U.S. States With Income Tax Rate Cuts Recently for 2025

In a notable change reflecting a shift in economic strategy from the Federal Reserve and others, a total of 13 states within the country have recently enacted personal income tax rate cuts for the year 2024. This adjustment is part of a broader initiative by states to evaluate and modify income tax cut frameworks in response to shifting economic conditions and new governmental objectives. Let’s delve into the details of the 14 states that have implemented in income tax rate cuts over the last year.

States that Cut Their Income Tax Rates?

In response to a prevailing trend observed among state governments, the choice to lower personal income taxes is gaining momentum. The primary objectives behind this decision include boosting economic activity, luring investments, and alleviating financial burdens on taxpayers. This tax reduction initiative is being carried out by states across different geographic areas, showcasing a wide spectrum of strategies in fiscal governance.

In a proactive move to stimulate economic growth, several states, including Arkansas, Connecticut, Georgia, Indiana, Iowa, and others, have reduced income taxes. This cascade of tax cuts promises residents the opportunity to have more money in their pockets, potentially boosting economic participation within their respective states.

Income Tax Rate Cut in Arkansas

On September 14 in the year 2023, the Arkansas tax cut bill was officially signed into law by Governor Sanders. This new legislation will reduce the state’s top income tax rate from 4.

In response to recent economic conditions, the tax rates in Arkansas have been revised. After a reduction in April 2023 from 4.9%, taxpayers in Arkansas earning more than $87,000 are set to benefit from this tax adjustment. Furthermore, individuals earning over $11,000 will see the corporate tax rate decrease from 5.

Income Tax Rate Cut in Connecticut

In a historic move, Connecticut made changes to its income tax rates on January 1, 2024. This marked the first reduction in income tax rates in nearly three decades and also stood out as the most significant cut in the state’s history. Specifically, the adjustments targeted the lower two tax brackets within the state’s progressive tax framework.

In the current tax structure, single filers see a reduced tax rate of 2% on their initial $10,000 of income and 4.5% on the following $40,000, down from the previous rates of 3% and 5%.

Income Tax Rate Cut in Georgia

In a significant move for Georgia’s tax system, the legislation known as HB 1437 was approved by Governor Brian Kemp on April 26, 2022. This new law marks a shift from the state’s previous tiered personal income tax structure to a single flat rate of 5.49%, set to take effect on the first day of 2024. The plan outlines a series of incremental decreases that will ultimately lower the flat rate to 4.

Income Tax Rate Cut in Indiana

Initiating changes to Indiana’s tax landscape, House Bill 1001 expedites the state’s planned reductions by decreasing the individual income tax rate to 3.05% in 2024, a move from the previous 3.15%. Furthermore, the legislation eliminates specific tax triggers linked to state revenue growth. Subsequently, the bill maps out a trajectory for further reductions to 3.0% in 2025, 2.

Income Tax Rate Cut in Iowa

In the ongoing drive for tax relief in Iowa, significant changes are on the horizon for taxpayers in 2024. A new flat tax plan is set to come into effect for corporate taxpayers, featuring rates of 5.5% on income under $100,000 and 7.1% on income surpassing that threshold. Meanwhile, individual taxpayers can anticipate a shift towards a flat income tax rate of 3%.

Income Tax Rate Cut in Mississippi

Incomes exceeding $10,000, the state has introduced a flat tax rate for individuals, which is set to decrease gradually in the upcoming years. By 2024, the rate will be lowered to 4.7% from the original 5% established in the preceding year. Subsequently, the rate is anticipated to reach 4.0% by 2026. Furthermore, the franchise tax is expected to be entirely phased out by 2028.

Income Tax Rate Cut in Missouri

During the summer of 2023, Governor Parson of Missouri approved Senate Bill 190 into law, altering the state’s tax policies. The bill rendered Social Security payments exempt from state income tax by removing the income threshold for deductibility. This decision also extended to federal Social Security payments, which will now remain untaxed within the state. Furthermore, starting in the fiscal year of 2024, Missouri’s top individual income tax rate was lowered to 4.

Income Tax Rate Cut in Montana

During 2021, significant amendments to Idaho’s tax regulations were introduced through Senate Bill 399, set to take effect by 2024. The reform merged multiple income tax brackets into two, reducing the highest marginal rate from 6.75% to 6.5%.

In the year 2023, as part of legislative changes, the tax rate was decreased to 5.9%. Furthermore, Montana is set to introduce reduced tax rates for capital gains, applying rates of 3% or 4.1%.

Income Tax Rate Cut in Nebraska

Efforts in Nebraska have been accelerated to implement scheduled cuts in individual and corporate tax rates, resulting in an earlier reduction of the highest marginal tax rate. Aiming for a uniform income tax rate of 3.99% for businesses by 2027, the state has fast-tracked adjustments. By the year 2024, the top marginal tax rate is set to drop from 7.25% to 5.84% for income surpassing $100,000.

In a parallel manner, the target for individual taxpayers is to attain a peak rate of 3.99% by the year 2027. Surpassing expectations, the rate of 5%.

Income Tax Rate Cut in New Hampshire

New legislation in New Hampshire, represented by S.B. 189, has effectively severed the state’s tax regulations from the federal business net interest limitation as outlined in IRC § 163(j). This change grants businesses the ability to deduct interest costs in full during the same year they are accrued. Furthermore, taxpayers are permitted to deduct any business interest expenses that were previously disallowed and carry them forward for up to three years.

In a significant move for fiscal policy, the latest state budget (H.B. 2) approved in June 2023 expedites the elimination of the tax on interest and dividends income, bringing the target year forward to 2025 instead of the previously planned 2027.

Income Tax Rate Cut in North Carolina

In the fiscal plan outlined in the legislative act 2023-134, the current individual income tax rate for the upcoming year 2024 is established at 4.5%, a slight decrease from the previous 4.75%.

Income Tax Rate Cut in Ohio

In the recent fiscal plan for Ohio, which was enacted in July 2023, a significant change was made to the state’s tax structure. Specifically, the merging of the highest two individual income tax rates into a new flat rate of 3.

Income Tax Rate Cut in South Carolina

Over the past few years, South Carolina has gradually decreased its personal income tax rates, starting at 7% in 2022 and reaching 6.5% in 2023. The state then lowered the top individual income tax rate to 6.4% in 2024. There are plans to continue reducing the tax by 0.

Benefits of State Income Tax Cut

In light of the upcoming income tax cuts set to bring advantages to residents and businesses in various states, there is a pressing need to address concerns about revenue impact and budget adjustments. Policymakers are tasked with skillfully managing these dilemmas to maintain the sustainability of tax reductions without risking the provision of crucial public services or the stability of finances.

In an effort to stimulate economic growth, Kansas made a bold move in 2012 by significantly reducing income tax rates by almost a third and nearly abolishing business taxes. The intention was to revitalize the economy; however, this decision led to the reduction of certain social services, which ultimately had to be reinstated due to unforeseen consequences.

The ongoing discussion among economists and policymakers over the impact of income tax cuts on economic growth and long-term prosperity continues to spark differing views. Advocates believe that reducing taxes can boost work, investment, and entrepreneurial activities, while opponents raise concerns about possible revenue deficits and increased income disparity.

Free Dedicated Tax Professional for Filing State Income Tax in 2025

In a noteworthy shift in state fiscal policy, 14 states have already reduced their income tax rates in 2024, marking a notable progression with wide-ranging impacts for residents, businesses, and policymakers. In the quest for tax relief, the states are setting sail on individual endeavors that will be under careful examination. This scrutiny provides important revelations on how taxation, economic progress, and public well-being intertwine within the United States.

At PriorTax, our team of experienced tax professionals offers complimentary assistance to individuals facing state tax concerns. You can connect with a dedicated tax professional will walk you through from start to finish, leveraging their expertise and successful history to address your tax matters effectively.

This entry was posted on Thursday, September 5th, 2024 at 8:00 am and is filed under Tax Deductions and Credits, Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.