Tax Foundation Report Outlines Significant State Tax Changes in 2010

August 23, 2010

A new Tax Foundation analysis of significant state tax changes in 2010 shows that some states have enacted targeted tax increases or turned to the politically convenient option of one-time funds and accounting gimmicks to fill budget gaps. So far in 2010, five states have seen changes to their individual income tax structures, two states have had sales tax rate increases take effect and five states enacted cigarette excise tax increases.

Among the income tax changes this year:

  • Oregon voters in January upheld a so-called “millionaire’s tax” measure, which creates two new income tax brackets: 10.8% on income over $125,000 and 11% on income over $250,000.
  • Ohio postponed for one year a planned 4.2% reduction in income tax rates, which had been scheduled to begin in January 2010.
  • New Jersey rejected calls to renew its temporary “millionaires’ tax” rates — with a top rate of 10.75% — which expired at the end of 2009.
  • Rhode Island enacted tax reform that goes into effect January 1, 2011 that eliminates the optional flat-tax method of preparing individual income taxes, reduces the number of brackets from five to three and lowers the top rate from 9.9% to 5.99%.
  • In June, Maine voters repealed a year-old law that replaced its four-rate income tax structure, which had a top rate of 8.5%, with a flatter income tax and a top rate of 6.85%.

For the full list, see Tax Foundation Fiscal Fact, No. 241, “A Review of 2010’s Changes In State Tax Policy.” A related report outlines significant changes in state tax policy during 2009: Tax Foundation Fiscal Fact, No. 204, “A Review of Significant State Tax Changes During 2009.”

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