This news is never nice and no one likes it, we know, but it must be reported: The next increase in federal income tax rates, scheduled for the end of 2025, is gaining relevance in the media and has become a central issue in the 2024 electoral campaign.
Although the future of these rates will depend on the outcome of the election (whether Biden wins or Trump returns), in at least 10 states, millions of Americans can look forward to a state income tax reduction this year, thanks to legislation approved in state capitals during the spring.
Tax Cuts in Various States: What Are These?
Between January and May, lawmakers in Colorado, Georgia, Idaho, Indiana, Utah and West Virginia implemented income tax cuts, making them retroactive to the start of 2024.
In June, Hawaii, Kansas, Arkansas, and South Carolina joined this action, thus completing a total of 10 states that have approved income tax reductions in the first half of 2024.
The South Carolina Case: You’ve Got to Read This
The latest tax cut comes from South Carolina. The new state budget, approved this week, has doubled the tax relief originally planned. The top income tax rate, which was 6.4%, was due to be reduced to 6.3% under the 2022 tax reform law. However, with the new budget, this rate will be reduced to 6.2% in 2024, ahead of the planned reduction.
South Carolina Senator Josh Kimbrell (R) told WYFF News 4: “This is a conservative budget. For the first time at the state level, we are funding nursing homes for veterans, supporting law enforcement, raising wages of teachers, reduced taxes and basic government services, and invested half a billion dollars in infrastructure, all without raising taxes or borrowing.
Economic Impact of the New Budget: More Taxes?
According to the Associated Press, the income tax cut will cost the state approximately $99.5 million annually. Put another way, this new budget will allow South Carolinians to retain a greater portion of their income, saving households that much this year alone.
North Carolina Tax Measures: Finally, Good News!
As South Carolina joins states that have implemented tax relief in 2024, North Carolina took steps last week to bolster an existing protection for taxpayers, offering greater certainty going forward.
On June 20, the North Carolina Senate proposed a constitutional amendment that, if passed, would reduce the state’s income tax limit from 7% to 5%.
The current 7% limit in North Carolina could allow for a nearly 55% increase in the personal income tax, which is currently 4.5%. With this tax expected to drop to 3.99% in the coming years, and potentially 2.49% if certain income criteria are met, the 7% cap offers less and less protection over time. If the amendment presented on June 20 is approved by both chambers of the General Assembly, it would need a favorable vote of citizens in November to become law.
Changes in Tax Collections in Kansas
In Kansas, a tax cut was passed on June 18 that will change the three-bracket system with a top rate of 5.7% to a two-bracket system with a top rate of 5.58%.
Kansas House Speaker Dan Hawkins (R) commented: “After two years of hard work by our tax committees and several vetoes by the governor, long-awaited tax relief for Kansans is finally here.” . A day after these cuts were approved in Kansas, Arkansas legislators took similar action.
Arkansas and More Tax Cuts: The News You Didn’t Expect, But It Happened!
Arkansas Governor Sarah Huckabee Sanders is the only governor in the country to have signed two income tax cuts in 2023. Thanks to legislation passed on June 19, Governor Sanders and Arkansas lawmakers are following that 2023 relief with further income tax rate reductions. Under the plan enacted this month in Little Rock, the state’s top income tax rate will drop from 4.4% to 3.9%, while the corporate rate will drop from 4.8% to 4.3%.