14 States With Income Tax Cuts in 2023

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On Jan. 1, noteworthy tax changes took effect in 38 states, according to a recent report from the nonprofit Tax Foundation.

Most of these changes represented net tax reductions, the result of a wave of rate reductions and other tax cuts in the past two years as states responded to burgeoning revenues, greater tax competition in an era of enhanced mobility and the effect of high inflation on residents.

The report noted that 11 states had individual income tax rate reductions taking effect on Jan. 1. Three of these states converted from graduated-rate income tax structures to flat tax structures on New Year’s Day.

In addition, five states are newly exempting all or a portion of retirement income or military pension income from income taxation.

Hawaii and Illinois will expand their earned income tax credits.

Massachusetts stood out from the tax-rate-reduction crowd. On Jan. 1, the state’s individual income tax converted from a flat to a graduated-rate tax, with a new rate of 9% on income exceeding $1 million.

See the gallery for 14 states that reduced personal income tax rates effective Jan. 1.