In their State of the State addresses and budget proposals, governors have recommended a wide range of tax policy changes aimed both at providing tax relief and generating additional revenue through targeted increases. These revenue actions have included further reducing personal income taxes; lowering property tax burdens; ending the grocery tax; middle class tax relief including one-time refund checks; creating or expanding child tax credits; boosting earned income tax credits; targeted tax relief to retirees, farmers, and law enforcement officers; modifications to corporate taxes; expanding the sales tax base; new tax brackets for high-income earners; increased rates for vaping, cigarettes, and other tobacco products; and taxes related to the legalization of cannabis and expanded sports betting. The variety of tax changes more closely mirrors fiscal 2025 when 27 states enacted net decreases in general fund revenue and 10 states enacted net increases, than fiscal 2023 and fiscal 2024, the two biggest years for net tax cuts on record (measured in nominal dollars) in the history of NASBO’s Fiscal Survey of States.
Over the past several months, NASBO has been publishing state-by-state summaries of both governors’ State of the State addresses and budget proposals. Listed below are selected highlights from these summaries outlining recommended revenue actions. These examples are meant to be illustrative and do not represent an exhaustive list of governors’ tax proposals for fiscal 2026. For more information on other gubernatorial priorities for the current year, please see NASBO’s prior blogs on addressing affordability concerns as well as expanding childcare access and lowering costs. More details on recommended revenue actions in governors’ budgets will be available in NASBO’s Spring 2025 Fiscal Survey of States, to be released later this spring.
Arkansas – In State of the State proposed ending the state’s grocery tax and easing the burden on families trying to put food on the table.
Connecticut – Budget proposal called for a series of changes to corporate taxes including accelerating the elimination of the capital base tax, modifying the research and development credit exchange program by increasing the reimbursement percentage to 90 percent for the biotech sector, reforming the unitary tax and net operating losses, extending the corporate surcharge for three additional income years, and reducing the top film production tax credit rate from 30 percent to 25 percent of qualifying expenditures. Also, it recommended expanding property tax relief by increasing the income tax credit for property taxes paid to municipalities and increasing income limits for phaseout of the credit.
Florida - The budget proposal includes $2.2 billion in tax relief through permanent and temporary changes. For businesses, the budget repeals the business rent tax, creates a new venture capital tax credit program, and permanently extends the sales tax exemption for Data Center Property. For homebuyers, the budget provides a one-year exemption of intangibles tax for the first $500,000 of residential mortgages for the purchase of a primary (owner-occupied) residence. The recommended budget also provides several temporary tax savings mechanisms and delays for two years the imposition of natural gas fuel taxes.
Georgia – In State of the State said that because of efforts to hold the line on state spending, Georgia can further reduce the personal income tax rate. The budget and accompanying legislation will further reduce tax rates by an additional 20 basis points, down to 5.19 percent for the 2025 tax year and beyond, saving taxpayers an average of $745 million a year.
Idaho – Promised another $100 million in tax relief during State of the State, on top of the $4.6 billion already given back to Idahoans over the past five years.
Indiana – In State of the State recommended further reductions to income taxes, property tax reform and cuts, tax relief on retirement income, tax credits for retiring farmers passing their farms onto the next generation, and the creation of Farm Savings Accounts.
Maine – In State of the State said that while her budget makes spending cuts, targeted revenue increases must also be considered. Proposed a $1 increase to the cigarette excise tax, lowering the excise tax and increasing the sales tax for cannabis, and assessments on non-municipal ambulance and on pharmacy prescriptions.
Maryland – Budget proposal includes a series of individual income tax changes such as doubling the standard deduction and eliminating itemized deductions, eliminating the standard deduction penalty for low-income workers, consolidating the bottom four income tax brackets at 4.7 percent, expanding the child tax credit, adding two new tax brackets for high-income households, and adding a 1.0 percent surcharge on capital gain income for high-income households for four years. In corporate income taxes, the budget proposes a lower corporate tax rate over two years (from 8.25 to 7.99 percent) and broadens the tax base by instituting “water’s edge” combined reporting. The budget also eliminates the inheritance tax and offsets the revenue loss by lowering the estate tax exemption from $5.0 million to $2.0 million, increases the sports wagering tax rate from 15 percent to 30 percent, increases the table game tax rate from 20 percent to 25 percent, increases the cannabis tax rate from 9 percent to 15 percent, phases out state funding for the Enterprise Zone tax credit, and reduces the student debt relief tax credit by $9.0 million for one year.
Minnesota – Recommended budget proposes cutting the statewide sales tax by .075 percent, which would be the first sales tax cut in state history; recommends closing loopholes by expanding the sales tax base to services provided to individuals by investors, bankers, and lawyers; calls for an investment in a new corporate franchise tax division unit to audit complex pass-through entities and close loopholes; and proposes an increase in the surcharge currently levied on health maintenance organizations from 0.6 percent to 1.25 percent of total premium revenue.
Mississippi – Recommended budget proposes eliminating the state income tax by reducing the income tax to three percent for fiscal 2026 and phasing it out completely by calendar year 2029.
Missouri – In State of the State called for developing a sustainable and comprehensive plan to eventually eliminate the individual income tax, with further income tax cut triggers this session.
Montana – Budget proposal includes the largest income tax cut in state history, reducing the income tax rate most Montanans pay from 5.9 percent to 4.9 percent, substantially boosts the earned income tax credit to benefit lower- and middle-income Montanans, lowers property taxes for Montana homeowners by 15 percent and for small businesses by 18 percent, and expands the business equipment tax exemption from $1 million to $3 million.
Nebraska – In State of the State called for continued tax reform including lowering property tax burdens, making commonsense adjustments to the state’s tax code, and eliminating the state’s death tax.
New Jersey – Recommended budget proposes a range of tax policy changes to generate additional revenue, including but not limited to, expansion of the current sales and use tax base, increases for the highest tier of assessment on real property greater than $1 million, and tax increases on sports betting, alcohol, adult-use marijuana, and cigarettes. The governor also announced his intention to create a new tax credit to incentivize global companies to manufacture next-generation products in New Jersey.
New York – Budget proposal provides “Inflation Refund” checks to 8.6 million New Yorkers of $500 for joint filers making less than $300,000 and $300 for single filers making less than $150,000, reduces rates for five of the state’s nine tax brackets to provide middle-class tax relief, and expands the Child Tax Credit over two years to provide $1,000 for kids under age four and $500 for kids of ages 4-16. Also in her State of the State discussed fighting for the full restoration of the SALT deduction.
North Dakota – In State of the State spoke about the need for relief and real reform to property taxes. Recommended budget provides a property tax credit of $1,550 per year for each primary residence, expands eligibility for the homestead tax credit program, and provides a 3 percent limitation on local political subdivision budgets funded by property taxes. Earnings from the Legacy Fund, the state’s sovereign wealth fund, would initially pay for part of the property tax relief and eventually cover all the cost.
Ohio – Recommended budget proposes a refundable child tax credit for working families with children through age six. The proposed budget would also raise the state’s cigarette tax by $1.50 per pack and raise taxes for vapor and other tobacco products to provide parity with the cigarette tax. This proposal generates sufficient revenue to offset the cost of the child tax credit.
Oklahoma – Recommended budget proposes reducing the individual income tax rate and the corporate income tax rate for the tax year beginning January 1, 2026, by 0.50 percent, supports removing the cap on the amount that can be spent on the Parental Choice Tax Credit, proposes the Oklahoma Tax Commission administer a tax amnesty program, and increases recurring revenue based on historical past practice of sweeping funds.
Pennsylvania – The budget proposal eliminates duplicative tax credit programs and replaces them with a new AdvancePA tax credit program aimed at incentivizing high-paying job creation, expedites Corporate Net Income Tax (CNIT) cuts by two years, and closes the “Delaware Loophole” that allows large corporations to avoid paying taxes by shifting income to out-of-state subsidiaries. Additionally, the budget charges the Gaming Control Board to regulate skill terminals, with revenues to be taxed at a rate of 52 percent, which will generate $8 billion in new revenue over five years, and proposes the legalization of adult use cannabis, which is estimated to generate $1.3 billion over the first five years.
Rhode Island – The recommended budget increases the per-pack cigarette tax by 50 cents. Additionally, it provides funding from multiple sources for homelessness initiatives, including a new 5 percent hotel tax on whole-home short-term rentals (previously excluded) and an increase to the real estate conveyance tax for certain properties.
South Carolina – In State of the State proposed further cutting the state’s personal income tax rate from 6.2 percent to 6.0 percent and eventually eliminating the personal income tax altogether. Also in budget proposal recommended a $2,000 nonrefundable individual income tax credit for individuals employed as sworn law enforcement officers, firefighters, and emergency medical technicians.
Tennessee – Recommended budget proposes a joint resolution to fully enact the Tennessee Rural and Workforce Housing tax credit; calls for legislation to reduce the administrative fee collected by the Department of Revenue on all taxes administered by the department; and supports legislation to reapportion the sales tax on tires from the general fund to the highway fund.
Texas – In State of the State called for at least $10 billion in property tax relief. In budget proposal recommended requiring two-thirds voter approval for all property tax rate increases at all local government entities and raising the Business Personal Property exemption to support more small businesses.
Utah – Budget proposal eliminates the state tax on Social Security income, providing direct tax relief to more than 150,000 filers and expands the state’s child tax credit to include children younger than one year of age.
Vermont – Recommended budget provides a full income tax exemption on military pension income; expands the Child Tax Credit for income eligible families with children up to age 6, increases the percentage of the “childless” Earned Income Tax Credit from 38 percent to 100 percent of the federal amount, and increases the Social Security income tax exemption. It also increases the annual cap on Downtown and Village Center Tax Credits and transfers funds from general fund to education fund to stabilize education tax rates by eliminating projected property tax increase this year.
Virginia – Budget proposal called for offsetting the car tax for working families by allocating funds for a refundable income tax credit for individuals ($150) and joint filers ($300) below income thresholds, exempting tipped income from individual income taxes for more than 250,000 Virginians in the food service, personal service, and hospitality industry, and making the existing $8,500/$17,000 standard deduction permanent. Also called for adopting market-based sourcing for multi-state corporations, increasing the threshold for estimated income tax payments, and aligning interest on over/underpayments with federal law.
West Virginia – In State of the State called for ensuring West Virginia has the lowest income tax of the states it borders.
Wisconsin – Budget proposal directs property tax credits to taxpayers through the school levy tax credit; provides aid to local governments that agree to freeze property taxes; and increases property tax relief programs under the individual income tax for veterans, seniors, individuals with disabilities, and others. It also eliminates the tax on cash tips, eliminates the sales tax on everyday household items and costs, including over-the-counter medications and utility bills, enhances the Earned Income Tax Credit (EITC), and nearly doubles the personal tax exemption under the Wisconsin individual income tax.
Wyoming – Recommended budget directs additional funds to the Department of Revenue for the property tax refund program.