Only eight U.S. states are set to let taxpayers benefit from President Trump’s 2026 tax breaks, experts say
WASHINGTON — A handful of states will be able to adopt several provisions from President Trump’s “One Big Beautiful Bill Act” by the start of 2026, according to analysts who spoke with The New York Post. The bill would eliminate taxes on tips for service‑industry workers, remove overtime taxes for certain blue‑collar jobs, and introduce a new deduction for seniors who rely on Social Security. While the legislation is aimed at boosting take‑home pay for millions of workers, most Democratic‑leaning states have not yet shown any intention of codifying these changes.
Blue‑state hesitancy
In a Reuters investigation referenced by The Post, Democratic strongholds such as New York, Illinois and California have declined to add the provisions to their own tax codes, citing the risk of significant revenue shortfalls. Treasury Secretary Scott Bessent has been particularly vocal, accusing the likes of New York and Illinois of “playing Ebenezer Scrooge” by “deliberately blocking” the bill’s popular measures. The bill’s key provisions—“No Tax on Tips for dedicated service industry staff, No Tax on Overtime for linemen and factory workers, and a new tax deduction for seniors who depend on Social Security”—are set to take effect on January 1.
What states can do
Some states adopt federal tax law automatically, a process known as “rolling conformity.” Colorado, for example, has such a system and a spokesperson for Gov. Jared Polis (D) said the state’s tax code already covers most of the bill’s changes unless lawmakers decide otherwise. Other states that automatically align their codes with the Internal Revenue Code include South Carolina, Iowa, North Dakota, Idaho, Montana and Oregon.
“We’ve seen that numerous states that start with federal taxable income bring in many of the new deductions unless they opt out,” explained Adam Michel, director of tax policy studies at the Cato Institute. “The rest of the states—those that use adjusted gross income or have independent tax laws—must pass a specific bill to adopt them.”
Michigan, the sole adopter so far
Michigan is the only state that has formally incorporated the bill’s overtime and tip‑tax cuts, according to the Michigan Legislature’s 2025‑2026 public acts. While Kentucky and North Carolina have floated similar proposals, they have yet to enact them.
Current status of the eight compliant states
- South Carolina, North Dakota, Montana and Idaho are fully conforming to the bill’s provisions on qualified tips, car‑loan interest, overtime premium pay and the $6,000 enhanced deduction for seniors.
- Oregon and Iowa will adopt three of those provisions, but not the enhanced senior benefit.
- Colorado will keep the senior benefit but drop the overtime premium‑pay deduction.
- New York could fall behind, as a Tax Foundation analysis predicts that the state could lose up to $1.7 billion in revenue if it does not adopt the bill.
Political implications
Vice president of state projects at the non‑partisan Tax Foundation, Jared Walczak, noted that many states have a “clear red‑blue” split when it comes to adopting federal tax changes, but “the tax stuff gets dealt with around the same time that the state budget stuff is getting worked out early in the year in the legislatures,” making a clean division unlikely.
“The temporary personal deductions aren’t the best economic policy, and they come at a cost,” Walczak said. “So states have to evaluate that as they consider whether they want to conform to them, and most states simply won’t do so.”
No comment yet from key governors
Representatives for New York Gov. Kathy Hochul, California Gov. Gavin Newsom and Illinois Gov. J.B. Pritzker did not respond to the Post’s request for statements.
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