Wisconsin

State legislative sessions are wrapping up, and final tax and budget packages are making their way to governors’ desks.

In Washington, Gov. Bob Ferguson and lawmakers decided to stop fooling around with one of the nation’s most upside-down tax codes and finally brought to life a new millionaires’ tax, the first new income tax created in a state since 1991.

State lawmakers are grappling with a range of challenges as their fiscal outlooks deteriorate, federal tax enforcement wanes (after the Trump administration cut the IRS workforce by 25 percent), and a rewritten federal tax code sends states scrambling to decide what changes they might want to make in their own codes.

While some may be excited for a romantic Valentine’s Day this weekend, many state lawmakers are breaking up and decoupling from recent federal tax changes that are poised to leave states with revenue shortfalls – much like a bad date who forgets their wallet and asks you to pick up the tab.

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.

2025 saw an intensification of state and local tax fights across the country, as well as growing experimentation with local-option taxes, levies, fees, and tourism taxes aimed at keeping budgets afloat while also navigating political constraints imposed by state legislatures.

With a little over a week left, some states are solidifying their spots on the tax policy “naughty or nice” list.

States are increasingly facing difficult choices as revenues stagnate and deficits come clearer into focus.

Taxing the proceeds generated by wealth through a new Wealth Proceeds Tax is a simple way for states to raise billions in new revenue and improve the fairness of their tax systems.