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    Here’s where Americans will pay less in state taxes in 2023- HindiNewsWala





    CNN
     — 

    States are kicking off 2023 with a bevy of tax changes for their residents and businesses.

    Some 38 states had noteworthy alterations – mostly net tax reductions – take effect on January 1, according to the right-leaning Tax Foundation. They have lowered individual and corporate income tax rates, exempted more products from sales taxes and reduced the amount of retirement or military pension income subject to taxation.

    “We are seeing the culmination of two years of substantial tax cutting across the country, in response to historically high revenues and a desire for states to remain competitive in a much more mobile environment,” said Jared Walczak, the foundation’s vice president of state projects.

    States have benefited from solid economic growth and federal Covid-19 relief funds flowing to them, their residents and their businesses. This has fueled increases in income and sales tax revenues and left many states with large surpluses. Some states have showered this largesse on residents through one-time measures, such as tax rebates or holidays, while others have adopted permanent tax reductions.

    However, several states increased certain levies, including those on gas, electric vehicles and recreational marijuana, for 2023. One state, Massachusetts, added a millionaire tax.

    And while states have built up sizable rainy day funds to cushion them in an economic downturn, some could start feeling squeezed if their revenues soften.

    “States that have reduced their tax rates are going to have to face a more severe reduction in that (revenue) growth than other states,” said Emily Mandel, an economist with Moody’s Analytics.

    Individual income taxes: Ten states, including Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New York and North Carolina, reduced individual income tax rates for 2023, according to the Tax Foundation. New Hampshire lowered its rate only on interest and dividends income.

    Arizona, Idaho and Mississippi converted to flat taxes from graduated rates. Arizona implemented its 2.5% rate a year earlier than anticipated. Idaho moved to a flat rate of 5.8%, down from its former top marginal rate of 6%.

    And Mississippi enacted a flat tax rate of 5%. The flat rate will phase down to 4% in 2026.

    Five states – Alabama, Delaware, Iowa, Rhode Island and Nebraska – have exempted some or all of residents’ retirement income or military pension income. Iowa and Nebraska also lightened their inheritance taxes.

    Corporate income taxes: Four states reduced their corporate income tax rates for this year, according to the Tax Foundation: Arkansas, Nebraska, New Hampshire and Pennsylvania.

    In Pennsylvania, the rate inched down to 8.99%, from 9.99%, one of the highest in the country. It is scheduled to phase down to 4.99% in 2031.

    Meanwhile, Oklahoma became the first state to make permanent a measure allowing companies to deduct the full cost of certain business investments in machinery and equipment in the first year. The federal bonus depreciation allowance is scheduled to start phasing down this year due to a provision in the 2017 Republican tax cut package.

    Sales taxes: Virginia now exempts groceries from state sales tax, while Kansas has begun lowering its sales tax on groceries, which will be eliminated in 2025, according to the Tax Foundation.

    Colorado and Iowa are no longer levying sales taxes on diapers and menstrual products, while Virginia is exempting certain personal hygiene items, including menstrual products.

    Individual income taxes: Massachusetts voters narrowly approved a millionaire tax at the ballot box in November. The measure, which took effect this year, adds a 4% surtax on income above $1 million to the current 5% individual income tax rate. The funds will be used for education, roads, bridges and public transit.

    Sales taxes and fees: In Kentucky, nearly three dozen additional services are now subject to the state’s 6% sales tax, according to the state Department of Revenue. They include recreational camp tuition, personal fitness, interior decorating, clothing and jewelry repair, website design and hosting, parking, cosmetic surgery and body modification, rental space and security system monitoring, among others.

    The state also established a 6% excise tax on ride-sharing, car rental and limousine and taxi services. Plus, it created an excise tax on electric vehicle power distribution, as well as registration and renewal fees for electric and hybrid vehicle owners.

    Colorado implemented a state fee of 10 cents on each recycled paper bag or single-use plastic bag that stores provide to customers, according to the state Department of Revenue. After this year, stores will no longer be able to distribute plastic bags.

    New Jersey hiked its recreational marijuana excise tax to $1.52 per ounce, from $1.10 an ounce.

    And Missouri now requires out-of-state businesses with more than $100,000 in annual sales in the state to collect state and local taxes. It’s the last state with a sales tax to put this requirement into effect.

    Gas taxes: Five states have increased their gas taxes, either due to inflation indexing or automatic adjustments tied to fuel prices, according to the Tax Foundation: Florida, Illinois, Michigan, North Carolina and Utah.

    Meanwhile, gas tax holidays ended in New York and Connecticut.

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