Just Taxes Blog by ITEP

State Rundown 3/20: It’s March, Welcome to Tax Policy Madness

March 20, 2025

ITEP
.ITEP Staff

March Madness kicks off today and the pressure is on as many states’ legislative sessions are nearing the final buzzer. Some state lawmakers are seemingly competing for the title of most regressive state tax policies while others are looking to lift up best practices for more equitable outcomes.  

The Mississippi legislature landed on a compromise tax cut plan that phases the state’s personal income tax rate down from 4 to 3 percent and leaves room for full elimination through triggered rate reductions. The plan also includes a lower sales tax on groceries and a gas tax increase. Proposals that overhaul current property tax structures continue to be worked out by lawmakers in North Dakota, Indiana, Idaho, and Iowa. 

Meanwhile, some states are bracket busting with tax policy ideas that center equity and preserve revenue. North Carolina Gov. Josh Stein included creating refundable tax credits, scaling back K-12 vouchers, and freezing corporate and personal income tax rate cuts as part of his budget. And lawmakers in Washington state are considering taxing financial assets over $50 million, reducing the state’s sales tax, and decoupling from the federal payroll tax cap to ensure equitable contributions from wealthier households. 

Major State Tax Proposals and Developments

  • MISSISSIPPI lawmakers have agreed to send the Senate’s tax cut compromise plan to Gov. Tate Reeves, who has not yet committed his support. The new plan would phase down the state’s personal income tax rate from 4 to 3 percent in 2030 and then further reduce the rate, ultimately to zero, using triggered reductions. The plan also reduces the sales tax on groceries from 7 to 5 percent and increases the gas tax from 18.4 to 27.4 cents over three years. -NEVA BUTKUS 
  • The MISSOURI House has approved about $1.3 billion in tax cuts, with the bulk coming from removing the state’s progressive income tax brackets in favor of a flat rate, then steadily slashing that rate. The measure also exempts all capital gains income from taxation and eliminates the state’s Earned Income Tax Credit for working families. The measure also includes provisions designed to induce donations to anti-abortion nonprofits. – ELI BYERLY-DUKE 
  • MICHIGAN Gov. Gretchen Whitmer announced her budget proposal, which includes $208 million in additional taxes. The largest revenue raiser is an increase to landfill tipping fees for environmental initiatives. It also includes a new tax on vape and nontobacco nicotine products, which is expected to generate $57 million annually. — MILES TRINIDAD 
  • NORTH CAROLINA Gov. Josh Stein’s budget proposal includes scaling 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 percent of the federal credit. Stein’s proposal would also freeze the personal income and corporate income tax rates at current amounts, rather than allowing further scheduled reductions to occur. The governor said the impending cuts would result in “self-inflicted fiscal pain.” — MILES TRINIDAD 
  • After companies such as Meta and Tesla threatened to leave DELAWARE and incorporate in another state, state lawmakers quickly passed legislation to overhaul the state’s corporate law, favoring controlling shareholders of large companies. If signed into law, the bill would 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. The bill now heads to the governor. — MILES TRINIDAD 

State Roundup

  • The Anchorage Assembly in ALASKA voted down an initiative that would have put a 3 percent sales tax before voters during a September special election. Opponents of the plan argued against the regressivity of the proposal, pointing out that the tax would disproportionately affect low-income households. 
  • Los Angeles Mayor Karen Bass is exploring if the city’s mansion tax can be suspended. In the wake of wildfires throughout southern CALIFORNIA, the real estate industry has been pushing for the tax to be suspended to spur redevelopment of destroyed properties. Elsewhere in the Golden State, the city of San Francisco is suspending its empty homes tax. A lawsuit challenging the legality of the tax is going to trial in early April, after the tax would be assessed for this tax year. 
  • Lawmakers and advocates in CONNECTICUT worry that federal spending cuts could impact the state’s ability to create a $600 per-child refundable tax credit, which roughly 42 percent of the state’s legislators support. To help reduce the cost of the plan, Senate President Pro Tem Martin Looney has suggested starting the credit at $150 per-child and gradually increasing it to $600 over three years.  
  • IDAHO Gov. Brad Little signed into law several pieces of a tax package. The latest increases the state’s grocery tax credit. A separate bill that would put $100 million toward property tax cuts recently passed the Senate and awaits the governor’s signature. 
  • A third property tax cut proposal has entered the debate in INDIANA. The plan re-envisions the state’s property tax system by phasing out certain deductions for homesteads, lowering business personal property tax floors, and increasing the local income tax expenditure rate. This plan will be weighed alongside Gov. Braun’s proposal and a separate Senate proposal.  
  • Lawmakers in IOWA continue to consider an overhaul to the state’s property tax system. The measure is intended to cut property taxes and replace the lost local government revenue with state general revenue. However, after recent tax cuts, the state’s baseline budget spending already requires regular transfers from cash reserves to fully cover proposed operating expenses. 
  • A new property tax cut proposal in KANSAS would create a “Freedom From Taxes Fund” initially created with revenue from eliminating sales tax exemptions. The fund, which would require a constitutional amendment, would then be used to replace property taxes once the annual interest is enough to replace the state’s 21.5 mills used to fund public schools.  
  • MAINE Gov. Janet Mills and her administration are pushing back on bipartisan proposals to expand the state’s property tax exemption for homeowners. 
  • MARYLAND Gov. Wes Moore said that the proposed broad business-to-business service tax proposal and plan to tax sugary drinks would not be included in the final 2026 budget. The state continues to weigh solutions to deal with a looming deficit, and the administration says that some form of a sales tax on services could be part of the mix. 
  • In MICHIGAN, the Republican-controlled House passed legislation that would reduce the state’s income tax rate from 4.25 to 4.05 percent. The move comes after the Michigan Supreme Court dismissed a case brought by Republican lawmakers and business groups trying to appeal a ruling where an income tax cut trigger that occurred in 2023 due to general fund revenues exceeding inflation was temporary. 
  • A property tax bill supported by NORTH DAKOTA Gov. Kelly Armstrong unanimously received a pass recommendation in a Senate Committee hearing. The bill would give homeowners up to a $1,450 primary residence tax credit, cap the amount of property taxes levied locally at a 3 percent 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. 
  • OHIO lawmakers are likely to reject Gov. Mike DeWine’s proposed tax increases on cigarettes, marijuana, and sports gambling as the legislature continues to work on the state’s budget. DeWine initially proposed the taxes under his budget plan that would fund a new Child Tax Credit.  
  • TENNESSEE lawmakers are debating dueling proposals to eliminate the state’s roughly $600 million sales tax on groceries. One proposal would eliminate the tax without offsetting revenue increases, while the other offsets the revenue loss by closing a major corporate tax loophole, adopting worldwide combined reporting. 
  • WASHINGTON residents are rallying to show their support for tax increases on upper-income households to address the state’s revenue shortfall. Proposals just released by Senate Democrats include a tax on financial assets exceeding $50 million, removing the income cap on payroll taxes that currently excludes income over $176,100, reforming property taxes, and eliminating some tax preferences, while also reducing the highly regressive state sales tax. 
  • WYOMING Gov. Mark Gordon signed into law a bill that provides $10.5 million for the state’s property tax refund program for 2025. 

What We’re Reading

  • Florida‘s Sun Sentinel Editorial Board argues that proposals to eliminate all property taxes in the state would be a windfall to the state’s wealthiest residents, and if Gov. Ron DeSantis wants to entertain this proposal, then lawmakers should consider replacing property taxes with a graduated personal income tax.  
  • MassBudget published a report explaining how taxing GILTI profits could help Massachusetts push back against corporate offshore profit shifting. 

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Aidan Davis at [email protected]. Click here to sign up to receive the Rundown via email.


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