- Updated to include additional changes in Kansas and Missouri
Thirty-four states will ring in the new year with notable taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. changes, including 17 states cutting individual or corporate income taxes (and some cutting both). Generally, state tax changes take effect either at the start of the calendar year (January 1) or the fiscal year (July 1 for most states), with rate changes for major taxes typically implemented effective January 1—either prospectively, as in these cases, or retroactively, as may happen under legislation enacted in the new year.
The past several years have seen a wave of significant tax reforms, including rate reductions and tax cuts, as states emerged from the pandemic with revenue surpluses and stared down inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. . Whether and how this trend continues is yet to be seen, but evidence from the past three years indicates that many states understand and value the importance of creating and maintaining a stable, pro-growth, and competitive tax code.
Summary of Changes
Tax Changes by State
Notable Changes Retroactive to 2023
Many states adopted tax changes that were retroactive to either January or July of 2023, or, occasionally, to some other date. Most of these were captured in our update on tax changes taking effect July 1, 2023, which also noted changes as of that date that were retroactive to earlier in the year. To this, however, can be added several additional tax changes adopted in 2023 with effective dates prior to 2024.