With a little more than two months left in 2023, most state legislatures have adjourned for the year and will not be back in regular session until 2024. In September, Arkansas and North Carolina lawmakers passed what look to be the final state income tax cuts of 2023, which marks the third straight year of significant income tax cutting activity in the states.
Half of the states passed income tax cuts over the last three years. While personal income tax rate reduction has been one of the most dominant policy trends in the states, there has also been noteworthy corporate income tax cutting activity in recent years, which has continued in 2023.
State corporate tax rates have been cut this year by lawmakers in Arkansas, Nebraska, and Utah:
- Arkansas: The corporate income tax rate was reduced from 5.3% to 5.1% in 2023.
- Nebraska: The corporate income tax rate was reduced from 7.5% to 7.25% in 2023.
- Utah: The corporate income tax rate was reduced from 4.85% to 4.65% in 2023.
Aside from those corporate rate cuts, significant business tax relief was also enacted in Tennessee this year. Furthermore, Ohio reduced its commercial activities tax on gross revenue by eliminating the tax for any business with less than $6 million in receipts by 2025. That might not be the end of corporate tax relief in 2023, as Democrats in Pennsylvania are now saying they would like to pass a bill that would accelerate the corporate tax reduction that was signed into law last year by then-Governor Tom Wolf (D), which is phasing Pennsylvania’s corporate income tax down from 9.99% to 4.99% by 2031.
Governor Josh Shapiro (Pa.-D) has already come out in favor speeding up the corporate rate phasedown, saying he would like to complete it five years ahead of the current schedule. More recently that support has been echoed by state legislators.
After the failure of Governor Doug Burgum’s proposed income tax cut this week, it looks like the personal income tax cutting activity in the states is done for the year. But it’s still too early to make that call when it comes to corporate tax relief, now a much more bipartisan phenomenon, which we could see more of before the end of 2023.