Three quarters of the way through the calendar and with most statehouses finished for the year, it’s clear that 2023 will mark the third year of significant state income tax relief.
So far this year, legislation cutting personal income tax rates has been enacted in Arkansas, Kentucky, Nebraska, North Dakota, Ohio, Utah, and West Virginia. The rate changes enacted in those states are as follows:
- Arkansas: Top marginal income tax rate was cut from 4.7% to 4.4%.
- Kentucky: Reduced state’s flat income tax from 4.5% to 4%.
- Nebraska: Reduced top rate from 6.84% to 6.64%.
- North Dakota: Moved from a five-bracket system to a flatter income tax code with a top rate of 2.5% and a bottom rate of 1.95%.
- Ohio: Reduced top marginal rate from 3.99% to 3.75%.
- Utah: The state’s flat income tax rate was reduced from 4.85% to 4.65%.
- West Virginia: Top income rate was reduced from 6.5% to 5.12%. The lowest rate fell from 3% to 2.36%.
Another state income tax cut is now poised to become law. The North Carolina House and Senate passed a new two-year budget agreement last week, one that would provide another round of income tax relief in a state that kicked off the income tax cutting trend in the states.
“A decade after North Carolina kicked off the flat tax revolution that has since swept the country, North Carolina lawmakers continue to lead by example, demonstrating for all what pro-growth tax reform looks like,” said Grover Norquist, president of Americans for Tax Reform. “10 years ago North Carolina was home to the least competitive personal and corporate income tax rates in its region. Now the state has one of the lowest flat income taxes and is on track to be the third state with no corporate income tax. It’s amazing how much has changed since Bev Perdue was raising income taxes, sales taxes, excise taxes, and other taxes only 14 years ago.”
Republicans in the North Carolina General Assembly have the supermajorities needed to override a gubernatorial veto, which they did six times in August alone. Governor Roy Cooper (D), however, has announced he’ll let this new budget become law without his signature.
“Arizona lawmakers, who currently hold that title with their 2.5% rate, were already looking to enact further rate reduction,” Norquist added. “This new budget agreement in North Carolina provides evidence that this heightened level of state tax competition shows no signs of abating. If Governor Glenn Youngkin is able to win control of his state senate this November, Virginia will be able to get in on the income tax cutting action and ensure their tax code does not continue to fall behind the like of North Carolina, Tennessee, Georgia, and West Virginia.”