LOCALIZE IT: How are states responding to Trump’s big law on tax cuts and social safety net changes?
By GEOFF MULVIHILL and DAVID A. LIEB
Associated Press
EDITORS/NEWS DIRECTORS:
The signature legislation of President Donald Trump’s first year in office cuts taxes and makes major policy changes to social safety net programs such as Medicaid health insurance and SNAP food benefits.
The changes are going to have a big impact on state governments. Figuring out how to handle them will be one priority for state lawmakers and governors as legislative sessions begin, many of them in January.
The 40 states that previously expanded Medicaid to cover a slightly higher-income group of adults will be required to implement work requirements for some beneficiaries by January 2027.
All states are going to have to pay a bigger share of the administrative costs for the Supplemental Nutrition Assistance Program, or SNAP, starting in October. And many could eventually be required to pay some benefit costs if their payment error rates are above 6%.
States also can decide whether to incorporate federal changes into their state income tax laws, including whether to eliminate taxes on overtime pay and tips.
___
READ AP’S LATEST COVERAGE
Trump’s ‘beautiful’ new law means states have big decisions this year on Medicaid, SNAP and taxes
___
FIND YOUR STATE: MEDICAID CUTS
KFF has a report that estimates the state-by-state impact of Medicaid cuts. The largest spending reductions stem from provisions requiring certain adults with slightly higher incomes than traditional Medicaid recipients to meet new work requirements and to verify their eligibility more frequently. Those cost estimates assume some people will be dropped from Medicaid as a result of the new requirements.
DATA HIGHLIGHT: LARGEST PROJECTED MEDICAID CUTS
The states with the largest projected percentage reduction in federal Medicaid spending over 10 years compared with what they would have received if not for the policy changes, according to KFF:
20% reduction: Louisiana
19% reduction: Illinois, Oregon, Nevada
18% reduction: Washington, Arizona, New Jersey, Virginia
17% reduction: California, Michigan, Iowa
16% reduction: New York, Oklahoma, Rhode Island
15% reduction: Pennsylvania, Kentucky, Minnesota, Connecticut, Hawaii, New Hampshire
___
FIND YOUR STATE: TAX CUTS
Trump’s law contains numerous new tax breaks for individuals and businesses, including deductions for tips and overtime wages, automobile loans and business equipment. In some states, the new federal tax breaks will automatically apply to state income taxes unless legislatures opt out. But in many other states, where tax laws are written differently, the new tax breaks won’t appear on state tax forms unless legislatures opt in.
In states that don’t conform to the federal tax changes, workers who receive tips or overtime — for example — will pay no federal tax on those earnings but could still owe state taxes on them.
An Associated Press graphic published last month as part of this article shows which states have and do not have tax breaks similar to the federal ones. States still can decide to change their tax conformity during their 2026 legislative sessions. (An embed code for this graphic can be found at the end of the guide).
DATA HIGHLIGHT: TAX CUTS ON TIPS AND OVERTIME WAGES
States offering income tax breaks on tips and overtime wages:
Colorado (tips only)
Idaho
Iowa
Michigan
Montana
North Dakota
Oregon
South Carolina
___
FIND YOUR STATE: FOOD AID
The federal government currently covers the full cost of food benefits for the Supplemental Nutrition Assistance Program and splits the administrative costs with states. Starting Oct. 1, states will have to pay three-fourths of the cost to run the program. And starting in late 2027, some states that make errors in more than 6% of their benefit payments will have to start paying a portion of the benefit costs.
The U.S. Department of Agriculture, which oversees SNAP, compiles a list or error rates by state, including a break down of the percentage of those who received too much or not enough money. Its most recent report covers the 2024 fiscal year. States still have time to reduce their error rates before the penalties kick in.
DATA HIGHLIGHT: FOOD AID ERRORS
Jurisdictions with the highest SNAP payment error rates during 2024:
Alaska: 24.7%
District of Columbia: 17.4%
Georgia: 15.7%
Florida: 15.1%
New Mexico: 14.6%
New Jersey: 14.3%
Massachusetts: 14.1%
New York: 14.1%
Oregon: 14.1%
Maryland: 13.6%
___
CONSIDER THESE REPORTING THREADS AND TIPS
— Ask legislative leaders and the governor’s office in your state how they plan to respond to the tax cuts. Is there support to embrace all, some or none of the tax breaks? If your state plans to opt-in to the tax breaks, would they apply retroactively to 2025 taxes that are due this April in order to align with the federal tax breaks, or would they begin with the 2026 tax year? If embracing the tax cuts, how much revenue do they think the state would lose?
— Dig into the budget proposal that your governor and state legislators will be considering during their 2026 session. Is the budget proposing to spend more money on technology or staff to comply with Medicaid work and eligibility determination requirements? How much is being budgeted to cover the state’s share of administrative costs for SNAP food aid? And how would the state pay for this — with reserves, with reductions to other programs, or with expected growth in state revenues?
— Talk with health and anti-hunger advocacy organizations about the potential impact for those who receive benefits. The organizations may be able to connect you with some recipients who could be interviewed about what the requirements mean for them. Do recipients subject to the work requirements support them? Do they have particular challenges in finding work or meeting the requirements through volunteering or job training? Could the work requirements force them out of Medicaid?
— Ask officials in your state’s health or social services agency what they are doing to reduce payment error rates in SNAP. Are they investing in new technology? Are they planning to hire more staff? If your state’s error rates were to remain at the current level, how much money could it eventually cost the state to have to pay a portion of those benefits?
___
READ ADDITIONAL COVERAGE ON STATE IMPACTS OF THE LEGISLATION
It’s decision time for states on Trump’s big tax cuts
How Trump’s big bill could leave states scrambling to cover federal funding cuts
Trump’s big bill is prompting urgent action in some Democratic states, but not in Republican ones
Trump administration focuses on SNAP fraud
Medicaid, food aid recipients worry about safety net cuts in bill sent to Trump
___
EMBED THIS INTERACTIVE
Lawmakers across the U.S. will be debating whether to adopt new federal tax breaks for tips, overtime and business expenses. The following digital embed is a searchable table of states that mirror Trump’s tax breaks and those that do not offer them. This table is current as of Dec. 18, 2025 and will be updated when new information becomes available. Source: Tax Foundation; Institute on Taxation and Economic Policy; AP reporting
To embed, insert this code into your CMS:
!– start AP embed —
iframe title=“States mirroring Trump’s tax breaks” aria-label=“Table” id=“ap-chart-To7fJ” src=“https://interactives.ap.org/embeds/To7fJ/6/” scrolling=“no” width=“100%” style=“border:none” height=“609″/iframescript type=“text/javascript”!function()(“use strict”;window.addEventListener(“message”,(function(e)(if(void 0!==e.data(“datawrapper-height”))(var t=document.querySelectorAll(“iframe”);for(var a in e.data(“datawrapper-height”))for(var r=0;rt.length;r++)(if(t(r).contentWindow===e.source)t(r).style.height=e.data(“datawrapper-height”)(a)+“px”))))))();/script
!– end AP embed —
___
Localize It is a resource produced regularly by The Associated Press for its customers’ use. Questions can be directed to the Local News Success team at localizeit@ap.org. View guides published in the last 30 days here.
