Tracking state tax policies has become more complex as the effects of the One Big Beautiful Bill Act may be changing states' strategy.
"Following several years when most states provided refunds and tax holidays, or cut taxes, taxation trends are beginning to diverge."
The statement comes from an S&P Global Ratings analysis published earlier this week. Uncertainty and negative changes in credit ratings could hobble new bond sales.
According to S&P, more states are moving toward higher income taxes leveled at the affluent.
"States imposing targeted taxes on higher-income taxpayers is not a new concept and from a creditworthiness perspective, we focus on how any tax change affects a state's ability to ensure ongoing budgetary balance."
Income tax rates charged on higher earners range from North Dakota collecting 2.5% on incomes above $244,825, to California's 13.3% for filers with incomes of more than $1 million.
According to S&P, "At least 10 states have incorporated a higher rate into their tax codes for incomes or investment income above $1 million."
From a ratings point of view, S&P likes states than can make budget changes quickly to respond to the ebbs and flows of revenue collection.
Fitch Ratings keeps an eye on revenue collection at the state level and published their findings last month.
"Solid gains in personal income tax and sales tax collections are driving overall tax collections higher in most states in fiscal 2026, providing a positive offset against spending pressures and economic uncertainty," said Fitch.
California is leading the pack by showing a gain of over 15% in tax collections compared to last year.
"Hawaii, Louisiana, Mississippi, North Dakota and West Virginia — saw year-to-date personal income tax declines, largely tied to tax cuts," said Fitch.
Tax cuts, which sometimes come in the form of property tax reductions and caps, often spark alarm in policy watchers.
"Broad property tax cuts and caps harm communities because property taxes are the primary source of revenue for over 90% of local governments," said the Center on Budget and Policy Priorities.
"The benefits from tax cuts and caps tend to accrue to existing and wealthier homeowners."
The CBPP, a progressive think tank, notes 11 states have cut or capped property tax revenue for local governments and schools so far in 2026.
Florida, North Carolina, Oklahoma, and Wyoming are also considering exemptions or caps on property tax levels.
The Tax Foundation tracks state sales tax rates, which have remained stable.
"There was no statewide tax rate change between January 2026 and July 2026," said Abir Mandal, a senior policy analyst with the foundation's Center for State Tax Policy.
"Sales tax rate reductions have been relatively rare in recent years, as state lawmakers have instead prioritized income tax cuts, which yield more economic benefit."
Forty-five states levy a state-level sales tax, and 38 states allow local sales taxes. The five states with the highest average combined state and local sales tax rates are Louisiana, Tennessee, Washington, Arkansas, and Alabama.
The four lowest states are Delaware, Montana, New Hampshire, and Oregon.
