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Millions Of Earners, Businesses To See State Tax Cuts Beginning On Jan. 1


Millions Of Earners, Businesses To See State Tax Cuts Beginning On Jan. 1

Authored by John Haughey via The Epoch Times (emphasis ours),

With state legislatures entering their third sessions since the 2020 pandemic pumped trillions in federal recovery and stimulus assistance into state and local government coffers, tax reform across a range of levies is among front-burner priorities for lawmakers in 2023.

Taxpayers across at least 38 states will see significant changes in state taxes in 2023 with 11 states trimming their income tax levies beginning Jan. 1. (Justin Sullivan/Getty Images)

During 2022 sessions, Washington, D.C.-based Tax Foundation reports at least 38 states adopted “noteworthy tax changes” with most going into effect on Jan. 1, including trims in personal income tax rates in 11 states and flat income tax structures being implemented in three states, Arizona, Idaho, and Mississippi on New Year’s Day.

Here is a round-up of “noteworthy tax changes” that go into effect Jan. 1 provided by analysts at the Tax Foundation, Council On State Taxation, and Institute on Taxation and Economic Policy:

* ARIZONA: A flat personal income tax rate of 2.5 percent will replace Arizona’s tiered, or progressive, income tax structure that had a top rate of 4.5 percent.

* IDAHO: Under 2022’s House Bill 1, Idaho will move to a flat personal income tax rate of 5.8 percent, replacing a progressive tax structure with a top assessment rate of 6 percent, on Jan. 3.

* INDIANA: Under 2022’s HB 1002, Indiana’s flat personal  income tax rate will drop from 3.23 to 3.15 percent through 2024. Afterwards, the personal income tax rate will incrementally decline to 2.9 percent by 2029, depending on state revenues.

* IOWA: On Jan. 1, Iowa’s nine personal income tax rates will be consolidated into four, with the top declining from 8.53 to 6 percent. The state is set to implement a flat income tax rate of 3.9 percent in 2026.

Also beginning in 2023, Iowa will exempt retirement income, certain farm rental income, diapers, and menstrual products from taxation. The state will phase out its inheritance tax by 2025, with this levy also being incrementally slashed beginning in 2023.

On the other side of the ledger, Iowans will no longer be able to claim a state deduction on federal income and property taxes.

* KENTUCKY: Under 2022’s HB 8, Kentucky’s income taxes will go down, and some sales taxes will go up on Jan. 1.

The state’s flat personal income tax rate will dip from 5 to 4.5 percent in 2023 and to 4 percent in 2024. Depending on state revenues, state lawmakers plan to implement further incremental cuts until the personal income tax is eliminated.

The income tax cuts will be countered by new or increased sales taxes on a range of services, such as a 6 percent levy on limousine, car rental, ride-sharing, car-sharing, and taxicab services. A 1 percent transient room tax will now apply to campgrounds and RV parks.

Kentucky will also impose a new excise tax of 3 cents per kilowatt hour for electric vehicle power distributed in the state by an electric vehicle power dealer or by electric charging stations located on state property. 

* MISSISSIPPI: Under 2022’s HB 531, Mississippi will adopt a flat personal income tax beginning Jan. 1. The state’s 4 percent levy on income between $5,000 and $10,000 will be eliminated and a 5 percent tax on income above $10,000 imposed. 

Under the bill, the 5 percent flat rate will decrease to 4.7 percent in 2024, 4.4 percent in 2025, and 4  percent in 2026.

But hold everything: Republican Gov. Tate Reeves and House Speaker Philip Gunn (R-Clinton) will spearhead divergent efforts to eliminate the state’s personal income tax altogether in 2023.

* MISSOURI: Under 2022’s Senate Bill 3, Missouri’s top personal income tax rate will be reduced from 5.3 to 4.95 percent, and the amount of income exempt from income taxation will increase from $100 to $1,000. The measure calls for incremental reductions in the top income rate levy to 4.5 percent.

Also on Jan. 1, Missouri will become the last state to assess state and local sales taxes on remote or online transactions under a 2021 bill.

* NEBRASKA: Under 2021 and 2022 bills, Nebraska will reduce its top personal income tax rate from 6.84 to 6.64 percent, and in its top corporate tax rate from 7.5 to 7.25 percent. The state will lower its top corporate income tax rate to 5.84 percent by 2027. 

Also beginning in 2023, beneficiaries can deduct 60 percent of Social Security benefits, up from 40 percent in 2022, and exemptions from taxation for retirement and military pension incomes will be increased. 

Property owners will also get some breaks in 2023 under 2022’s Nebraska Property Tax Incentive Act, which sets aside $660.7 million for income tax credits that will offset portions of school district and community college property taxes.

* NEW HAMPSHIRE: Under 2022’s HB 2, New Hampshire will start phasing out its income tax on interest and dividends income, lowering the levy from 5 to 4 percent on Jan. 1. The rate will decline by 1 percent until the tax is no more by 2027.

Under 2022’s HB. 1221, the state’s corporate income tax, or ‘Business Profits Tax,’ will drip from 7.6 to 7.5 percent beginning Jan. 1.

* NEW YORK: Under 2022’s SB 8009, New York will accelerate reductions in the state’s personal income tax rated for “middle-income earners” first adopted in 2016. 

Beginning Jan. 1, the tax rate applied to income between $13,900 and $80,650 for single filers, and between $27,900 and $161,550 for joint filers, will be 5.5 percent, down from 5.85 percent. The tax rate on income between $80,650 and $215,400 for single filers, and between $161,500 and $323,200 for joint filers will decline from 6.25 percent to 6 percent. 

Also beginning Jan. 1, New York will resume assessing its gas tax. The state’s 16 cents per gallon motor fuel tax had been suspended since June 1, 2022.

* NORTH CAROLINA: Under 2021’s SB 105, North Carolina’s flat personal income tax rate will decline from 4.99 to 4.75 percent on Jan. 1. 

The rate is set to continue declining 3.99 percent by 2027, with North Carolina’s current 6.9 percent corporate income tax to disappear entirely by 2030.

Also beginning in 2023, the state’s franchise tax will be a simplified net worth levy instead of the three different franchise tax liability rates previously assessed.

* ALABAMA: Under 2022’s HB 162, Alabama will exempt the first $6,000 of retirement and military pension income for those 65 or older from income taxes beginning Jan. 1.

State lawmakers in 2022 also revised Alabama’s “business privilege tax,” reducing the minimum payment of $100 to $50 a year. 

* DELAWARE: Under 2022’s SB 188, Delaware will increase its exemption from taxation on retirement and military pension income from $2,000 to $12,500 for those 60 and older beginning Jan. 1.

* RHODE ISLAND: Under 2022’s HB 7123, Rhode Island will boost its exemption on taxation on retirement and military pension income from $15,000 to $20,000 beginning Jan. 1. 

* ILLINOIS: Under SB 157, Illinois’ Child Tax Credit will increase from 18 to 20 percent of the federal Earned Income Tax Credit (EITC) beginning Jan. 1.

On the other side of the ledger, the state’s gas tax inflation adjustment will be implemented on Jan. 1 following a six-month freeze. The state’s 42.3 cent tax on a gallon of gas will increase by 3.1 cents. Another inflation adjustment will be implemented in July.

* ARKANSAS: Under 2022’s HB 1002, reductions in personal and corporate income tax rates will be accelerated. Beginning Jan. 1, the top tax rate on personal income will dip from 5.5 to 4.9 percent, and the state’s corporate income tax rate will go down from 5.9 to 5.3 percent.

* PENNSYLVANIA: Under 2022’s HB 1342, Pennsylvania’s corporate income tax rate will be reduced from 9.99 percent to 8.99 percent on Jan. 1. The corporate tax rate will decline by a half-percent until it reaches 4.99 percent by 2031. 

* OKLAHOMA: Under 2022’s HB 3418 in May 2022, Oklahoma will become the first state to make permanent a 100 percent bonus depreciation allowance for investments in machinery and equipment beginning Jan. 1. 

The state will also require that local sales taxes be levied on retail sales of tangible personal property in 2023.

* VIRGINIA: Under several 2022 bills, Virginia will exempt groceries and essential hygiene products, including menstrual products, from the state’s 1.5 percent sales tax beginning Jan. 1.

Also, retired military pensioners 55 and older will be eligible to subtract up to $20,000 in military benefits from taxable income in 2023, up from $10,000. That exemption will increase to $30,000 in 2024 and $40,000 in 2025.

* KANSAS: Under 2022’s HB 2106, Kansas will begin phasing out its 6.5 percent sales tax on groceries to 4 percent on Jan. 1. The sales tax on groceries will decline to 2 percent in 2024 before disappearing in 2025. 

* COLORADO: Under 2022’s HB 22-1055, Colorado will exempt diapers and menstrual products from sales taxes.

Read the rest here…

Tyler Durden
Fri, 12/30/2022 – 20:35

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