Budget & Tax
Income-tax-cut trend continues
November 23, 2021
Recent action in North Carolina and Louisiana continues the tax-cut trend seen across the country. Both states are making changes to their tax code by simplifying their income tax structures and reducing rates for both individuals and corporations.
Voters in Louisiana approved Amendment 2, reducing the individual income-tax rate for each income bracket. The current rates are 2, 4, and 6 percent; the new rates will be 1.85, 3.5, and 4.25 percent.
For its part, North Carolina passed a multitude of tax changes through HB 334. The bill reduces the corporate income-tax rate by 0.5 percentage points each year starting in 2024 until it is completely phased out in 2028. The individual rate will fall from 5.25 percent to 4.99 percent. Individuals will also benefit from an increase in the standard and child deduction, and eligibility for the child deduction is being expanded.
North Carolina is also moving to simplify its franchise tax, resulting in a reduction in tax collections by $150 to $170 million.
With the tax changes in North Carolina, the number of states that have enacted some sort of income-tax reform this year has increased to twelve. With the growth seen in states like Florida and Texas over the last decade, it's no wonder states have begun to shift their tax structure away from income taxes.
Oklahoma made a good first step last year by reducing the individual and corporate tax rates, but it's clear the work should not end there. If Oklahoma is content with patting itself on the back for last year’s work, it risks being left behind as more states continue to move to a pro-growth tax structure.