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.
At least 32 notable tax policy changes recently took effect across 18 states, including alterations to income taxes, payroll taxes, sales and use taxes, property taxes, and excise taxes. See if your state tax code changed.
As fiscal year 2023 draws to a close, North Carolina’s House and Senate have each passed their own versions of the biennial budget for fiscal years 2024-25. While legislative leaders have generally agreed to overall spending levels, negotiations remain ongoing to resolve different approaches to tax policy.
The Pennsylvania Senate Finance Committee recently advanced two bills, SB 345 and SB 346, that would build on last year’s historic corporate net income tax (CNIT) reform.
As Minnesota lawmakers consider making theirs the first state to mandate worldwide combined reporting, they are relying on a revenue estimate that is—this may not be the technical term—completely bogus.
Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections:
With other states upping their game to attract ever-more-mobile people and businesses, lawmakers and the governor are not content to leave Tennessee’s business taxes in their current, uncompetitive form.
Done responsibly, reducing income tax rates while consolidating brackets would return excess tax collections to taxpayers and promote long-term economic growth in Nebraska.
Forty-three states adopted tax relief in 2021 or 2022—often in both years—and of those, 21 cut state income tax rates. It’s been a remarkable trend, driven by robust state revenues and an increasingly competitive tax environment.
West Virginia is one of only seven states that hasn’t offered any significant tax relief since 2021—and five of the other six forgo an individual income tax.
By shifting to a flat income tax, Georgia has already made an important commitment to tax competitiveness. Although the state’s top rate threshold is already very low, a true single-rate income tax will help protect taxpayers from inflation-related tax increases and provide a buffer against rising tax rates in the future. To combine responsible rate reductions with these benefits, Georgia should create tax triggers that empower the state to keep pace with its competition.
In what is already a year of significant bipartisan focus on tax relief, 2022 is launching something of a flat tax revolution by reforming income taxes.
With increases to the standard deduction, a flat tax could provide a net tax cut to taxpayers of all income levels, providing both short-term and long-term relief to taxpayers across the income spectrum. It would also simplify the tax code in ways that encourage greater investment and economic growth, particularly by ensuring that the marginal rate on small business investment is competitive with peer states.
As Idaho attempts to further solidify its position as a growth-oriented, taxpayer-friendly state this special session, other states should look to its example and pursue similar reforms.
As Missouri legislators head into a special session, they should consider making a pro-growth change that the state is already so close to achieving: creating a flat income tax.
