Published January 23, 2026
The budget reconciliation law (H.R. 1/OBBBA) marks one of the most significant federal disinvestment efforts in decades, fundamentally reshaping the fiscal relationship between the federal government, states, and municipalities. By cutting roughly $187 billion from the Supplemental Nutrition Assistance Program (SNAP) while directing about $170 billion to Immigration and Customs Enforcement (ICE) and delivering hundreds of billions in tax benefits to corporations and the ultra-wealthy, the law reflects political priorities — not fiscal necessity. These choices redirect resources away from children, workers, and local economies, shifting substantial social and financial burdens onto states and taxpayers.
The distributional effects are stark: Approximately 75 percent of the law’s tax benefits flow to the top 20 percent of households, with the top 1 percent projected to gain more than a trillion dollars over the next decade. Corporate tax provisions — such as accelerated depreciation, expanded passthrough deductions, weakened estate taxes, and preferential treatment of investment income — further concentrate wealth among those least reliant on wages. At the same time, low wages make it difficult for families to meet their basic needs, contributing to the rise of the working poor who rely on programs like SNAP.
These federal choices collide with state and local tax systems that are already deeply regressive. In most states, households with low incomes pay a higher share of their income in state and local taxes than the wealthiest residents. In 41 states, the top 1 percent pay the lowest effective tax rate; in 34 states, the lowest-income households pay the highest. These inequities reflect decades of policy decisions that favor wealth and capital while underfunding the public systems that support families and communities.
As states attempt to fill the gaps created by federal withdrawal, these disparities risk intensifying. Some proposed state revenue measures, such as expanding or increasing taxes on groceries under the guise of promoting “healthy choices,” would deepen hardship for households least able to absorb additional costs. Food taxes are among the most regressive revenue tools, disproportionately affecting families with low incomes who already spend a larger share of their budgets on necessities. When food assistance is being cut, taxing groceries compounds hunger, worsens health outcomes, and accelerates inequality.
Progressive revenue options offer a more equitable path. For example, eliminating preferential tax treatment for luxury goods, such as sales tax exemptions for private aircraft, illustrates how states can raise meaningful revenue without increasing hardship. Aircraft ownership is overwhelmingly concentrated among high-wealth individuals, yet many states exempt private jets and helicopters from sales taxes while offering no comparable support for everyday transportation used by working families. These exemptions cost tens of millions of dollars annually — funds that could instead support food assistance, health care, education, or local aid. Choosing to tax groceries while subsidizing private jets reflects policy priorities, not fiscal constraints.
This playbook is designed for that reality. It outlines progressive tax policy options that states and localities can adopt to counteract federal disinvestment and generate sustainable, equitable revenue. These strategies are not substitutes for federal responsibility; they are defensive tools for states forced to absorb the consequences of federal withdrawal. The goals are clear: prevent further harm to families and communities, and challenge regressive tax structures that deepen inequality under the banner of “budget balance.”
At a moment when public dollars are being redirected away from food, health care, and housing to finance unprecedented tax breaks for the wealthy, states face a defining choice: They can continue relying on regressive revenue mechanisms that widen racial and economic disparities, or they can pursue progressive reforms that ask those with the greatest ability to pay to contribute fairly. This playbook is grounded in the belief that equity, fiscal stability, and democratic accountability are inseparable — and that rebuilding them requires intentional, structural change.
Take Action
Congressional Republicans recently chose to ignore a critical opportunity in the appropriations process to delay two of the most damaging provisions in H.R. 1 — changes that drive up administrative costs and shift SNAP benefit costs onto states — making strong, coordinated advocacy more urgent than ever. Advocates should express their disapproval directly to their Member of Congress and use the playbook resource as both a policy guide and an organizing tool to defend SNAP’s core functions, expose how federal disinvestment harms families, and highlight that these cuts come alongside massive tax benefits for corporations and high-wealth households. By documenting the consequences, elevating community impact, and pushing for equitable state-level solutions, advocates can counter the narrative of fiscal inevitability and insist that public resources serve public needs rather than subsidize wealth at the top.