Several states are wrapping up their legislative sessions for the year. In 2024, a handful of states continued to cut and reform taxes—a trend that ignited after the pandemic in 2020.
In fact, 26 states enacted individual income tax rate reductions from 2021 to 2023. This year, several more states followed, and many more made changes to their tax codes that will help American families cope with the high cost of living.
Below is a snapshot of the states that advanced tax reforms in this year’s legislative sessions.
Property taxes are putting a significant financial burden on Alabama residents. That’s why the Alabama Policy Institute, in its 2024 Blueprint for Alabama report, encouraged lawmakers to implement an assessment cap to make property tax increases more predictable and lessen the tax burden of Alabama’s homeowners. State leaders took API’s advice, capping annual property tax assessments and taxes at no more than seven percent per year.
Colorado lawmakers passed a bill that restructures how Coloradoans receive their Taxpayer Bill of Rights (TABOR) refunds, or an amendment that gives taxpayers a rebate when the Legislature runs a surplus. The legislation would replace the rebate checks with income tax reductions. The size of the tax cuts would depend on the TABOR surplus each year, but will effectively cut the income tax rate from 4.4% to 4.25% when the surplus is greater than $1.5 billion, as the Independence Institute explains.
Independence Institute noted that while using TABOR surplus to buy down the income tax rate is a good step in the right direction towards eliminating the income tax, lawmakers also passed several other bills this session that will draw from the TABOR surplus.
Georgia lawmakers passed a bill that accelerates the state’s planned cut in the personal income tax rate this year to 5.39 percent, from the original 5.49 percent. The Peach State also cut the corporate income tax to 5.39 percent and advanced a policy that reduces the state’s dependent exemption, which means a traditional family of four won’t pay tax on its first $32,000 of earnings. The Georgia Public Policy Foundation applauded lawmakers for making these changes, but noted Georgia should seize the opportunity for deeper tax cuts.
Read the Georgia Public Policy Foundation’s Kyle Wingfield’s related op-ed at National Review.
On March 29, 2024, Idaho Governor Brad Little signed a bill that moves Idaho’s income tax from 5.8% to 5.695%. The Mountain States Policy Center noted this legislation will continue the state’s ongoing income tax rate reduction efforts to help improve regional economic competitiveness.
Iowa Governor Kim Reynolds signed legislation on May 1, 2024, that provides significant tax relief for residents of the Hawkeye State. The new law moves Iowa from a 5.7% top income tax rate in 2024 to a flat rate of 3.8 percent starting in 2025—saving taxpayers more than $1 billion over the next six years. In addition, Iowa also passed measures that ensure this reform stays on the books in future years. First, lawmakers passed a proposed constitutional amendment that requires a 2/3 majority of the Legislature to raise the income tax. Second, in another constitutional amendment, the flat tax would be protected—ensuring Iowa does not move back to a progressive tax structure. If both measures pass in Iowa’s 2025 legislative session, they will be sent to the ballot in November 2026 where voters will decide their fate. Iowans for Tax Relief Foundation played a significant role in advancing these reforms.
This year Hawaii enacted the biggest income tax cut in state history. On June 3, 2024, Hawaii Governor Josh Green signed a tax package into law that lowers the state income tax burden for average families by almost 70% by 2031—saving taxpayers roughly $5 billion during that period. The Grassroot Institute of Hawaii played a significant role in helping lawmakers pass this legislation—making a strong case for tax relief and explaining how lowering rates would help Hawaii families and the state overall.
Read the Grassroot Institute of Hawaii’s Keli’i Akina’s related op-ed in National Review.
In line with the Beacon Center‘s recommendation, Tennessee recently reformed its franchise tax—making the state more attractive for businesses and saving Tennesseans $400 million a year. The franchise tax is essentially a tax for doing business in a state. Sixteen states have a franchise tax.
On March 14, Utah Governor Spencer Cox signed a law that lowers Utah’s income tax rate from 4.65% to 4.55%.
Additional Reading:
The Income Tax: Explained
State Policy Network
If you are a state think tank who has a tax win that should be added to this list, please email Camille Walsh, SPN’s Media Relations Manager, at walsh@spn.org.
