State and Local Tax Updates- 05/02/2025
In this weeks SALT update: groundbreaking environmental taxes, income tax cuts, and states grappling with vacation homes.
The big news this week is the groundbreaking “Green Fee” passed in Hawaii, a first of its kind tourism tax to fund climate resilience projects. Next week, I’ll dive deeper into how this compares to environmental taxes in other states. Meanwhile the dominant trend of the legislative session continues: tax cuts. From groceries to income, Republican-led states are rushing to cut taxes in an attempt to spur growth.
Alabama:
A series of tax bills that passed the Alabama House last week will get attention in some form before the legislative session ends on 05/15. This includes:
House Bill 386 lowers the state’s grocery tax from 3% to 2% percent.
House Bill 387 gives local municipalities the authority to lower sales tax on groceries by resolution or ordinance.
House Bill 388 doubles the state’s income tax exemption from $6,000 to $12,000 for individuals 65 years old or older who withdraw funds from a defined contribution retirement plan such as a 401(k) or Individual Retirement Account.
House Bill 389 raises the standard deduction from $2,500 to $3,000 for individuals, and expands dependency exemptions beginning with the 2026 tax year.
Source: Alabama Daily News
Arizona:
Arizona passed the “Arizona Strategic Bitcoin Reserve Act,” allowing 10 percent of public funds to be invested in bitcoin.
“Lawmakers in Arizona have passed a bill allowing the state treasurer and retirement system to invest up to 10% of available funds in digital assets, specifically bitcoin. The governor has not said whether she will sign the legislation.
Source: Bloomberg
Florida:
Florida house passes tax relief bill, setting up conflict with Florida senate. The session will be extended past the May 2nd end date to resolve the tax issues.
The house bill would lower states sales tax by .75% from 6% to 5.25%. It would also include provisions to reduce all other sales tax rates by the same amount — commercial rent from 2% to 1.25%; electricity from 4.35% to 3.6%; new mobile home purchases from 3% to 2.25%; and coin-operated amusement machines from 4% to 3.25%.
This legislation would also make changes to the tourist development tax, which is causing the most controversy. The current draft of the legislation would redirect tourist development taxes away from tourism-related efforts to the county’s general revenue coffers and use this money to offset county property taxes beginning in 2026.
The Florida Senate has floated a more modest plan, including permanent elimination of the sales tax on clothing and shoes costing $75 or less. Other parts of this plan include a permanent reduction in the business rent tax from 2% to 1%, a one-time credit for vehicle registration fees, and several sales tax holidays.
Source: Florida Phoenix
Hawaii:
The Hawaii legislature passed a 0.75% “green fee” to help pay for the effects of climate change.
Under the bill, the transient-accommodations tax that visitors pay on their nightly hotel and short-term rental stays will increase by .75%, plus travelers who dock in Hawaiʻi on cruise ships will start paying that tax as well, to cover the new fee.
Those dollars would then be used to cover environmental projects across Hawaiʻi, along with efforts to make the state’s infrastructure and homes more resilient to natural disasters and the changing climate.
Source: Honolulu Civil Beat
Iowa:
Iowa house passes legislation making certain items tax-free, modifies child tax credits and adds income tax credit for radon mitigation. The legislation now moves to the Iowa senate.
Under three separate proposals passed by the house, Iowans would not have to pay sales tax on toilet paper, laundry detergent, or dietary supplements.
The Iowa House also passed a bill that will eliminate the current $90,000 net income cap. An additional bill will adjust the Iowa Child and Dependent Care Tax Credit to make it 50% refundable for Iowa taxpayers with a net income of $25,000 or above.
House File 1027 creates a nonrefundable individual income and corporate income tax credit capped at $1,000 for the purchase of a radon mitigation system designed to reduce radon concentrations inside buildings.
Source: Des Moines Register
Montana:
0.50% Income Tax Cut signed into Law by Montana Governor
House Bill 337 reduces the state’s top-bracket tax rate down from 5.9% to 5.4% over the next two years. It also raises the maximum threshold for the state’s lower tax bracket to $47,500 which is taxed at a 4.7% rate, and expands the Earned Income Tax Credit available to lower-income working families from 10% to 20%.
Source: Montana Free Press
Montana property tax relief passes legislature
The relief contains a homestead exemption that taxes second homes at higher rates than primary residences. To prioritize residential homeowners, other shifts would result in higher taxes for some large businesses and utilities. The median priced-home will see savings of $719 in property taxes next year.
Source: Daily Montanan
Oklahoma:
Oklahoma House passes income tax reform, must have a procedural vote in the Oklahoma Senate before being signed by the governor.
House Bill 1539, by state Rep. Mark Lepak and Bergstrom, would cut Oklahoma’s 4.75% personal income-tax rate by .25% each time that net state revenue increases by at least $300 million, continuing the process until the tax is completely repealed.
Source: Oklahoma Council of Public Affairs
New York:
New York Governor announces budget framework that will go to Legislature for a vote
The full details of the legislation are yet to be accounted for but it is expected to include inflation refund checks between $200 and $400 as well as an income tax reduction of .20% for all income brackets phased in over two years. Tax credits are also supposed to rise to $1,000 dollars for each child under 4 and $500 for children ages 4-16.
Source: Record Online
Other Good Reads:
Vermont Public Radio- Vermont lawmakers struggle with how to classify vacation homes for tax purposes.