Seven State Legislatures Act Now to Reduce Income Tax

Mississippi could become the nation’s 10th state to eliminate its personal income tax, with Republican Gov. House Speaker Philip Gunn (R.Clinton), Tate Reeves, and House Speaker Philip Gunn (R.Clinton), support different plans to eliminate the levy at their 2023 session in January.

Similar 2023 proposals for phasing out or erasing state income taxes immediately are expected to be filed in West Virginia and Arkansas as well as Georgia, North Dakota, Utah, West Virginia, and possibly Wisconsin. 

Such measures are not unusual in state houses but are usually symbolic bills lodged by fiscal conservatives who argue taxing individual incomes to fund state—and in some cases, local— governments is counter-productive, especially with an array of alternate assessments available to replace “lost” Revenues generated by personal income taxes

As legislatures begin their third sessions, after the 2020 pandemic, which pumped trillions in federal stimulus assistance and recovery assistance into state and local government coffers, many state budgets boast temporary surpluses.

Some lawmakers and governors believe these surpluses should go back to the taxpayers. The Washington, D.C.-based Tax Foundation reported that more than half of the states approved personal tax reductions. 38 states trimmed other taxes and 11 states debated eliminating personal income levies entirely. 

As state leaders create 2023 budget projections for the year, the same issues are at the forefront. With revenue surpluses prompting lawmakers to push another round of tax cuts despite admitting that the largesse will only be temporary and amid calls for prudence given the possibility of a recession that some economists claim the nation is already in, lawmakers must also consider the impact on other areas. 

Nine states right now don’t assess personal income taxes—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—with Mississippi the most likely to join their ranks in 2023.

The largest tax cut Mississippi legislators have ever approved was in 2022.