8 States Proposing the Biggest Changes to Taxes in 2025 and Beyond
Written by
Adam Palasciano
Edited by
Chris Cluff
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Donald Trump’s second term is promising to usher in renewed tax reform. During his first term, the Tax Cuts and Jobs Act of 2017 lowered tax rates across the board and was one of the most significant overhauls to the federal tax code in decades.
This legislation is slated to expire by Dec. 31, 2025, if Congress doesn’t act to extend it or pass a new bill. However, given the new Republican majorities in both the House and the Senate, the passage or extension of a similar bill is highly likely.
Now, many states are planning tax cuts this year as well. Per ABC News, these eight states are proposing big changes to how their residents will be taxed in the near future.
Also see tax moves you should make now.
Kentucky
A new bill in the Kentucky legislature is proposing a cut to the state’s individual income tax rate from 4% to 3.5%, representing a 12.5% decrease. If signed into law, the tax cut would take effect in 2026.
Democratic Gov. Andy Beshear supports the new law, however, analysis from the Kentucky Center for Economic Policy says that further tax cuts could adversely impact funding for the state’s human services, health care, infrastructure and schools.
New York
Republican-led states aren’t the only ones proposing new tax cuts this year. In New York, Democratic Gov. Kathy Hochul is pushing a new “affordability agenda” following major Democratic losses this past election cycle.
A recent New York State press release outlined some of Hochul’s proposed initiatives which include:
- Cutting taxes for 8.3 million middle-class New Yorkers, including joint filers earning up to $323,000 annually
- Expanding the child tax credit for working families
- Sending qualifying New Yorkers checks for up to $500 later this fall, dubbed the state’s first-ever “inflation refund.” Joint filers earning up to $300,000 would be eligible for a one-time payment of $500, while single filers earning up to $150,000 would be eligible for a one-time payment of $300.
Other Republican-Led States
In addition to Kentucky and New York, many Republican-led states across the country are proposing various cuts to income tax rates.
Utah Gov. Spencer Cox’s 2026 budget recommendations proposed the elimination of Social Security taxes.
On the East Coast, Virginia Gov. Glenn Youngkin proposed car tax relief for working-class Virginians. In addition, he wants to exempt tips from income tax and maintain the standard deduction of $8,500 for individuals and $17,000 for couples beyond its expiration at the end of this year.
Other Republican governors in the South and one in the Northwest want to provide tax relief to their state’s residents too. Montana Gov. Greg Gianforte proposed further income and property tax cuts for Montanans, South Carolina Gov. Henry McMaster proposed further cuts to the current state income tax from 6.2% to 6.0% and Georgia Gov. Brian Kemp has proposed a similar 20 basis points cut to the income tax rate in his state, from 5.39 to 5.19%.
Meanwhile, Missouri Gov. Mike Kehoe is directing the Missouri Department of Revenue to create a plan to completely phase out the state income tax “once and for all.”
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