December 26, 2023
Year in Review: The Biggest State Tax Policy Wins of 2023
2023 was another hard year for Americans who had to deal with higher prices from inflation. The cost of rent, electricity, groceries, gas, and everything in between was more expensive than previous years.
Thankfully, several states provided some relief from high prices by cutting taxes for individuals, families, and businesses. Lowering taxes allows Americans to keep more of their hard-earned money. With a bigger paycheck, these families can better cope with rising prices.
Below is a snapshot of the states that reduced taxes or stopped a proposed tax increase from going into effect in 2023.
During the 2023 regular legislative session in Alabama, the Alabama Policy Institute (API) was instrumental in the elimination of the state income tax on overtime. API helped lead a bipartisan coalition of advocates and legislators to achieve this $35 million tax cut.
Thanks in part to the Arkansas Public Policy Foundation and Opportunity Arkansas, the Arkansas Governor and legislative leaders reduced the income tax rate to 4.4%. Total permanent personal income tax cuts this year in Arkansas is approximately $243 million.
On Tuesday, November 7, 2023—thanks in large part to the Independence Institute—Colorado voters rejected Proposition HH—a ballot initiative that would have significantly raised taxes on Colorado families. In fact, if it passed, Prop HH would have cost Coloradans an estimated net $21 billion through 2040.
In December 2023, Georgia lawmakers noted they would expedite income-tax reductions for Georgia families .Under current law, Georgia’s income tax is slated to decrease from 5.75 percent to 5.49 percent on January 1, 2024, and then to 5.39 percent in 2025. Lawmakers are eager to provide relief, however, and proposed legislation to lower the tax rate to 5.39 percent on January 1, 2024—a full year earlier than initially planned.
Iowans for Tax Relief Foundation was instrumental in helping to get a comprehensive property tax reform measure passed by the Iowa Legislature.
In February, the Kentucky Governor signed legislation which lowers the state personal income tax rate to 4.5% retroactive to January 1, 2023, and to 4.0% effective January 1, 2024.
Maine has had a persistent transportation funding shortfall in excess of $200 million for many consecutive years, leading the state to consistently pursue bonds to cover the difference. While some lawmakers sought a remedy in the form of tax and fee increases, Maine Policy pursued a different strategy that stopped tax increases, reduced General Fund spending, and saved taxpayers millions of dollars in future debt payments.
Maine Policy Institute advanced a bill that would reappropriate a portion of automobile-related sales from the General Fund to the state’s Highway Fund, which pays for infrastructure projects and road and bridge repairs.
This change accomplished three notable goals: 1) It plugged the state’s ongoing transportation funding shortfall without new tax or fee increases on Mainers; 2) It reduced the amount of money in the General Fund for lawmakers to spend in current and future budget cycles; and 3) It reduced the need for future borrowing and stops the state for bonding annually for road and bridge repairs, saving taxpayers millions in future debt payments.
In April, Montana cut spending and lowered taxes. The state lowered the income tax rate most Montanans pay from 6.75 to 5.9%.
On May 31, 2023, the Nebraska Governor signed two bills that enact major tax reforms in the state. The first bill grants more property tax relief to Nebraskans—establishing a three percent annual cap on how much school districts can increase property tax requests. It also eliminates community college property taxes and beefs up a tax credit that offsets the cost of property taxes. The second bill reduces the individual and business income tax rate to 3.99% from 5.84% and 7.25%, respectively. The Platte Institute played a key role in this win for the Cornhusker State.
In April, North Dakota passed historic tax relief that provides $358 million in individual income tax relief. As the Governor Burgum explained, the legislation zeroes out the state’s bottom tax bracket and combining the top four brackets into two brackets with reduced tax rates of 1.95% or 2.5%.
Thanks to The Buckeye Institute, Ohio returned some of the state’s record surplus to taxpayers and moved Ohio closer to a single flat tax.
Tennessee passed the “Tennessee Works Tax Act” the largest tax cut in Tennessee history, with over $400 million in taxes cuts. In The Tennessean, the Beacon Center’s Justin Owen noted these reforms will improve Tennessee’s economic competitiveness, eliminate taxes on small businesses, and provide relief for working families.
Thanks to the Texas Public Policy Foundation, Texas secured historic property tax relief this year. The Texas Legislature passed a legislative package that provides $18 billion in tax relief. This package lowers school tax rates by more than 20 cents per $100 of value, increases the homestead exemption to $100,000, creates a 3-year circuit breaker pilot program for non-homestead properties valued at $5 million or less, and increases the franchise tax exception to $2.47 million.
In March, West Virginia passed the state’s largest tax cut in 37 years. The legislation includes a 21.25% income tax reduction in the first year and triggers to continue reducing the income tax beginning in 2024. The bill also includes several personal property tax rebates. The Cardinal Institute was instrumental in helping pass this reform that will ensure working West Virginians keep more of their own money to spend, save, or invest—while making the state a more attractive place to live and work.
In June, the Wisconsin Institute for Law & Liberty’s litigation team scored a unanimous victory for taxpayers before the Wisconsin Supreme Court. Local road costs, funded primarily through property taxes, are subject to levy limits and uniformity requirements. The Town of Buchanan attempted to circumvent these limits by imposing a transportation utility fee on taxpayers which amounted to an illegal tax. The Court agreed with WILL’s attorneys, repealing the transportation utility fee and creating a strong precedent to protect taxpayers across the state.
Georgia Leaders Sweeten Tax Deal with More Tax Cuts
State Policy Network’s Michael Lucci in National Review
Strong Revenue and Fiscal Federalism Are Driving a State-Based Tax Revolution
State Policy Network’s Michael Lucci in National Review
Nebraska Leads the Great Plains Tax Sweep
State Policy Network’s Michael Lucci and Platte Institute’s Jim Vokal in National Review
West Virginia Poised to Join Ranks of States Cutting Income Taxes
Cardinal Institute in National Review
Montana Cuts Spending and Lowers Taxes
Frontier Institute’s Kendall Cotton in National Review
If you are a state think tank that has a win you’d like included in the list, please email Camille Walsh at walsh@spn.org.
