U.S. States Tackle Budgets with Tax Cuts and Rebates Amid Economic Challenges

Nearly every state in the U.S. has finalized its budget for the 2027 fiscal year. Some states are including measures to return taxes to citizens. Lawmakers face multi-billion-dollar shortfalls and issues in underfunding key social programs. According to the National Conference of State Legislatures (NCSL), plateauing revenue growth is a major concern. This may prompt state leaders to budget cautiously.

Despite economic challenges, many states are cutting taxes, while others provide rebates and refunds. Elevated inflation has increased the cost of essentials such as housing, groceries, insurance, and utilities. Wage gains have not kept pace for lower- and middle-income households.

California

California’s Budget Act of 2026, signed in late June, emphasizes green-energy rebates. It aims to counteract the loss of certain federal incentives. Funds are allocated to Senate Bill 168, offering a $3,500 rebate for first-time buyers of electric vehicles under $50,000. Vehicles costing less than $25,000 receive a $1,750 rebate.

New Jersey

Governor Mikie Sherrill signed New Jersey’s $60.7 billion budget in late June. This budget allocates over $4.1 billion for property tax relief programs. Changes were made to the Stay NJ initiative, created in 2025, to help older residents lower their property tax burden. Eligibility rules now have a lower income cap of $200,000, though homeowners can still receive up to $6,500 annually.

New York

Governor Kathy Hochul’s budget, signed in May, allocates $1 billion to a one-time “Protecting Our Wallets Energy Rebate.” This aims to provide relief to millions of New Yorkers. Checks will be distributed from September to December 2026. Joint filers earning less than $150,000 will receive $200. Those earning between $150,000 and $300,000 will receive $150. Single filers under $150,000 will receive $100.

Pennsylvania

Pennsylvania’s 2027 fiscal year plan includes expanded tax credits and property tax rebate programs. Governor Josh Shapiro’s office states that the property tax/rent rebate program has issued over $1 billion via 1.84 million rebates in the past four years. In July, the Department of Revenue sent out 376,000 rebates totaling $226.4 million to seniors, widows and widowers, and people with disabilities. These rebates were for property taxes or rent paid in 2025. Applications for next year’s rebates are open until the year’s end.

Other State Initiatives

Several states are returning money to taxpayers through programs unrelated to their new budgets:

• South Dakota raised sales taxes to fund property-tax relief for homeowners.
• Georgia issues surplus tax refunds under HB 1000, signed in March. Eligible taxpayers who timely filed their 2024 and 2025 returns receive $250 for single filers, $375 for head of households, and $500 for married, joint filers. Governor Brian Kemp emphasized that residents know best how to spend their money.

Contact Newsweek editors on this story: John Fitzpatrick and Gray R. Thomas