States are constantly reconsidering not only how much tax revenue they collect, but which taxes generate that revenue and who bears the burden. Nikki Dobay, co-chair of Greenberg Traurig’s U.S. State and Local Tax Practice, discussed this topic at the 2026 COST Annual Meeting in San Antonio. The panel she joined covered tax swaps, emerging revenue proposals, and their potential implications for business taxpayers.

Rethinking the Tax Mix: Tax Swaps Are Not New

State and local governments have historically relied on income, sales, and property taxes, supplemented by gross receipts, excise, and other taxes. Reducing or eliminating one tax — without corresponding budget cuts — generally requires the lost revenue to be made up from another source, which often results in consequences for multistate businesses.

The presentation highlighted attempts to expand the sales tax base to services; many proposals have failed or were repealed shortly after passage, reflecting political and practical challenges. Presenters cited Oregon’s enactment of the Corporate Activity Tax (CAT) as an example of how the outcome may differ from the original policy objective. The presentation noted that when Oregon legislators initially introduced the CAT, it was intended to replace the state’s corporate income tax. Ultimately, what began as a tax swap resulted in a new tax without the corresponding repeal.

Income and Property Tax Changes Remain in Focus

Examples of more recent tax swaps include North Carolina’s phase down of corporate and individual income tax rates. The state’s corporate income tax rate, formerly 6.9%, has declined incrementally since 2013 and is scheduled to reach 0% beginning in 2030. North Carolina’s individual tax rate may reach 2.49% between 2035 and 2040 if specified revenue triggers are satisfied.

According to the presentation, Florida’s proposed Amendment 3 would increase the state’s homestead exemption for non-school taxes to $150,000 in 2027 and $250,000 in 2028, with inflation indexing thereafter. The proposal would also limit annual assessment increases for non-homestead property to 5%. Amendment 3 requires approval from 60% of voters in November 2026.

But where might the revenue to offset these reductions in individual and property taxes come from?

States Explore Novel Revenue Sources

Some states and localities are also exploring new revenue sources.

California’s Proposition 40 proposes a one-time 5% tax on the worldwide net worth of California billionaire residents, with residency measured as of Jan. 1, 2026, and wealth measured as of Dec. 31, 2026. If approved by voters, the proposal may face judicial challenges. 

New York City, meanwhile, adopted a five-year pied-à-terre tax surcharge applicable to certain non-primary residences beginning with the July 2026 to June 2027 fiscal year. Litigation seeking to delay implementation followed when the city issued the regulations and corresponding notices.

In 2021, Washington, which historically relied heavily on sales taxes and its business and occupation tax rather than an income tax, adopted a capital gains tax. More recently, the state also adopted a millionaires’ tax, scheduled to take effect in 2028 at a rate of 9.9%. The millionaires’ tax faces both a judicial challenge and a voter initiative that may result in repeal before implementation.

In addition to these measures, some states are pursuing targeted taxes on specific industries and activities, rather than broad-based increases. For instance, retail delivery fees add charges to qualifying transactions, while digital advertising and data-tax proposals target advertising receipts, social media activity, and consumer data monetization. These measures may add to existing taxes rather than replace them. For multistate businesses, differing thresholds, exemptions, and tax bases may further complicate compliance.

Considerations for Businesses

A tax cut in one area does not necessarily reduce a business’s overall tax burden. Businesses should consider evaluating proposed reductions alongside new or expanded taxes, monitoring changes through enactment and implementation, and modeling their cumulative impact. Early engagement may be beneficial: a proposed tax swap may ultimately become an additional tax.