The Taxpayers’ Happy Thanksgiving
We all know there is nothing scarier than taxes, but with Halloween behind us, taxpayers have much to be thankful for this holiday season. ALEC’s recently released 2013 State Tax Cut Roundup highlights the 18 states that significantly cut taxes in the 2013 legislative session. Here are some of this year’s top picks that highlight how much reform minded legislators can save taxpayers.
North Carolina’s 2013 tax reform package is one of the most successful tax reform efforts in the last decade. Although it was contentious, the final plan is estimated to save taxpayers $500 in the first two years and more than $650 million per year by the 2017-2018 fiscal year. From the summary in the recent Tax Cut Roundup, here are the major provisions of the plan:
- Replaced 3-tiered personal income tax structure with a modified flat tax.
- Lowered the top marginal rate of the personal income tax (from 7.75 percent down to 5.8 percent in 2014, and then 5.75 percent in 2015)
- Reduced the personal income tax across all income brackets
- Lowered the corporate income tax rate (from 6.9 percent down to 6 percent in 2014, 5 percent in 2015, and the possibility of falling to 4 percent in 2016 and to 3 percent in 2017, depending on whether revenue growth targets are met)
- Eliminated the state’s death tax;
- Broadened the sales tax base
- Eliminated multiple gross receipts franchise taxes, privilege taxes, and preferential sales tax rates.
This plan is a victory for taxpayers, not only because it lowers the income tax, but it also accomplishes two distinct tax policy reforms that are difficult to come by, let alone, be passed together. The plan completely eliminated the state’s death tax and it flattened out the income tax by reducing the 3 income brackets to just one. This plan is definitely something taxpayers can be thankful for this Thanksgiving.
Indiana is another tax success story this year. State lawmakers were able to cut the personal income tax and completely eliminate the state’s death tax. The tax was set for phase-out, but this year’s tax reform package greatly accelerated its repeal. Without the death tax, smaller family businesses are able to grow and be passed on without a looming tax bill. This is good news for anyone who wants to see more economic growth in Indiana. Overall, Indiana taxpayers have some very good reasons to be thankful this year.
Taxpayers in Wisconsin will save an estimated $650 million over the next two years due to a tax reform package passed this year. Lawmakers worked to cut tax rates for every income bracket and to shrink Wisconsin’s five income tax brackets down to four.
While this plan is certainly a middle-class tax cut in every sense, there is an even broader victory here. By turning five income tax brackets into four, the plan effectively made income taxes in Wisconsin a little less complicated. It also helps to remove the tax penalty for increasing earnings and potentially contribute to economic growth.
While these are just three highlights from what happened across the states this year, it is clear that states are looking for ways to make their economies more completive. Lowering taxes is a great way to achieve this goal and increase economic growth. ALEC’s Rich States, Poor States shows that this is true by comparing state economic data going back more than 50 years. As more states realize this, there are many reasons to be thankful.