A number of states are slashing taxes this year, putting more money into some Americans’ pockets as they grapple with a cost-of-living crisis triggered by stubbornly high inflation.
At least 11 states, a majority led by Republicans, have reduced taxes for residents in some form this year, according to the nonpartisan Tax Foundation, a group that lobbies for lower taxes.
“We are seeing the culmination of two years of substantial tax cutting across the country, in response to historically high revenues and a desire for states to remain competitive in a much more mobile environment,” said Jared Walczak, the vice president of state projects at the Tax Foundation.
Here is a closer look at where state taxes are being reduced.
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Arizona has adopted a flat tax plan that eliminates its old graduated income tax scale, which began at 2.59% and had a maximum tax of 4.5% for income over $159,000 a year for individuals. All taxpayers in the state will now pay a maximum rate of 2.5%.
“This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity,” former Arizona Gov. Doug Ducey, a Republican, said in a statement in September.
In total, the plan will save taxpayers an estimated $1.9 billion next year, although critics say the plan largely benefits wealthy Arizonans.
The top individual income tax rate in Arkansas was cut to 4.9% from the previous high of 5.9%.
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The change, which is retroactive to 2022, accelerates rate reductions that originally were scheduled to begin in the 2025 tax year.
Idaho adopted a flat individual income tax rate of 5.8% that will go into effect this year.
That compares to the previous maximum rate of 6%.
The state’s flat individual income tax rate has been reduced to 3.15% from 3.25%, effective for 2023 and 2024. There are certain triggers in place that could further reduce the rate to 2.9% if specified conditions are met.
Iowa will start phasing in a 3.9% flat tax this year, although the change takes effect over four years, so some residents will see benefits sooner than others.
The $1.9 billion tax cut – signed into law last year by Republican Gov. Kim Reynolds – also eliminates taxes on retirement income and lowers taxes for corporations.
“With this bill, Iowa is now the fourth lowest for individual income tax rates in the nation,” Reynolds said in a statement. “There’s never been a better time in Iowa for bold, sustainable tax reform.”
Kansans looking to save some money on groceries this year are in luck: The state implemented the first phase of a plan to eliminate taxes on food. As of Jan. 1, the state’s food state was reduced to 4% instead of 6.5%.
The tax will continue to decline until it hits zero in 2025.
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Beginning in January, Kentucky reduced the individual income tax rate while broadening its sales tax base. The individual income tax rate fell to 4.5% from 5%, but sales tax will now be applied to a number of new services including car rental, ride-sharing and taxi services. On top of that, a 6% excise tax will be applied in lieu of the general sales tax.
Republican Gov. Mike Parson signed into law last year a projected $760 million tax cut, which he lauded as the “largest tax cut in the state’s history.”
Under the new tax law, Missouri’s top individual income tax rate fell to 4.95% in January from the previous rate of 5.3%. (The tax rate was already slated to drop to 5.2% this year).
On top of that, the first $1,000 of income is now exempt from taxation.
Mississippi is converting to a flat tax system, effective in January. A 4% tax on taxable income between $5,000 and $10,000 has been eliminated; in its place is a single rate of 5% on income exceeding $10,000.
The tax rate will drop to 4.7% in 2024, 4.4% in 2025 and 4% in 2026.
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New York accelerated income tax rate reductions for middle-class families, with rate reductions originally planned for 2025 now scheduled to take effect this year.
The tax rate on income between $13,900 and $80,650 for single filers will drop to 5.5%. For individual filers earning between $80,650 and $215,400, the tax rate is dropping to 6%>
That marks a decline from tax year 2022 when the respective rates on those levels of income were at 5.85% and 6.25%.
The flat tax rate in North Carolina is dropping to 4.75% in 2023, down from the previous rate of 4.99%.