Several states cut income taxes to promote post-pandemic economic growth
Arizona is the latest state to seek to reduce its income tax rate, citing a budget surplus despite the economic devastation caused by the coronavirus pandemic.
Governor Doug Ducey last week signed a budget that includes a transition from the state’s current progressive tax structure to a 2.5% flat tax rate, which would allow an estimated $ 340 reduction in the average payment. state income tax.
Ducey said Arizona is able to make tax cuts because the state’s economy is “booming” and has generated a budget surplus.
Arizona isn’t the only state looking to cut taxes as the US economy as a whole recovers from a recession.
“Many states that are in a strong fiscal position despite the pandemic see tax reform as an opportunity to make a down payment on continued long-term economic growth and make a name for itself as a taxpayer-friendly state, especially given the increased remoteness of work flexibility offered by many employers, ”Katherine Loughead, senior policy analyst at the Tax Foundation, said in a statement to FOX Business.
Overall, nine states have lowered their personal income tax rates, Lughead said.
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Ohio Governor Mike DeWine recently signed a state budget for 2022-2023 that includes 3% tax cuts worth an estimated $ 1.6 billion. About 125,000 people will have no state income tax liability as the lower income bracket threshold increases. The top tax bracket has also been removed, so richer residents will pay a lower rate.
The budget calls for a billion dollar investment in the state to accelerate economic growth.
Ohio Lt. Gov. Jon Husted told a press conference earlier this month the budget was balanced and officials didn’t have to dip into his rainy day fund .
“Every person will receive tax relief in the state of Ohio through this budget,” Husted said.
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Idaho Gov. Brad Little signed off what his office described as “the biggest tax cut in state history” using the state’s record budget surplus.
The budget reduces the number of income tax brackets from seven to five and lowers the maximum rate to 6.5% from 6.925%. The state has also pledged to provide hundreds of millions of dollars in rebates to people who paid taxes in the state in 2019.
Oklahoma Governor Kevin Stitt approved a tax cut for state residents in late May, which will cut personal income tax rates by 0.25%. The state’s top tax rate will drop from 5% to 4.75%.
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Iowa, Louisiana, Missouri, Montana and New Hampshire are the other states that have cut personal income taxes, Loughead said. Five have also reduced their corporate tax rates.
Lughead added that North Carolina and Wisconsin are considering reforms and tax cuts.