Eleven states imposed individual tax rate reductions on January 1. According to the Tax Foundation, a group that lobbies for lower taxes, 11 Republican majority states plan to reduce taxes for residents in some form this year. States are doing this in an attempt to remain competitive in a mobile work environment.
Which States Are Cutting Taxes?
The following states are various individual tax rate reductions: Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire, New York, and North Carolina.
State by State Breakdown
Arizona- Arizona has adopted a flat tax plan that eliminates its old graduated income tax scale. All taxpayers in the state will now pay a maximum rate of 2.5%.
Idaho- Idaho will reduce their individual income tax rate from 6% to 5.8%.
Indiana- The state’s flat individual income tax rate has been reduced to 3.15% from 3.25%. If specific conditions are met there are triggers in place where the rate could further reduce it to 2.9%.
Iowa- The state is beginning a phase down to a 3.9% flat tax this year. However, some residents will see the changes sooner due to this occurring over a four year time period.
Kentucky-The state individual income tax rate is reduced from 5% to 4.5%, however sales tax will now be applied to different services. A 6% excise tax will also be applied instead of the general sales tax.
Mississippi- Mississippi is converting to a flat tax system. Replacing the 4% tax on taxable income between $5k and $10k, a single rate 5% tax will go on income exceeding $10k.
Missouri- The state’s individual income tax will fall from 5.3% to 4.95%.
Nebraska- The state individual income tax will reduce 0.2% every year, starting with a reduction from 6.84% to 6.64% this year.
New Hampshire- The state is beginning to remove income tax on interest and dividends income. The rate will lower from 5% to 4%.
New York- The state is being lowered to better benefit middle class workers. The tax rate for people earning between $13,900 and $80,650 is now 5.5%. Individual taxpayers with incomes between $80,650 and $215,400 will pay a maximum 6% tax rate.
North Carolina- The flat tax rate in the state is dropping from 4.99% to 4.75%.
Is California Included?
No, California will not be changing their taxes. The only two changes in the state are regarding cannabis retailers as well as the lithium extraction tax.
If you have questions regarding the new tax changes, reach out to us today!
FOR MORE INFORMATION VISIT:
https://taxfoundation.org/2023-state-tax-changes/#California
