October through March) and 4% (April through September), beginning in 2027 and ending in 2034. He has also discussed new limits on government spending, oil tax changes, and a new formula for the Permanent Fund Dividend payments, also known as PFD.
The House has since rejected a Senate-approved bill that would have levied the state’s corporate income taxes on Hilcorp, a privately owned oil and gas producer.

Arizona

Gov. Katie Hobbs vetoed two budget bills backed by the legislature that would have conformed to the 2025 federal tax law.
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.
Gov. Hobbs has also expressed interest in pausing the state’s gas tax in response to increasing prices.

Arkansas

In her state address, Gov. Sarah Huckabee Sanders urged lawmakers to reduce spending so she can call a special session to further reduce income taxes later this spring.
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 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. The state’s top tax rates are up for renewal under Prop 55. Cities across the state are weighing local revenue raising measures.
The state also passed their 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 announcement comes as lawmakers continue to weigh how to address the state’s shortfall – over $1.5 billion for fiscal year 2026-2027 – driven in large part by tax and spending cuts under last year’s federal law.
Officials have approved a graduated-rate income tax ballot initiative and revenue raiser that is expected to appear on this November’s ballot, if enough signatures are collected.
In a 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 have since introduced legislation that would decouple the state from several business provisions included in the federal tax bill, like the expansion of write-offs for certain companies, the new deduction for bonus depreciation, and R&E expenditure changes, among others. Lawmakers intend to use the revenue saved from decoupling to help fund the state’s Family Affordability Tax Credit (FATC) for 2026.

Connecticut

Lawmakers are considering tax increases on the wealthy—who received a windfall from the new federal tax law—to help fund increased benefits for middle- and low-income households. Plans currently 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, though, have proposed increasing the state property tax credit from $300 to $1,000. Other issues likely at play include protecting state revenue via changes to estate tax conformity.
Several lawmakers have introduced legislation that would create a fully refundable $600 Child Tax Credit for up to three children per family. It would be available to families that earn up to $100,000 for single filers and $200,000 for those filing jointly. In contrast, Gov. Ned Lamont raised the possibility of a short-term gas tax holiday to mitigate recent price increases.

D.C.

Following votes from the House and Senate to block D.C. from decoupling from the 2025 federal tax law, a move that many states have chosen to make, President Trump signed the resolution into law. Blocking the District’s earlier actions will cost the city more than $650 million in revenue over the next five years, resulting in administrative chaos, increased inequality, long-term damage to D.C.’s ability to self-govern, and far less funding for key services (like recent improvements to both the District’s EITC and Child Tax Credit, which were estimated to reduce child poverty by one-fifth).
Ahead of 2026, the D.C. Council voted to decouple from the 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% to 100% of the federal credit.
Now, faced with the downsizing of the federal workforce, slow revenue growth, and federal intervention on the District’s federal conformity decisions, Mayor Muriel Bowser is seeking to fill a $1.1 billion budget gap. Her FY 2027 budget plan does not include any major tax increases, but does lean on significant cuts, like a pay freeze for D.C. employees, a trimmed universal paid leave program, and a near full elimination of the Pay Equity Fund, which supports the pay of child care workers. The budget also delays a planned sales tax increase from 6 to 7%.
As part of Mayor Muriel Bowser’s budget, D.C. will decouple from several federal tax provisions for the current tax year, saving $180 million in revenue that will be kept in escrow in case it’s needed for future litigation. The budget, however, couples to most provisions in future years, decoupling from the higher standard deduction, charitable deduction for non-itemizers, business expensing, depreciation for qualified production property, and the retroactive application of the R&E deduction.

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. 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. Matt Meyer’s proposal to increase annual fees for LLCs, partnerships, and other non-corporate business entities is estimated to generate $81 million in additional revenue a year. State officials say these changes, in addition to other revenue increases such as increases to the state’s cigarette tax, will help address the state’s roughly $500 million deficit.

Florida

The state’s legislative session ended with lawmakers failing to pass a budget. The property tax cut debate became gridlocked as lawmakers struggled to come to an agreement. A special session is expected after the Easter and Passover holidays, as a budget must be passed by July 1. Florida is also facing a $1.5 billion (and growing) revenue shortfall.
Both House and Senate lawmakers have proposed conformity bills that would decouple from multiple corporate provisions under OBBBA, including expansions to bonus depreciation, full expensing for research and development, and more.
Earlier this year, Gov. Ron DeSantis made the case for eliminating property taxes, but the legislature’s response was tepid. One proposal considered included a phase out of non-school property taxes for homestead owners over 10 years by gradually increasing the state homestead exemption until 2037, at which point non-school property taxes would be eliminated. Another would have limited annual property tax rate increases to 3 percent or inflation for homesteads and lower the assessment increase limit from 15 to 10 percent. Counties across the state, especially rural communities, expressed deep concern over these proposals and their impact on the ability to fund vital services. Any change would need 60 percent voter approval at the ballot.

Georgia

The state wrapped its legislative session with two major tax cut bills. Despite an early session push to eliminate the state’s personal income tax by 2032, lawmakers opted to pass another accelerated rate cut that lowers the state’s flat personal income tax rate from 5.19 to 4.99% for 2026, as opposed to allowing the rate to trigger down based on economic growth as originally intended. The bill includes further triggers that could bring the rate down to 3.99% in the coming years. The same economic measures needed to drop the rate to 3.99% will also be used to increase the standard deduction to $15,000 for single filers and $30,000 for joint filers. And the first $1,750 of tipped and overtime income will also be exempt from tax. Some lawmakers initially proposed a similarly extreme elimination of property taxes earlier in the session. Instead, local governments will be mandated to cap annual increases to homestead assessments to inflation or 3% with the option to raise sales taxes.
Gov. Brian Kemp also signed off on a fourth round of tax rebates of $250 for single filers and $500 for married filers as part of the FY 2026 budget. And approved a 60-day state gas tax suspension on the state’s 33-cent-per-gallon gas tax.
As an alternative to the deep tax cuts, some lawmakers proposed returning to progressive income tax brackets, increasing the state’s corporate income tax rate, phasing out the standard deduction for high earners, boosting the state’s Child Tax Credit, and creating a refundable state EITC.

Hawaiʻi

Earlier this year, Gov. Josh Green called on the state legislature to pause (for three years) scheduled tax cuts. The cuts, which were passed in 2024 and are scheduled to phase in through 2031, are estimated to cost the state $1.8 billion annually once fully phased in. The House and Senate are now weighing differing approaches as the state faces a projected $3 billion revenue shortfall caused by federal policies and an anticipated economic slowdown.
The Senate plan would maintain tax cuts for individuals earning less than $175,000 annually, or $350,000 for joint filers. However, an advisor to Gov. Green expressed concern that the bill would not preserve enough tax revenue over the next several years. The House plan would preserve the standard deduction increases, repeal future tax bracket reductions for all taxpayers, and add a 1 percentage point surcharge on the state’s three highest brackets in 2027.
Lawmakers are also exploring additional revenue raisers, including closing the state’s existing capital gains tax loophole, strengthening the state’s conveyance tax, and a wealth proceeds tax.

Idaho

Gov. Brad Little signed into law a bill that cuts funding for most state agencies and departments by 4 percent in fiscal year 2026. Lawmakers plan to make an additional 5 percent cut in fiscal year 2027 to help fund conforming to tax cuts from the federal tax law.
In his state address, Gov. Little touted the state’s income tax cuts over the past five years. Relatedly, he also discussed the state’s lagging revenue forecast and his recommendation for spending cuts.
A bill has been introduced to permanently restore the state’s $205 per-child, non-refundable Child Tax Credit. The credit expired after hitting its sunset date at the end of 2025. Idaho also eliminated a $30 million program that benefited public school families and is rolling out its new $50 million private school voucher program, which spurred pushback and litigation from public schools and lawmakers across the aisle.
On the conformity front, lawmakers declined to adopt some of the largest business tax cuts found in OBBBA. Following the governor’s signature, Idaho will not follow the federal government’s lead in offering bonus depreciation for equipment or structures, and most of the retroactive federal tax cuts for research and experimentation expenditures (those incurred from 2022 through 2024) will not be mirrored in Idaho’s code either. Most of OBBBA’s other provisions, however, are now incorporated into Idaho tax law at an estimated cost to the state of $155 million this fiscal year.

Illinois

House leadership endorsed a proposed constitutional amendment that would enact a 3% surcharge on income over $1 million. Gov. JB Pritzker has come out in support of the legislation. Democrats in the state are now debating how much of the new revenue from the tax should be spent on property tax cuts versus other priorities like public education and child care.
In late 2025, lawmakers decoupled from the bonus depreciation deduction in OBBBA and adjusted language to ensure the state remains 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.
In his state address, Gov. JB Pritzker proposed a two-year pause on the state’s data center tax credit program.

Indiana

Gov. Mike Braun signed the legislature’s conformity bill into law, temporarily coupling the state tax code to the new federal tipped and overtime income deductions for 2026 (a revenue loss of $251 million in 2026) and permanently decoupling the state from 168(n) bonus depreciation for certain qualified production property (a revenue gain of $65.9 million in 2026). Gov. Braun also signed an executive order pausing the state’s 7% sales tax on gas for 30 days.
Public schools in the state are feeling the impact of property tax legislation, passed in 2025, that decreased taxable assessed values. Changes to local income taxes are being pushed out a year, to 2029, as lawmakers address concerns from municipalities.

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. For instance, the Senate advanced a measure to limit the state’s property tax cap system to 2 percent plus inflation and increase property taxes paid on rental properties. It would also eliminate property taxes for seniors who own a home without a mortgage.
These property tax cut conversations follow years of deep income tax cuts and ongoing conversations around stricter constitutional limitations via the ballot.

Kansas

Gov. Laura Kelly vetoed the legislature’s bill that would increase the allowable tax credits for the state’s voucher program and participate in the new federal tax credit program for vouchers. Upon vetoing the legislation, Gov. Kelly called on the legislature to instead focus on her stated budget priority of boosting funding for K-12 special education.
Faced with stagnating revenue, lawmakers are also considering property tax cuts. Namely, a petition-option that would allow voters to contest property tax growth over a cap of 3%. The bill requires 10% of voters who voted in the last presidential election to sign the petition in order to contest the property tax increase. These property tax cutting efforts follow deep personal and corporate income tax cuts passed in 2025, when ITEP identified Kansas as one of the top 5 states to provide the biggest tax cuts to millionaires.

Kentucky

Kentucky’s income tax continues to be reduced when meeting specific metrics, per existing law. The income tax rate decreased 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.
The state will participate in the new federal education scholarship tax credit program after the legislature overrode Gov. Beshear’s veto of the measure.

Louisiana

In his State of the State address Gov. Jeff Landry encouraged lawmakers to phase out personal income taxes despite the state projecting a shortfall approaching $300 million by fiscal year 2027. However, leadership within the legislature called for members to be extremely cautious with any bills that would lower revenues. House and Senate leadership rejected proposals to cut or eliminate the state’s individual income tax this session.
Gov. Landry also pushed lawmakers to double the amount allocated to the state’s private school voucher program (to $88 million) even though a bipartisan group of lawmakers rejected this proposal last year.
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. The state’s sales tax exemption for data centers – that benefits only three companies – could soon cost the state nearly $3.6 billion. This is in addition to the PILOTs or “payments in lieu of taxes” that will provide significant property tax breaks for Meta and Amazon if they hit their hiring goals of 300 and 150 jobs, respectively.

Maine

Gov. Janet Mills signed into law the state budget, which included a millionaires’ tax that will levy a 2% surcharge on income over $1 million ($1.5 for heads of households and joint filers). This will improve Maine’s tax structure and raise nearly $100 million in new revenue in its first year. The law also expands the Property Tax Fairness Credit, authorizes $300 one-time payments for eligible households, increases pay for teachers, and makes community college free for residents. The state will also couple to select federal tax provisions and decouple from others, including depreciation, the Opportunity Zone program, and the Qualified Small Business Stock (QSBS) exclusion.

Maryland

Gov. Wes Moore signed the state’s budget into law. It does not include any tax or fee increases, as lawmakers closed a nearly $1.4 billion deficit through a combination of cuts and one-time resource shifting maneuvers. However, the budget does not address long-term structural deficits in the state as it faces a $2.3 billion deficit starting in July 2027 that will grow to nearly $4 billion by July 2030 if left unaddressed.
Earlier this year, Gov. Moore proposed a budget that included no new taxes or fees, addressing the shortfall with spending cuts. The budget also proposed 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 the new depreciation allowance for production property and replacing a federal calculation for bonus depreciation benefits with a state-specific calculation. Other efforts, though, continue on corporate accountability, revenue raisers, and stronger tax credits.
Lawmakers narrowly failed to repeal a one-year-old surcharge on IT and data services that has fallen short of projected revenue. The surcharge collected $35 million when it was originally estimated to raise $500 million as part of a package last year to close a $3.3 billion budget gap.

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.
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 tax on Social Security income; elimination of tax on tips and overtime pay until 2028; and a 10% property tax refund for eligible seniors. Her budget also proposes a new sales tax holiday on school supplies, an additional $800 million in new revenue via increases on gambling and cigarette taxes, and a new digital advertising tax.
While Gov. Whitmer resisted suspending the state’s gas tax as the war in Iran pushes gas prices higher, she declared a statewide energy emergency and issued an executive order to ease certain gas regulations so gas stations can sell cheaper fuel.
A ballot initiative known as Invest in MI Kids has been suspended. The proposal, which would have created a 5% surcharge on individuals earning more than $500,000 per year or $1 million for joint filers, is estimated to raise $1.7 billion annually for K-12 education. The effort is expected to return in 2027 with the goal of appearing on the 2028 ballot.

Minnesota

Gov. Tim Walz proposed a new social media tax on tech companies that host more than 100,000 Minnesotans on their platform. He also says he has no interest in having the state opt into the new $1,700 tax credit for those who donate to private school voucher programs.
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 state general fund.
The legislature has followed suit, with the House and Senate advancing proposals to authorize an expansion of the state’s sales tax and set up eventual elimination of the state’s income tax. The shift, if fully realized, would provide a significant tax cut for the wealthiest Missourians while raising taxes on low- and middle-income families. This follows the state being identified as one of the states that in 2025 provided the biggest tax cuts to millionaires via its full elimination of the state tax on capital gains income.
On property taxes, the House advanced a bill that makes a variety of changes, including rescheduling local tax elections to the November general elections, allowing separate rates for different classes of property, such as residential and commercial, and changing the revenue cap calculations.

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 debate the creation of a statewide sales tax that would be coupled with property tax cuts.

Nebraska

Lawmakers have passed the state budget. Private school vouchers were removed to gain support for the budget, but a care subsidy extension that had been jettisoned as part of negotiations was brought back as a standalone bill and passed. An assortment of revenue bills is expected to bring in the last $38 million needed to finish closing what was at one point a $646 million shortfall, largely due to tax cuts for high-income households that are still phasing in. The bills institute some new and increased fees and end some sales tax exemptions, among other small changes.
Most lawmakers continue to insist that further funding cuts are their only solution, despite clear options to raise revenue by decoupling from recent federal tax cuts or pausing or reversing income tax cuts. In his address to the state, Gov. Jim Pillen outlined a tentative goal to reduce property taxes by $170 million.

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.
Lawmakers are considering a handful of revenue raising proposals, including a tax on second homes 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 an estimated cost of $26 million annually.

New Jersey

Gov. Mikie Sherrill released her budget proposal in the face of a multi-billion-dollar revenue shortfall. She proposed a reduction to the Stay NJ property tax rebate policy by capping eligibility at $250,000 in income and the total benefit at $4,000. She also proposed capping corporate Net Operating Losses while supporting a controversial policy that would charge a fee to companies that do not offer health insurance and have at least 50 employees who use the state’s Medicaid program.
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

The state enacted a significant corporate tax reform, offering a blueprint for other states seeking to limit multinational corporate tax avoidance. A new law will prevent corporations from hiding their income in offshore tax havens by conforming to parts of the federal law, namely the federal code’s new definition of Net Controlled-Foreign-Corporation Tested Income (NCTI, or “necktie”).
The state also decoupled from provisions of the federal tax law, including bonus depreciation, the new deduction for qualified property, and business interest. The state’s conformity changes will collectively raise more than $110 million in fiscal year 2028 and beyond.
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.

New York

The budget was due April 1, but lawmakers and Gov. Kathy Hochul seem to remain far apart on important components. Both houses of the legislature included progressive tax increases in their budget plans, but Gov. Hochul continues to generally oppose those measures.
Gov. Hochul’s executive budget and state address contained little news 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.
Tax discussions underway include 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. Policymakers are again discussing a “pied-à-terre tax” on high-value second homes owned by non-New Yorkers. Both Gov. Kathy Hochul and New York City mayor Zohran Mamdani are in support of the tax.
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. Democrats in both houses will include income tax increases on high-income households in their budget proposals to be unveiled next week, aligning them with New York City Mayor Zohran Mamdani and statewide public opinion. Gov. Hochul has so far rejected the idea.

North Carolina

Gov. Josh Stein warned that the state could face a $3.5 billion budget shortfall within two years, primarily driven by automatic income tax cuts. Gov. Stein has called for pausing the tax cuts and warned that public education would be the most likely to be harmed by the budget shortfall.
The state continues to operate without a balanced budget. State revenues are not keeping pace with current projected spending. 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 these tax cuts and enacting a millionaire’s tax and a mansion tax is building support as residents face steeply reduced public services.
Despite that stark reality, a House Committee advanced a proposed constitutional amendment to limit local authority by directing how much cities and counties can raise property taxes. Democratic lawmakers argued the proposal punishes local governments for filling in the gaps for funding that have occurred after Republican-backed tax cuts to state government funding. Other bills would limit property tax exemptions for affordable housing projects and scale back property and sales tax exemptions for hospitals.

North Dakota

Lawmakers are considering an increase on gas tax and electric vehicle fees 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.
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 five states in 2025 to provide the biggest tax cuts to millionaires as a result of cuts to the state’s income tax.
Previously, Gov. 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 said would be harmful to families, businesses, and low-income residents. Also, lawmakers from both parties are discussing a renewed effort to repeal tax breaks for data centers after the governor vetoed the proposal last year. And Republican leaders are planning to override Gov. DeWine’s veto in last year’s budget that would have eliminated a sales tax break on construction materials for data centers.
Gov. Mike DeWine signed legislation that conforms the state to federal tax changes, which is estimated to cost the state $63.3 million in 2026.

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 on 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. With senators advancing a measure to increase the state’s homestead property tax exemption from $1,000 to $5,000. Others have proposed more extreme measures, like exempting homesteads from the property tax—at the cost of $4 to $5 billion—with no clear plan to sustain the state’s education system. The state’s Senate Majority Leader criticized a proposed ballot initiative aiming 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 signed legislation decoupling the state from some provisions of the federal tax law, protecting about $300 million a year in state revenue. The legislation decouples the state from the Qualified Small Business Stock (QSBS) exclusion, a provision allowing businesses to immediately claim tax breaks on large purchases known as bonus depreciation, and a tax deduction for car loan interest. The law also increases the state’s EITC from 9% for individual filers and 12% for filers with a child under 3 to 14% and 17%, respectively. Gov. Kotek also signed off on legislation to increase the state’s lodging tax, from 1.5 to 2.75%, to fund wildlife conservation.
Gov. 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 May. With the new funding blocked, Gov. Kotek has asked lawmakers to redirect existing funds to avoid layoffs and fund core programs, but warned that broader tax decisions will need to be revisited in 2027 to create a long-term funding plan.

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 per year. This comes as the state faces a budget deficit of more than $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 seniors, 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 contrast, the state’s Senate Minority Leader introduced legislation that would reduce the personal income tax by 8 percent over five years. Once fully phased in, the bill would cost the state $213 million per year.
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

Gov. Henry McMaster signed H. 4216 into law, which will immediately reduce the state’s individual income taxes by $309 million and enact triggers to phase out the individual income tax over time. The state’s individual income tax currently raises $6.6 billion annually — nearly 45 percent of the total state general fund. Upon elimination, the state’s wealthiest 1 percent of households would receive an annual tax cut of $51,063, while the bottom 20 percent of households would receive no benefit.
In a scramble to pass conformity legislation ahead of 2025 tax filings, the state Senate rejected legislation that would temporarily couple to certain provisions in OBBBA, such as the tipped and overtime income deductions and senior deductions for the 2025 tax year. They did, however, pass an increased homestead exemption for seniors.
In his final State of the State address, Gov. McMaster called upon the legislature to further reduce personal income taxes while simultaneously calling for an additional $1.1 billion in new infrastructure spending.

South Dakota

Gov. Larry Rhoden signed legislation that will increase the state sales tax and allow local governments to levy new sales taxes to be used for property tax reduction. The first bill, which was initially proposed by the governor, allows counties to levy up to a half-percent sales tax to offset property taxes for owner-occupied homes. The other would allow the state sales tax to increase from 4.2 percent to 4.5 percent, as it was scheduled to do when it was temporarily lowered three years ago, and use the estimated $114 million in additional revenue to lower school district property taxes through the state’s education funding formula. He also signed legislation reducing the statewide general education levy by 1.68, which would reduce property taxes by $1.68 for each $1,000 in taxable value.
A former state senator is leading a petition to place a proposal to abolish property taxes on the state ballot. The measure would replace lost revenue with a new sales tax. The group would need 35,000 signatures to make the ballot.
Two other property tax bills were defeated in the legislature. One would have made it easier for citizens to refer local government decisions that could increase property taxes to a public vote, and the second would have limited growth in home valuations to 5 percent per year with a reset to market values every five years.

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 a 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

Gov. Spencer Cox signed into law several tax bills. These include: an income tax cut (both individual and corporate) from 4.5 percent to 4.45 percent that will cost $123 million annually, an expansion to the state’s Child Tax Credit’s income eligibility thresholds, a digital ads tax, a cigarette tax increase, and a temporary gas tax cut from 38 cents per gallon to 32 cents.
Earlier this year, Gov. Cox expressed interest in exploring a digital advertising tax. The bill, if signed, would levy a tax on entities that deliver targeted advertising using personal data to target specific audiences or individuals. The tax would apply only to companies that earn more than $1 million from targeted advertising in Utah or more than $100 million in total from targeted advertising.

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% increase by half.
The House Ways and Means Committee advanced legislation to reduce property taxes by using $52 million in surplus funds to buy down increased education spending on the local level, which would bring the average property tax increase down from about 12 to 7%.

Virginia

The House and Senate released their versions of the state’s budget. The Senate budget would eliminate the sales tax exemption for data centers, which is estimated to raise $1 billion over two years. It also includes a $100 rebate ($200 for joint filers) to Virginia taxpayers. The House proposal would raise about $270 million from skill games and digital gambling. Both chambers included an increase to the standard deduction, and neither proposal would align the state with the recent federal tax changes. Gov. Abigail Spanberger signed legislation that allows counties to levy a tax of up to 10% on admissions charged for attendance at events.
Lawmakers also proposed a three-month suspension of the state gas tax as prices rise due to the war in Iran. The proposal is estimated to cost the state $375 million.
There’s also an effort to reshape the state’s revenue landscape and raise needed revenue. Proposals include a millionaires tax and a new 3.8% tax on net investment income, among others. Gov. Abigail Spanberger floated the possibility of a consumption tax on data centers for energy consumption as the General Assembly continues to debate energy costs and the state’s $2 billion tax exemption for data centers.

Washington

Gov. Bob Ferguson signed major tax legislation into law. The changes include: the creation of a millionaires’ tax, a 9.9 percent tax on income over $1 million; an expansion of the Working Families Tax Credit – the state’s EITC – to reach an additional 460,000 households; sales tax exemptions; and changes to the Business and Occupations, or B&O, Tax.
The new law is expected to bring in more than $3 billion per year to make significant investments in public education, child care, and other vital services.

West Virginia

Lawmakers gave final approval to a budget which includes a 5 percent cut to income tax rates at a cost of about $125 million a year. These cuts will accelerate existing triggers that will eventually fully eliminate the state’s personal income tax. Meanwhile, the state is struggling to keep its employees’ health insurance fund solvent and will incur over $100 million in increased costs for its school voucher program.
Earlier this year, the governor claimed the state can afford to cut taxes again this year and indicated his support for once again reducing the state income tax. The Senate followed by proposing a larger tax cut than the governor in their version of the budget, with a 10 percent cut to state income tax rates. The House version did not include an income tax cut.
Gov. Morrisey signed into law two bills that mostly conform the state’s tax code to the recent federal cuts to both the personal and corporate income tax. Lawmakers continue to debate 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 the property tax cuts proposed by the legislature. Among other conformity measures, lawmakers are considering opting in to a state tax cut on tips, mirroring changes made at the federal level.
Gov. Evers vetoed a bill that would have opted the state into the new federal tax credit for donations to private schools. The policy — intended to benefit private and religious schools — could cost over $50 billion nationwide without benefiting the majority of students who attend public schools.

Wyoming

While lawmakers are no longer considering proposals to eliminate the property tax, they are still weighing bills to repeal or revise the long-term homeowner tax exemption and codify into law the practice of distributing a portion of sales and use tax revenue to cities, towns, and counties (to make up for lost funding from property tax cuts made in recent years).
Leading up to this, lawmakers were weighing 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.
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.
Gov. Mark Gordon signed into law a bill that would lower the registration fee for all-electric vehicles from $200 to $100 and lower the fee for plug-in hybrid vehicles to $50. The bill also exempts alternative fuels — like electricity — from the sales tax.