2013 State Tax Cut Roundup

December 6, 2013

Eighteen states cut taxes in 2013, according to the American Legislative Exchange Council's (ALEC) State Tax Cut Roundup report.

Of the states that cut taxes this year, 25 cuts took place in specific tax categories:

  • One-quarter of the cuts were to the personal income tax, followed by state-specific tax cuts and cuts to the corporate income tax.
  • Sales taxes were cut the least.
  • The states that cut taxes were: Alaska, Arkansas, Florida, Idaho, Indiana, Iowa, Kansas, Mississippi, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Tennessee, Texas and Wisconsin.

ALEC also gave each state an Economic Outlook ranking, taking 15 state policy variables (including the state's tax, regulatory and labor policies) and weighing them equally. The states were ranked from 1 (best) to 50 (worst). Of the states that cut taxes this year, here are some of the rankings:

  • Montana received a ranking of 42, though they did make tax reform efforts this year. Montana legislators voted to exempt the first $100,000 of personal property from the business and equipment tax, while reducing the tax rate to 1.5 percent on the first $6 million of taxable value and to 3 percent on value above $6 million.
  • Texas was ranked at number 12, reforming the Texas margins tax, which resulted in a $1 billion tax cut to businesses. The state also lowered tax rates on all businesses, small and large.
  • North Carolina, ranked at 22, passed major tax reform over the summer. The state replaced its personal income tax structure with a modified flat tax and lowered the personal income tax across all income brackets. The state also dropped the corporate tax rate and abolished the death tax.

When one state cuts taxes, other states are challenged to enact similar pro-growth reforms in order to compete. Sound tax reform should be based upon the principles of simplicity, equity and fairness, transparency, economic neutrality and reliability.

Source: "State Tax Cut Roundup: 2013 Legislative Session," American Legislative Exchange Council, November 2013.

 

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