The year of state advocacy
by Melissa Bova
2025 was a wild year at the federal level, from significant tax legislation being passed to the longest government shutdown in history–which leaves you to wonder, what will 2026 bring? While I may be biased, I believe 2026 will be known as the year of state advocacy. Let me tell you why.
Balancing Budgets
State legislatures are not the federal government, and their budgets must be balanced from year-to-year. Deficits cannot exist, and therefore any significant shift in federal financial support has a very direct impact on the passage of state budgets—the vast majority of which are passed each year, though some are every two years. H.R. 1 was signed after most state legislatures recessed and therefore—financial impacts such as a $20.5 billion annual impact and needing to decouple from automatic compliance with the federal tax code to preserve revenue will all be 2026 activities. And where there is a potential budget deficit comes…taxes.
Taxes
We will cover elections later in this article because they will play a part in this conversation, but it would be naïve for us to think that new taxes and tax increases won’t be debated as a way to balance budgets and keep state coffers full. Taxes can come in all variations, but we have seen some discussed more than others in the last couple of years:
- Income tax increases—straight forward yet broad reaching, which comes with its own risks.
- Wealth tax—creation of new tax structures such as mark-to-market or taxes on net worth. These come under the mantra of ‘tax the rich’ but also put states that consider these taxes at a significant disadvantage to others that don’t have such a tax structure in place. Further, while many of these proposals claim to tax billionaires, you can expect that marker to change over time.
- Premium tax—we remain diligent in our partnership with the American Council of Life Insurers (ACLI) in opposing any increase in premium taxes that would then be passed onto advisors/clients they serve.
- Sales tax expansion to financial planning—this has popped up in red states and blue states and would assess sales tax on the advice and services the profession provides its clients. Finseca remains opposed to any tax that increases and, in the end, hinders access to financial advice.
Independent Contractors
In 2025, the New Jersey Department & Workforce Development introduced a regulatory proposal that would re-classify who is an independent contractor in the state. While the proposal itself was not specifically targeting members of the profession, the broad language could be interpreted that regulatory requirements, compensation and product offerings eliminate independent contractor status and would require members of the profession to become employees for all of the carriers they write for. Thousands of pages of comments in opposition were submitted against the proposal and there are efforts to introduce legislation that would carve out the profession from being subject to the proposal—but this will languish into 2026 and there could be other states that consider a regulatory change that is similar.
Long-Term Care
While state long-term care activity has slowed down over the last few years, that doesn’t mean that state activity and conversations aren’t ongoing.
In Washington, a voter referendum that would have made the Washington Cares program optional was defeated, and a second referendum that would allow the program to invest funds in the stock market passed. Further, benefits from the program will begin in 2026.
Massachusetts once again introduced legislation that would establish a commission to explore a state-wide long-term care program, and in addition to a second piece of legislation that would create a 20 % tax credit for premiums paid (which Finseca supports)—neither was passed this year, but both will carry over into 2026.
Overall, with the reduction of Medicaid funding to states slated to begin at the end of 2026, conversations around long-term care are likely to continue. Finseca continues to promote the need for private sector products to be part of any long-term care solution.
New York State
Finseca continues to advocate on the impact overly burdensome regulations have had on consumer access to advice in the Empire State. To that end, legislation has been introduced that would clarify that age and income are the only required suitability information needed to obtain a term life insurance policy with no cash value. Currently, Reg. 187 is unclear in this regard, and, in an effort to ensure compliance, applications are overly burdensome and negatively impact consumer access to advice. As for a step in the right direction, the NY Department of Financial
Services at the beginning of the year did release an updated FAQ pertaining to Reg. 187, thanks to Finseca’s advocacy efforts, that clarifies producers do not need to take duplicative Reg. 187 trainings to be compliant with the Regulation. Finally, with the exit of previous Superintendent Adrienne Harris and a Gubernatorial election on the horizon, there could be continued leadership changes within DFS that will impact the industry and profession.
2026 Elections
The 2025 ‘off-year’ elections demonstrated a significant swing from 2024 as Abigail Spanberger (D) and Mikie Sherrill (D) won the gubernatorial elections in their states of Virginia and New Jersey. It remains to be seen if that trend will continue into 2026—where 82% of the nation’s 7,300 legislative seats will be up for re-election and 36 Gubernatorial contests will be held. Either way, the legislative impacts from the 2026 election will be far-reaching.
The Un-Answered Question
With so many legislative and Gubernatorial seats up in 2026, we will continue to ask the question of whether legislators/Governor’s running for re-election want to pass legislation that increases taxes. Some of the federal financial impact won’t hit until the end of 2026, which means some of the items we posed here could be even more likely to gain traction in 2027.
Whichever year it does occur though, state legislative activity can happen quickly and tax threats, especially, tend to pop up most during last minute budget negotiations and special sessions, with passage weeks, sometimes days, after introduction.
Being a member of an association like Finseca that can alert you to these legislative threats that would allow for grassroots engagement with legislators will be key to defeating some of these potentially burdensome proposals.
No matter what, Finseca will continue to advocate on behalf of the profession and our mission, FINancial SECurity for All.
