Given the unprecedented revenue surpluses in states across the country, it’s no surprise that many of those states chose to use a portion of their surplus to reduce tax rates.
In recent years, thirteen states have reduced their corporate income tax rates since 2018, and several of those states reduced their rate more than once.
Given the unprecedented revenue surpluses in states across the country, it’s no surprise that many of those states chose to use a portion of their surplus to reduce tax rates. While the trend of reducing tax rates is not a new one, it’s certainly accelerated in recent years. Over the past five years, a record number of states have enacted corporate income tax reductions. Below is a summary of states which have enacted corporate rate cuts since 2018. This report only includes measures that were enacted since 2018, not rate changes that may have been triggered or planned to phase in due to legislation enacted prior to 2018.
Thirteen states have reduced their corporate income tax rates since 2018, and several of those states reduced their rate more than once. State lawmakers enacted 23 total bills during this period. When comparing partisan makeup, nine of these states were Republican trifectas, one state was a Democratic trifecta, and three states were under divided government. See the map and table below for a complete description of each income tax reduction since 2018.
Accelerates the previously planned corporate income tax cuts which reduce the top marginal rate from 5.7 percent to 5.3 percent (such that cuts that were to take effect in 2025 shall become effective in 2023.
Reduces the top marginal corporate income tax rate from 7.5 percent to 7.25 percent on January 1, 2023. The rate will continue to decrease an average of 0.33 percentage points per year until it reaches 5.84 percent on January 1, 2027.
Reduce the corporate net income tax rate from 9.99 percent to 8.99 percent on January 1, 2023. Each year thereafter the rate will decrease 0.5 percentage points until it reaches 4.99 percent at the beginning of 2031.
Reduces the higher of the state’s two marginal corporate income tax rates from 7.81 percent to 7.25 percent in 2023. The bill also expresses the intent to pass additional legislation reducing the rate to 7 percent for TY 2024 and to 6.84 percent for TY 2025, though these reductions are not guaranteed without future legislative action.
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