Federal Budget Developments and State Tax Policy Updates

February 5, 2025

Senate Republicans Consider Early Action on Budget Reconciliation

The American Institute for Tax Policy and Research (AITPR) reports that Senate Republicans are preparing to move forward with budget reconciliation ahead of the House. According to The Hill, Senate Budget Committee Chair Lindsey Graham (R-SC) is briefing Republican senators on a resolution that would advance two major legislative packages. The first proposal focuses on border security, energy production, and defense spending, while the second bill would serve as a legislative vehicle for tax cuts, including provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that are set to expire at the end of this year. The House has yet to reach consensus on its budget plan, making Senate action increasingly likely.

Ohio Governor Proposes Child Tax Credit and Higher Sin Taxes

Gov. Mike DeWine (R) has introduced a $218 billion budget plan that includes full public education funding and a new $1,000 child tax credit. To finance these initiatives, Ohio Capital Journal reports that the proposal would raise taxes on marijuana, tobacco, and sports betting. A portion of the revenue would also be allocated toward funding a new Cleveland Browns stadium.

Texas Lawmakers Weigh Additional Property Tax Cuts

Texas lawmakers are prioritizing another round of property tax relief, according to The Texas Tribune. Gov. Greg Abbott (R) has proposed allocating $10 billion for property tax reductions. However, rising property values have offset some past tax cuts, making additional relief a pressing issue. With a smaller budget surplus this year, policymakers are debating the best approach. The Senate’s plan includes raising the homestead exemption from $100,000 to $140,000, while the House has yet to reveal its proposal.

Georgia Lieutenant Governor Pushes for Child Care Tax Incentives

Lt. Gov. Burt Jones (R) is advocating for expanded child care tax credits, The Associated Press reports. His proposal would introduce a new $250 per-child tax credit for children under seven, increase the existing child care tax credit to $1,200 per child, and expand business incentives for on-site child care programs. While Democrats have suggested further expanding the credit, some legal experts argue that Georgia’s constitution may prohibit refundable tax credits. Jones' proposal is estimated to cost between $100 million and $200 million annually.

Maryland Tests Mileage-Based User Fees as Gas Tax Revenue Declines

With fuel tax revenues shrinking, Maryland is experimenting with a mileage-based user fee (MBUF) as a potential alternative to the traditional gas tax, reports WMAR-2 News. A pilot study found that participants paid about the same in mileage fees as they currently do in fuel taxes. However, concerns about privacy and fairness remain. Rural drivers, who often own less fuel-efficient vehicles, could benefit from this system, but Republican lawmakers worry that the state may impose the MBUF in addition to existing gas taxes.