Starting January 1, nine states implemented income tax cuts, hoping to increase spending and attract new residents. The move was met with mixed reactions, with some praising its economic potential while others worry about the impact on public services.
Nine states across the country have lowered their income tax rate as of January 1, in a move that, at least on paper, should allow residents to have more money to spend on goods and services. Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, and West Virginia all implemented income tax cuts as of the new year, two states embracing flat rates, according to the Washington-based think tank Tax Foundation.
Another state, South Carolina, has made a temporary income tax reduction permanent as of the same date. Newsweek contacted the Tax Foundation for comment by email on Friday. Income tax cuts are expected to be popular among benefiting residents and could potentially make the states which have implemented them more appealing to Americans looking to move to cheaper places—a strategy that has served Texas and Florida (which have no state individual income tax) well for decades. Many of the states that have implemented cuts on January 1 have done so as part of long-term plans to reduce the tax burden on their residents, backed by sufficient revenues in the past few years. But Democrats in some of these states—many of which are controlled by the GOP—have expressed concerns over the impact these cuts could have on publicly-funded services. Indiana, which already had a flat individual income tax rate, lowered from 3.05 percent in 2024 to 3 percent as of January 1 under its biennial budget bill. The cut is part of the state's goal to lower its flat individual income tax rate to 2.9 percent by January 1, 2027. In Iowa, the individual income tax rate has gone from a graduated-rate tax of 5.7 percent last year to a flat 3.8 percent as of the beginning of the year. As in Indiana's case, the change is also part of a multiyear plan to curb fiscal expenses for its residents.Louisiana has lowered its income tax rate from 4.25 percent to 3 percent under HB2; Mississippi has reduced its flat individual income tax from
INCOME TAX TAX CUTS STATE BUDGETS ECONOMY MOVING
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