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State Tax Trends

Since 2021, 25 states have cut individual income tax rates (including 23 reductions to top marginal rates), 13 states have cut corporate income tax rates, two have cut sales tax rates, and many more have made structural improvements like repealing capital stock taxes, adopting permanent full expensing, raising nonresident filing and withholding thresholds, improving treatment of business tangible property, eliminating throwback and throwout rules, and more.

The pace of tax reform will ebb and flow, and lawmakers’ ability to implement rate reductions will depend on future revenue and expenditure levels, but there will always be room for structural reforms. In an era characterized by remote work and greater workplace flexibility, more states should prioritize policies that attract investment, like permanent full expensing, and which reduce burdens for nonresidents, like higher filing and withholding thresholds.

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