14 States Approve Income Tax Cuts

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Posted by Christian Matos on Wednesday, January 12th, 2022, 2:16 PM PERMALINK

The new year came with much to celebrate for Americans who live in the seven states where income tax cuts took effect on January 1. Thanks to many states in the union underestimating how much revenue they would bring in during year two of the pandemic, several states had the opportunity to enact meaningful income tax reform last year.

Fourteen states enacted income tax relief in 2021: Arizona, Arkansas, Georgia, Idaho, Iowa, Louisiana, Montana, Missouri, Nebraska, New Hampshire, North Carolina, Ohio, Oklahoma, and Wisconsin. Of these fourteen state income tax cuts, half of them took effect on the first day of 2022. Taxpayers in the following states woke up to reduce income tax rates on new year’s day:  Montana, Missouri, Louisiana, Nebraska, North Carolina, Oklahoma, and New Hampshire. In Georgia, an increase in the standard deduction that was signed into law by Governor Brian Kemp also took effect on January 1. 

Arkansas's income tax cuts will begin to take effect at the start of the new year; however, it will not fully go into effect until 2025 and is dependent on how Arkansas handles its finances. The Arizona state legislature also passed a bill into law that would provide significant income tax relief, but an Arizona judge delayed the implementation of the tax cuts in a recent ruling stating Arizona residents have the right to vote on a referendum to either affirm or repeal the income tax cuts. Idaho and Iowa lawmakers opted for a retroactive income tax cuts that made them effective going back to January 1, 2021. Wisconsin also had the tax cuts go into effect in 2021, beginning on July 8, 2021.

Many of the state income tax cuts enacted in 2021 were significant. By 2025, when all the provisions go into effect,  residents of Arkansas will see $500 million dollars in income tax relief. Residents in Georgia will see their deductions rise from $4,600 to $5,400 if they are filing individually and if they are filling jointly the deduction will rise from $6,000 to $7,100. In addition to the income tax rate reduction, Idaho will be issuing $220 million in total rebates to its citizens. Montana's top marginal rate will drop from 6.9% to 6.75%. North Carolinians just had their flat income tax cut from 5.25% to 4.99%. The rate will drop again to 3.99% in 2027, a rather substantial tax reduction that once it is fully implemented will help everyday Americans bring home more money.

The Sooner state will cut all residents’ taxes by 0.25% the state’s top tax rate will drop from 5% to 4.75% and the governor has plans to completely phase out the state’s corporate income tax, which currently sits at 6%. Such a plan will help individuals and will allow businesses to retain more money as they continue to reopen and recover from the financial hardships of the pandemic. Nebraska lawmakers also gave businesses that operate within its borders tax relief as the corporate income tax will drop from 7.81% to 7.25%. People in New Hampshire will see the investment income tax completely phased out and businesses will also see a tax break as well. Residents in Louisiana will see a $600,000 in total income tax deductions. Ohioans will see a 3% reduction in income tax. Wisconsin residents will have their second highest tax bracket drop from 6.27% to 5.3%. Residents in Missouri will see their tax rate reduced from 5.3% to 4.8%.

These state tax cuts will benefit American businesses and taxpayers. What’s more, these tax cuts will make these 14 states more attractive places to live and do business, which is especially important at a time like this, when Americans are voting with their feet and moving in droves from high-tax states to lower-taxed states.

Photo Credit: Income-tax-491626 1920 (1).jpg by stevepb is licensed under CC BY-SA 4.0

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