11/23/2014
Income Tax Revision
As states finally begin to stabilize in this post-recession economy, some of these states will look towards making major changes to their current tax codes. One of these codes deals with income taxes. Many governors have made efforts to lower, limit, or eliminate completely the use of income taxes. We discuss previous actions made to lower income taxes and current plans to regulate or change income tax laws.
Last year, ten governors made efforts to float tax cuts and devised proposals to lower or eliminate income taxes in their states in order to keep their states economically competitive with the rest of the nation. Three of the proposals planned to eradicate income taxes altogether. There are currently seven states that don't implement income tax. While none of the states joined those existing seven states that don't tax income, some reductions to income taxes were put forth and budget watchers expected those themes to leak into 2014 as a number of governors have again made plans to lower the income tax rates.
Louisiana, Nebraska and North Carolina were the three states that devised proposals to eliminate their income taxes. Although they failed to eliminate their states income taxes, major efforts were made to cut down on tax rates. Nebraska established a commission to study the income tax issue. North Carolina Republicans were able to shift to a lower, flat income tax. The actions of North Carolina were watched by GOP legislators across the U.S., so further actions towards reducing/eliminating income taxes are expected in 2014.
Economical constraints and tepid growth have caused increases in interstate competition. States compete for the lowest tax rates and as neighboring states reduce their rates. Others will attempt to match or reduce even further to stay ahead of their neighbors. This is a healthy competition that both lowers rates for citizens as well as aids in the rebuilding of a state's economy through competitive cuts on taxes.
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