“Overall, states with lower taxes and sound tax structures experienced stronger inbound migration than states with higher taxes and more burdensome structures,” Loughead added. In her analysis of IRS migration data from 2019 to 2020, the Tax Foundation’s Katherine Loughead noted that tax rates and other cost-of-living factors “may not be the primary reason for an interstate move, but they are often one of several factors people consider when deciding whether-and where-to move.” Interstate migration data suggests income tax rate reduction helps states become more attractive to new residents. “All three of those states have no income tax, and therefore all three of those states have a competitive advantage when we are recruiting for both businesses and individual talent.” “You don’t have to be a geography expert to look at a map and recognize that we have Texas to our west, Florida to our east and Tennessee to the north,” Governor Reeves said to business leaders at an October event hosted by the Mississippi Chamber of Commerce. Governor Tate Reeves (R) recently reiterated his ultimate goal is to completely repeal Mississippi’s income tax. In Mississippi, the 4.0% income tax bracket, which is the lower of the state’s two income tax brackets, will be repealed on January 1, leaving Mississippi with a flat 5.0% income tax that excludes the first $10,000 in income. The reform package signed by Governor Reynolds also brings Iowa’s corporate rate from 9.8% down to 5.5%. By 2026, Iowa will levy a flat, 3.9% income tax. As part of that reform package, on January 1 Iowa will go from having nine income tax brackets with a top rate of 8.53%, to four brackets with a top rate of 6.5%. Iowa Governor Kim Reynolds (R) signed legislation in March moving Iowa to a flat income tax. Thanks to legislation signed in September by Governor Brad Little (R), a flat 5.8% income tax rate will take effect on January 3, 2023. Idaho has a progressive income tax with a top rate of 6.0%. Income tax cuts take effect in a couple other states at the start of 2023. “This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity.” “It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money,” Governor Ducey wrote in a letter to Arizona Department of Revenue Director Robert Woods on September 29. In September, it was announced that revenue triggers had been hit earlier than anticipated and that the 2.5% income tax rate expected to start in 2024 would take effect one year ahead of schedule. In the process, Ducey and lawmakers passed legislation to cut the state’s income tax rate down to a flat 2.5%, with that reduction contingent upon revenue collections hitting certain levels. Governor Doug Ducey (R) and Arizona legislators subsequently passed legislation in 2021 that effectively blocked the imposition of the Proposition 208 tax hike. Proposition 208, a ballot measure approved in 2020, would’ve created a new 8.0% top rate in Arizona by imposing a 3.5% surtax on upper income households to be levied on top of the state’s current 4.5% top rate. While North Carolina’s new 4.75% income tax rate marks a signifiant reduction from where the Tar Heel State’s income tax rate had been only a few years prior, Arizona’s new 2.5% is far less burdensome than the 8.0% income tax rate that was scheduled to be in place by now.
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