April 18, 2023
What States are Passing Tax Cuts?
This year’s Tax Day takes place amid high inflation and growing fears of a recession. Many Americans are worried about the high cost of living and if economic conditions will get worse in the coming months.
To ease the financial burden on hardworking Americans, state policymakers are advancing tax reforms that allow people to keep more of their money. With this extra income in hand, Americans can more easily afford groceries, housing, electricity, and other needs.
What states are passing these tax cuts? Let’s dive in.
The Arkansas Governor and legislative leaders passed a $124 million tax cut on April 10. The Arkansas Policy Foundation applauded Arkansas lawmakers for recognizing the importance of reducing the top state income tax rate from 4.9% to 4.7%, and the corporate rate from 5.3% to 5.1%, retroactive to January 1, 2023.
The Kansas Legislature passed a $1.4 billion tax relief bill in mid-April. The Kansas Policy Institute’s Dave Trabert noted the largest piece of tax relief is on individual income tax ($881 million), followed by food sales tax ($228 million), property tax ($130 million), and corporate income tax ($115 million). Lawmakers said they will be able to override a potential veto by the governor.
The Kentucky Legislature passed a bill that lowers the personal income tax rate from 4.5% to 4% beginning Jan. 1, 2024.
Missouri is moving to cut their corporate tax rate in half. The Platte Institute explained the legislation would also exempt social security benefits from taxation, accelerate individual income tax rate cuts to 4.5% with immediate effect, and schedule further income tax rate reductions to 4.05% in future years.
Nebraska is on the verge of passing significant income tax reform. The Platte Institute noted: “the individual and corporate income taxes are both overhauled by the bill, with top rates slashed, the tax structure flattened, and the tax base trimmed. These changes would significantly enhance Nebraska’s competitiveness and impact nearly every Nebraskan either directly or indirectly. The reforms are so broad that even some non-Nebraskans would be directly impacted.”
North Dakota passed legislation that would scrap the state’s progressive tax structure, with its 2.9 percent top rate, and replace it with a flat income tax of 1.5 percent.
Lawmakers in the Ohio House introduced legislation to cut income taxes. As The Columbus Dispatch reports, the proposal would raise the amount Ohioans can earn before paying taxes to $26,050. Then, it would combine the two lower brackets and set that rate at 2.75%. The Buckeye Institute has been encouraging policymakers to enact tax cuts and applauded lawmakers for “a strong effort to improve Ohio’s overall tax climate by reducing and flattening the state income tax,”
The West Virginia Governor signed a bill to cut the top income-tax rate from 6.5 percent to 5.12 percent. Garrett Ballengee, Executive Director of the Cardinal Institute, noted “This historic personal income tax cut will ensure working West Virginians keep more of their own money to spend, save, or invest. When coupled with other recent—and historic—reforms like the Hope Scholarship program, these tax cuts make West Virginia a much more attractive place to the millions of workers and families who relocate every year.”
Wisconsin lawmakers are debating changes to the state’s tax structure. The Badger Institute, Institute for Reforming Government, and Wisconsin Institute for Law & Liberty—three policy organizations in Wisconsin—are encouraging lawmakers to adopt a flat tax. The Badger Institute’s President Mike Nichols noted: “Moving toward a flat tax with a low rate will benefit everyone—small business owners who create jobs, individuals looking to earn more or keep more, folks who aspire to start businesses themselves and would like to do it in Wisconsin.”
If you work at a state think tank and have a reform you’d like included in this list, please send a note to Camille Walsh at walsh@spn.org.
Strong Revenue and Fiscal Federalism Are Driving a State-Based Tax Revolution
State Policy Network’s Michael Lucci in National Review
