Dive Brief:
- Businesses and individuals will see income tax cuts across 17 states this year, with some of those changes already in effect since Jan. 1 and others set to go live July 1, which is the start of the fiscal year in many states, according to the non-profit Tax Foundation, a Washington, D.C.-based think tank.
- Companies in six states — Arkansas, Iowa, Kansas, Nebraska, New Jersey and Pennsylvania — will enjoy lower corporate income tax bills while 14 states, many in the South, will see individual income tax rate reductions going into effect this year.
- The changes come amid a flurry of tax changes in 34 states, according to the foundation, which has a stated mission of fostering economic growth through tax policies. “The past several years have seen a wave of significant tax reforms, including rate reductions and tax cuts, as states emerged from the pandemic with revenue surpluses and stared down inflation,” according to a Tax Foundation blog post by Manish Bhatt and Benjamin Jaros.
Dive Insight:
The decline in business tax rates vary from state to state.
Of the half dozen state’s trimming their corporate income tax rates, Arkansas’s will drop to the lowest level, with top marginal rates of the state’s corporate income tax falling to 4.8% this year from 5.3% last year, according to the Tax Foundation. In contrast New Jersey’s rates will fall to 9%, but from a higher level of 11.5%. Meanwhile, the business rates in Kansas will go to 6.5% from 7%, Nebraska’s rates will change to 5.84% from 7.25% and Pennsylvania’s to 8.49% from 8.99%.
Other states have taken different measures to ease the tax pressures on businesses. Florida reduced its tax rate on business rent, Ohio increased its Commercial Activity Tax gross receipts threshold and Texas is doubling the so-called “no tax due” threshold for the state’s franchise tax.
The states where residents will enjoy income tax rate reductions for individuals are: Arkansas, Connecticut, Georgia, Indiana, Iowa, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Hampshire (interest and dividends income only), North Carolina, Ohio and South Carolina.
Not all state taxes are falling. Michigan residents will see the top marginal individual income tax rate inch up to 4.25% from 4.05%.
