US Treasury Presses States to Adopt Trump Tax Cuts as Session Nears, Few Have Acted
The U.S. Treasury is ramping up pressure on states to adopt President Donald Trump’s new federal tax cuts, but most legislatures remain on the sidelines as the next session fast approaches. According to AP News, Treasury Secretary Scott Bessent has urged states “to immediately conform” to deductions for tips, overtime wages, vehicle loans and business equipment, all benefits aimed at reducing tax burdens for workers and businesses.
But the stakes are rising as states prepare for 2026 budgets and face deadlines to lock in changes for 2025 tax filings. Many lawmakers are hesitant, citing tight finances and questions about whether the breaks will deliver the promised relief without undercutting revenue.
Federal tax cuts from a bill Trump signed July 4 total roughly $4.5 trillion over 10 years. Some states automatically conform to federal law; others must explicitly opt in. Workers in nonconforming states could pay no federal tax on tips or overtime but still owe state income tax.
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Only a handful of states have taken votes so far. Michigan became the first, and to date only state to adopt the personal income tax breaks, projecting upwards of $150 million in costs in its current budget year. Several other states have rejected parts of the corporate tax package to protect funding for schools and health services.
“States in general are approaching this skeptically,” said Carl Davis, research director at the Institute on Taxation and Economic Policy.
The lack of action across most states underscores growing tension between federal incentives and state fiscal priorities as legislatures prepare to convene.
Lawmakers in several states have signaled they could act when sessions begin in January, though some may wait until 2026 tax planning rather than adopt retroactive changes.
With decisions looming, states face a choice between offering residents bigger take-home pay and maintaining tight control over already stretched budgets.
What happens next will shape how widely Trump’s tax cuts are felt on the ground in 2026 and beyond.
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