President Trump’s bold tax cuts might not reach everyone thanks to some stubborn state governments.
Under the One Big Beautiful Bill Act, set to kick in on Jan. 1, 2026, federal taxes on tipped wages and overtime pay are axed, but only eight states are ready to match this relief at the state level, leaving many Americans—especially in Democratic-leaning areas—still on the hook for local taxes, the New York Post reports.
This isn’t just a minor hiccup; it’s a full-blown roadblock for hardworking servers, linemen, and factory workers who were promised a break with provisions like “No Tax on Tips” and “No Tax on Overtime.”
South Carolina, Iowa, North Dakota, Idaho, Montana, Oregon, Colorado, and Michigan are aligning with at least some of these federal changes. South Carolina, North Dakota, Montana, and Idaho are going all-in, adopting every personal tax break, including exemptions on tips, overtime pay, car loan interest, and a $6,000 senior deduction. Meanwhile, Oregon and Iowa are skipping the senior benefit, and Colorado is passing on the overtime deduction.
Colorado’s automatic alignment, known as “rolling conformity,” has its leaders quick to defend their position. “Claims that Colorado is refusing to adopt the majority of tax changes from H.R.1 are not accurate,” a spokesperson for Gov. Jared Polis (D) insisted.
Michigan, under Democratic Gov. Gretchen Whitmer, surprisingly stands alone in fully adopting tax breaks for tips and overtime. Kentucky and North Carolina are mulling similar moves.
On the flip side, heavyweights like New York, Illinois, and California are slamming the brakes, citing massive budget gaps as their excuse. New York alone could lose $1.7 billion in revenue if it matches the federal cuts.
California officials are noting that matching federal provisions would generally require new legislation. A spokesperson for the California Franchise Tax Board, via a representative for Gov. Gavin Newsom, confirmed, “Legislation would generally be required for California to conform to provisions within the federal One Big Beautiful Bill Act.” So, don’t hold your breath, Golden State workers—your state isn’t rushing to lighten your load.
New Jersey offers a sliver of hope, expressing openness to exempting tipped workers from state taxes. But with 42 states lacking automatic alignment to the federal tax code, the majority are still in limbo, waiting for legislative action that may never come.
State leaders in blue strongholds argue they’re protecting their budgets, but at what cost to the average Joe clocking extra hours or relying on tips to make ends meet?
Tax experts point out the divide isn’t purely partisan, with both red and blue states still undecided on whether to redefine taxable income to match federal changes.
Let’s be real: these tax cuts were designed to put money back into the pockets of workers and seniors dependent on Social Security. When states like New York waffle with promises to “evaluate federal changes” during budget talks, it feels like a polite way of saying, “Thanks, but no thanks.”
The resistance from Democratic strongholds risks widening the gap between federal promises and state realities, especially when provisions like the enhanced senior deduction could ease burdens for the elderly. Isn’t it time to cut through the red tape and focus on tangible relief?
As the 2026 deadline looms, the debate over state conformity will heat up in legislative sessions across the country.
Workers deserve clarity, not a patchwork of half-measures where your tax break depends on your ZIP code. Let’s hope more states see the light and join the eight already on track—because a promise made should be a promise kept.
