11 states will cut individual income taxes in 2023
From: The Center Square
Eleven states will reduce their individual income tax rates on Jan. 1.
Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire, New York, and North Carolina will cut the individual income tax rate on New Year’s Day, according to the Tax Foundation. Over the past two years, more than 20 states have cut individual income tax rates.
Three of these states – Arizona, Idaho, and Mississippi –will also move away from a graduated-rate income tax to a flat tax where all income is taxed at the same rate regardless of income level, the Tax Foundation reported.
Only one state, Massachusetts, is increasing its individual income tax, according to the Tax Foundation. The state will change from a flat to a graduated-rate tax of 9% on any household income over $1 million.
Two states, Hawaii and Illinois, expanded their tax credit programs, which reduce the final dollar amount on the tax bill rather than reducing taxable income, according to the Tax Foundation.
States with low or no personal income tax rates are among the fastest-growing populations in the country, according to data from the U.S. Census. Among those states are Florida, Idaho, and North Carolina.
Florida has no income tax, while both Idaho and North Carolina have a flat tax on income, according to data from the Tax Foundation.
Alabama, Delaware, Iowa, Rhode Island, and Nebraska enacted exemptions for a portion to all of retirement income or military pension, according to the Tax Foundation.
Hillsdale College Professor of Economics Gary Wolfram told The Center Square that states with lower income taxes often attract more businesses and economic activity to their economies.
“States with lower income taxes attract economic activity,” Wolfram said. “The latest census data on state population growth is evidence of the fact. This results in job opportunities and increases in property values that particularly benefit the median income earners.”
States like New York, Hawaii, California, and Oregon with high income taxes have shrinking populations, data from the U.S. Census shows. These states are also among the top ten states with the highest income tax with California having the highest tax rate in the country at 13.3%.