Connecticut

Most states are adopting a very cautious approach so far this year as legislators begin their sessions and governors make their annual addresses, thanks to ongoing economic uncertainty and federal retrenchment.

The progressivity of the federal tax code has been waning. State and local policymakers should respond by protecting their revenue bases, promoting equity, and safeguarding vulnerable communities from harmful budget cuts. 

States across the nation are debating how best to respond to costly new federal tax cuts.

Nearly two-thirds of states now have an Earned Income Tax Credit (EITC). Momentum continues to build on these credits that boost low-paid workers’ incomes and offset some of the taxes they pay, helping lower-income families achieve greater economic security.

The Trump megabill hands the richest 1% a trillion-dollar windfall while gutting funding for health care, education, and disaster relief — leaving communities to pick up the pieces. State and local leaders must step up, tax the wealthiest fairly, and safeguard the essentials that keep America healthy, educated, and safe.

Federal policy choices on tariffs, taxes, and spending cuts will be deeply felt by all states, which will have less money available to fund key priorities. This year some states raised revenue to ensure that their coffers were well-funded, some proceeded with warranted caution, and many others passed large regressive tax cuts that pile on to the massive tax cuts the wealthiest just received under the federal megabill.

Refundable tax credits were a big part of state tax policy conversations this year. In 2025, nine states improved or created Child Tax Credits or Earned Income Tax Credits.

Sales tax holidays are often marketed as relief for everyday families, but they do little to address the deeper inequities of regressive sales taxes. In 2025, 18 states offer these holidays at a collective cost of $1.3 billion.

If instead of giving $117 billion to the richest 1 percent, that money had been evenly divided among all Americans, we'd each get $343 - or nearly $1,400 for a family of four.