State Tax Snapshot: Legislative Rate Changes Give Taxpayers a $1.3 Billion Tax Cut


State tax policies developed during the 2013 legislative session have resulted in a net $1.3 billion tax cut for taxpayers, according to a recent report by the National Conference of State Legislatures. The number is expected to increase next year, with a net reduction of $1,892,700,000 in personal income taxes alone.

According to the report, changes in income taxes, sales taxes, and transportation funding mechanisms account for the tax cuts. Ohio cut its personal income tax by a projected $1.2 billion in 2014, while Iowa, Maine, North Dakota, and Wisconsin have also decreased various taxes by a significant amount.

The tax cuts may have been inspired by an influx of tax revenue to state general funds, potentially a result of taxpayers pushing income into 2012 to avoid potential increases in 2013 federal rates.

Tax reform in general was a hot topic this legislative session, with 12 states reporting tax reform efforts thus far. Areas of reform included the expansion of sales tax to services and reductions in motor fuel tax.

While the states significantly reduced rates for some types of taxes, contributing to the net $1.3 billion tax cut, they also increased rates for other taxes, such as the sales tax and motor fuel tax.

Here are a few of the tax changes implemented by the states:

Arizona:reduced sales tax by more than $900 million after temporary rate expired.

Kansas: lowered sales tax rate from 6.3% to 6.15%.

Ohio:reduced income tax rates; expanded sales tax base to cover previously exempt services.

Maine: raise the general sales tax rate.

Maryland:raised motor fuel taxes.

Massachusetts:raised motor fuel taxes.

Minnesota:expanded sales tax base to cover previously exempt services.

Vermont:raised motor fuel taxes.

Virginia: increased sales tax revenue by nearly $1.3 billion by raising the rate of sales tax and imposing sales tax on motor fuel; eliminated the motor fuels tax.

Wyoming:  raised gas tax by 10 cents per gallon.

For more detail on the report and for a breakdown of the sources of increased revenue, see a full article in the Daily Tax Report .

 

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