Several states plan tax hikes to offset funding loss from BBB
While the Big, Beautiful, Bill is now federal law, its ripple effects are being felt in state budgets across the country. Lawmakers in nearly half a dozen, mostly blue, states are moving to raise taxes in order to offset the loss of federal funding.
The One Big Beautiful Bill Act extended federal tax cuts enacted during the first Trump administration in 2017 and included other tax provisions. It also cut spending to various programs, including Medicaid. Those changes are forcing states to make up for the fiscal shortfalls.
Rhode Island and the ‘Taylor Swift tax’
One state, Rhode Island, has already approved a new tax on vacation homes worth more than $1 million. Fox Business reports that it’s been nicknamed “Taylor Swift tax” because the pop icon owns an expensive house in Westerly, Rhode Island.
The new tax is a $2.50 levy for every $500 above $1 million. Realtor.com did the math and determined that for Swift’s $17 million home, the new tax would generate $136,000 in property taxes for the state of Rhode Island. Supporters of the new tax believe wealthy owners should pay more to help level revenue.
Connecticut and Maryland: Income tax hikes
In Connecticut, lawmakers are weighing higher income tax rates for individuals earning more than $250,000 and couples making over $500,000, specifically to counteract federal cuts.
In Maryland, legislators recently raised brackets for residents earning more than $500,000 and $1 million annually. They also imposed a new 2% capital gains tax on those making $350,000 and added a 3% tax on IT services. AP reports the changes are aimed at reducing a widening budget deficit.
Capital gains in Washington
Out west, Washington state’s spring budget included an increase in the capital gains tax, with a new tier for earnings above $1 million. Supporters believe it’s a way to make the wealthy pay more. Fox Business says the tax is structured to mainly hit deals that involve stocks, bonds and other business transactions.
Out-of-state homeowners in Montana
In Montana, lawmakers are considering new property taxes on second homes and vacation properties. The proposal sets a flat rate of 1.9% while reducing taxes for owner-occupied homes. Realtor.com points out that 23% of property tax revenue in Montana comes from out-of-state owners, with many seen as wealthy enough to shoulder more of the burden.
Ella Rae Greene, Editor In Chief
