Welcome to this edition of our roundup of state tax developments. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance, and incentive needs.
State and Local Sales Tax Rates, 2025 - Jared Walczak, Tax Foundation:
Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32 percent of state tax collections and 13 percent of local tax collections (24 percent of combined collections). They also benefit from being more pro-growth than the other major state tax, the individual income tax, because they introduce fewer economic distortions.
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Sales taxes are just one part of an overall tax structure and should be considered in context. For example, Tennessee has high sales taxes but no income tax, whereas Oregon has no sales tax but high income taxes. While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.
Trump Considers Ending Carried Interest, Expanding SALT Deduction - Akayla Gardner, Bloomberg News via CPA Practice Advisor:
President Donald Trump outlined his tax priorities in a meeting with Republican lawmakers, including a call to end the carried interest tax break used by private equity fund managers and expand the state and local tax deduction. White House Press Secretary Karoline Leavitt told reporters that Trump laid out those measures and other provisions he would like to see in a sweeping tax bill this year during a meeting Thursday.
State-By-State Roundup
Arizona
Ariz. Senate Bill Seeks Tax Subtraction For Capital Gains - Sanjay Talwani, Law 360 Tax Authority ($):
S.B. 1331, introduced Monday by Sen. J.D. Mesnard, R-Chandler, would allow Arizona taxpayers to subtract capital gains from their taxable incomes. Under the bill, 25% of the federally taxable net long-term capital gains could be subtracted from Arizona taxable income.
California
S.B. 263 — the Protecting Residents, Industries, and California’s Economy (PRICE) Act — would require the California State Transportation Agency to work with the Department of Finance and the Governor’s Office of Business and Economic Development and coordinate with the California Freight Advisory Committee to study the consequences for California of U.S. tariff increases, including resultant retaliatory tariffs by other countries.
The study would examine tariffs’ possible effects on the state’s economic output, employment, and affordability of goods to residents; state and local tax revenues; financing of infrastructure for the state's seaports, airports, and land ports of entry; and other effects, including on California’s agricultural and manufacturing sectors.
Georgia
Georgia lieutenant governor pushes to aid parents through tax credits - Jeff Amy, AP News:
Lt. Gov. Burt Jones told The Associated Press on Tuesday that a Senate ally has introduced a bill to create a state income tax credit of up to $250 for every child under age 7, expand an existing tax credit for child care to give parents up to $300 more per child, and let employers claim a larger credit for investing in an on-site child care center.
Idaho
Idaho legislation to lower the state's income tax rate has cleared the House, but critics argue that the bill would primarily benefit higher earners.
H. 40 was passed by the House on a 63–7 vote on February 3. Under the bill, Idaho's individual income and corporate tax rate would fall from 5.695 percent to 5.3 percent.
Minnesota
Minn. Senate Panel Backs Creating Letter Ruling Program - Sanjay Talwani, Law 360 Tax Authority ($):
After a hearing, the Senate Taxes Committee laid over S.F. 783, as amended, for future consideration. If enacted, the bill would direct the department to establish a program to provide guidance on the application of state law to the specific facts described by a taxpayer. That guidance would be binding on the department if the facts as presented remained applicable.
Eide Bailly's Chris Martin comments:
Chris Martin, a tax practitioner with Eide Bailly LLP, offered the example of a businessperson with a sales and use tax question on her product, which includes software or services or similar elements. Currently, she would have the option of collecting and remitting the tax, potentially charging her customers more than her competitors, and then seeking a refund, he said. Or, she could skip the tax and risk an audit and potential penalties.
Private letter rulings could provide guidance, clarity and certainty, he said.
Minn. Senate Bill Seeks Cuts To Corporate Income Tax Rate - Micharl Nunes, Law 360 Tax Authority ($):
Under S.F. 951, the state's 9.8% corporate franchise tax would be reduced to 9.3% in 2025, and would drop to 9.05% in 2026 before reaching 8.8% in 2027. The state's corporate alternative minimum tax rate, which is currently 5.8%, would be lowered to 5.5% starting in 2025, then would be further cut to 5.35% in 2026 and 5.2% in 2027.
Minn. Senate Bill Would Phase Out Estate Tax - Jaqueline McCool, Law 360 Tax Authority ($):
S.F. 953, introduced Monday by Sen. Carla Nelson, R-Rochester, would phase out the state's estate tax by reducing the rates by 1.6 percentage points annually until June 30, 2034. The current lowest estate tax rate is 13% on income under $7.1 million, and the highest is 16% on income over $10.1 million.
Michigan
Mich. Supreme Court Says City's Electricity Fee Is Illegal Tax - Carolyn Muyskens, Law 360 Tax Authority ($):
A franchise fee added to East Lansing, Michigan, residents' energy bills is a disguised tax, the Michigan Supreme Court ruled Monday, saying the fee was used to raise revenue for the city without first being approved by voters.
In a 4-1 decision, the state's highest court said the charge would be unquestionably illegal under the Michigan constitution's Headlee Amendment if it was directly levied by the city because the voters did not consent to the charge.
New Jersey
New Jersey Joins IRS Direct File, Launches New Tax Portal for Seniors - Matthew Pertz, Tax Notes ($):
New Jersey's Direct File launch coincides with an announcement of a unified property tax relief application that allows seniors to apply for three programs at once: ANCHOR (the Affordable New Jersey Communities for Homeowners and Renters program), Senior Freeze, and the coming StayNJ program.
New York
A company that locates to the city from outside the state and operates in an eligible premises — defined as an office space or a space used for manufacturing activities that is at least 20,000 square feet and was built before 2000 — would be eligible for a 10-year, $5,000 credit for each employee, according to a brief on the program by the New York City Economic Development Corporation (EDC).
Ohio
Ohio governor’s proposed budget includes public ed funding, tax hikes on weed, tobacco and betting - Morgan Trau, Ohio Capital Journal:
Other benefits proposed by DeWine include creating new $1,000 child tax credits for parents, providing more access to literacy and vision care for children, and proposals to make child care more affordable by expanding the eligibility for publicly funded programs.
Texas
Texas Gov. Floats $10B Property Tax Relief Proposal - Michael Nunes, Law 360 Tax Authority ($):
In his State of the State address Sunday, Abbott, a Republican, voiced support for a $10 billion property tax relief package that would also constrain the ability of a political jurisdiction to raise taxes. No taxing entity, the governor said, should be able to raise property taxes without a two-thirds approval from residents.
Virginia
Va. General Assembly advances budget bills that cut taxes, fund schools - Gregory S. Schneider and Laura Vozzella, The Washington Post:
The Democratic-controlled Virginia General Assembly advanced budget bills Thursday that include broad tax cuts and rebates, drawing bipartisan support but setting up possible confrontation with Gov. Glenn Youngkin (R) over his plans for even more targeted tax reductions.
Washington
Wash. House Bill Seeks Surcharge On 'Excessive' CEO Pay - Michael Nunes, Law 360 Tax Authority ($):
Introduced Monday, H.B. 1785 would create a surcharge in addition to a company's business and occupation tax if the ratio of executive pay to median worker pay exceeded 50 to 1. If the ratio was between 50 to 1 and 150 to 1, the surcharge would be 10%, and if the ratio was higher than 150 to 1, the surcharge would be 25%.
Tax History Center
Did you know?
History of Taxes, Tax Foundation:
Income Tax
Ancient Roman Emperor Augustus changed the tax system in the late 1st century BCE. The collection had originally been done through “tax farmers” who collected taxes from their respective regions based on the assessment of the region as a whole and turned them over to the government. This system was tough to continue, and Augustus switched to a direct taxation system that resembled an income tax. This began as a direct tax on an individual’s wealth, but when it was clear this too was difficult to execute, the income tax replaced that collection.
