State Policy Network
Checking in on legislative sessions: What states passed tax relief to help American families?

American families are struggling. The highest inflation in 40 years has raised the costs of gas, groceries, rent, electricity, and other basic goods. Three out of four Americans have made cutbacks in the last three months due to personal economic concerns.

And these high costs have put most Americans in a sour mood. According to a new Wall Street Journal-NORC poll, 83 percent of Americans describe the state of the economy as poor or not so good. Six in 10 said they were pessimistic about the ability of most Americans to achieve the American Dream.

To get the economy back on track, many people look to the federal government and politicians in Washington for solutions. While reducing inflation will ultimately lie with the federal government, there are steps states can take to help Americans cope with the increased cost of living. One way to help Americans in need is through tax cuts.

In the 2022 state legislative sessions, policymakers adopted reforms that lower taxes so Americans can keep more of their money—easing the pain of historic inflation. A Network of state policy organizations, committed to improving the livelihoods of the people in their communities, played a key role in helping policymakers adopt these reforms.

ARIZONA

The Goldwater Institute defeated Proposition 208—an unconstitutional power grab that would have massively increased income taxes, led to staggering job loss, and turned Arizona from one of the lowest-taxed states in the country to one of the highest.

Goldwater also helped strike down an Arizona county’s illegal transportation excise tax. The Institute represented a group of taxpayers and businessowners in challenging the tax, which, among other things, only applied to purchases of less than $10,000, with the consequence that the tax burden fell primarily on lower- and middle-income taxpayers, as opposed to the wealthy.

GEORGIA

Georgia passed a bill that will gradually drop the state income tax rate from 5.75 percent to 4.99 percent by 2029. The Georgia Public Policy Foundation noted lawmakers have taken another key step toward ensuring our state government does not overly burden Georgians through a tax on work, savings, and investment. 

IDAHO

Idaho passed a $600 million income tax cut—the largest in the state’s history.

INDIANA

The Idaho Governor signed legislation that reduces Indiana’s income tax rate from 3.23 percent to 2.9 percent over seven years.

IOWA

Iowa adopted a significant tax reform package that lowers the individual income tax from 8.53 percent to a flat rate of 3.9 percent; eliminates the tax on retirement income; and lowers the corporate tax rate. The Iowans for Tax Relief Foundation helped usher in this historic tax reform that will help taxpayers and attract more people and businesses to The Hawkeye State. Iowans for Tax Relief is a member of State Policy Network’s Economic Recovery Working Group.

KANSAS

Kansas achieved bipartisan tax reform this session when the Kansas Governor signed into law a bill increasing standard deductions, freezing property taxes for elderly citizens, and making changes to prevent double taxation of resident owners of multistate pass-through entities. The Kansas Policy Institute has been a driver of tax reform in Kansas for years, and this win follows another major tax reform victory in 2021. KPI has been a core member of the economic recovery working group, even taking other groups under its wing to teach about the reforms it helped achieve in 2021.

Kansas Policy Institute also highlighted how residents and businesses in 21 Kansas counties will pay less in property tax this year, thanks to the transparency aspect of last year’s Truth in Taxation Act.

KENTUCKY

The Kentucky Legislature overrode the Kentucky Governor’s veto of legislation that reduces the state’s flat income-tax rate to 4.5 percent from 5 percent in 2023.

MISSISSIPPI

Thanks to Empower Mississippi and the Mississippi Public Policy Foundation, Mississippi lawmakers passed the largest tax cut in the state’s history. The legislation will cut the state personal income tax rate over four years. It will help hardworking families cope with the rising cost of living and also make Mississippi a more attractive state to work and set up a business. Empower Mississippi President Russ Latino noted: “Creating a simple, lower flat tax will make us more competitive across the region and put money back into the pockets of the people who earned it.”

NEBRASKA

The Nebraska Legislature and governor passed legislation that reduces personal and corporate income tax rates. The Platte Institute noted the bill will likely improve Nebraska’s overall tax competitiveness by a certain amount.

PENNSYLVANIA

The Commonwealth Foundation commended the Pennsylvania Senate’s passage of two bills that would reduce Pennsylvania’s corporate net income (CNI) tax. With the second-highest CNI tax rate in the nation at 9.99 percent, Pennsylvania’s business tax climate stifles opportunity and job creation.

TENNESSEE

The TennesseeGovernor signed a bill that prevented a looming “innovation tax” in the state. The tax would have prohibited a business from deducting all research and development expenses in the year incurred. This is one of the ideas put forth by SPN on how states could use their American Rescue Plan Act (ARPA) funds in a fiscally responsible way. Beacon was the driver of this reform in Tennessee and continues to work on several other proposals in the state, including a conservative budget.

In addition to halting the innovation tax, Tennessee also chipped away at the professional privilege tax. As the Beacon Center explained, Tennessee’s Professional Privilege Tax is a $400 annual tax for the “privilege” of working in a handful of fields and the last tax preventing Tennessee from being a truly income tax-free state.

WASHINGTON

In a victory for tax fairness in Washington, the Douglas County Superior Court Judge struck down the capital gains income tax passed by the Washington State Legislature in 2021. The ruling was a resounding victory for the Freedom Foundation and Washington Policy Center, which both implemented campaigns to halt the tax.WPC has been actively involved for the past decade trying to educate policymakers that a capital gains tax is an unconstitutional income tax in Washington state.

In addition, Washington policymakers delayed the implementation of the unpopular long-term care payroll tax until July 2023. The Washington Policy Center noted the legislation implements WPC’s recommendation that workers not be forced to pay a heavy new tax of 58 cents on every $100 earned for a harmful and inadequate government program.

Further, thanks to the efforts of the Washington Policy Center, officials in 28 local governments, 16 cities, and 12 counties in Washington passed a local income tax ban.

UTAH

Utah passed a law that creates a property tax deferment program for older Utahns across the state—allowing homeowners, over the age of 75, with an income of less than $65,000 a year, to apply to forgo the payment of property tax until the sale of their home or a transfer of ownership takes place. The Libertas Institute noted they are excited for the establishment of this program and applaud lawmakers for taking the necessary actions to ensure this population does not face housing insecurity. 

Additional Reading:

Did Iowa Spark A Tax Reform Movement?

Iowans for Tax Relief Foundation

More Than a Tax Cut: Mississippi Shifts Away from Big Government

National Review

Mississippi Needs to Nix Income Tax

Real Clear Policy

Categories: Policy Issues
Organization: State Policy Network