In just the first few months of the 2022 tax year, we have already seen several states introduce legislation that would decrease corporate and individual income tax rates. Idaho became the first state to pass such legislation this year, on February 4. The Eversheds Sutherland SALT team expects other states to follow and will provide updates here as new changes are made.

The Latest Updates

On April 13, Nebraska Governor Ricketts signed into law LB 873, which will gradually decrease the top rate on individual and corporate income tax rates. Specifically, the legislation reduces the corporate income tax rate for taxable income in excess of $100,000 from 7.5% to 7.25% in 2023, 6.5% in 2024, 6.24% in 2025, 6% in 2026 and 5.84% in 2027. In addition, the state’s individual top tax rate of 6.84% will be reduced annually from 2023 through 2027, ultimately resulting in a top tax rate of 5.84% in 2027.

On April 13, the Kentucky General Assembly voted overrode Governor Beshear’s veto of HB 8, which will reduce the state’s 5% individual income tax rate if certain revenue targets are met. Specifically, if the balance of the state’s budget reserve trust fund account at the end of a fiscal year is greater than 10% of the receipts deposited in the general fund for that fiscal year, and such deposited receipts are equal to or greater than the authorization by the General Assembly to expend such receipts for that fiscal year, then the tax rate will be reduced by 0.5%.

On April 5, Mississippi Governor Reeves signed into law HB 531, which will gradually decrease the top rate on individual income in excess of $10,000 to from 5% to 4% by 2026 and eliminate the current 4% tax bracket on income between $5,000 and $10,000 in 2023. Specifically, the legislation reduces the individual income tax rate for income in excess of $10,000 from 5% to 4.7% in 2024, 4.4% in 2025 and 4% in 2026.

On March 15, Indiana Governor Holcomb signed into law HB 1002, which will decrease individual income tax rates annually. Specifically, the legislation reduces the gross income tax rate from 3.23% to 3.15% in 2023 and 2024. In addition, the gross income tax rate will further decrease provided state revenue fund collections meet certain targets annually.

On March 1, Iowa Governor Reynolds signed into law HF 2317, which will decrease individual and corporate income tax rates annually for tax years 2023 through 2025. Specifically, the legislation reduces the corporate income tax rate over time based on the net corporate income tax receipts for the preceding year. If net corporate income tax receipts for the preceding fiscal year exceed $700 million, the corporate income tax rate will be adjusted in such a way that when combined with all other applicable rates, the tax rates would have generated net corporate income tax receipts that equal $700 million in the preceding fiscal year. Such adjustments will take place at the end of each tax year until the corporate income tax rate is reduced to a cap of 5.5%. In addition, the state’s individual top tax rate will be reduced annually from 2023 through 2026, ultimately resulting in a 3.9% flat tax being imposed in 2026.

On February 11, Utah Governor Cox signed into law SB 59, which will decrease individual and corporate income tax rates. Specifically, the legislation lowers the individual and corporate income tax rates in Utah from 4.95% to 4.85%. These individual and corporate income tax changes are retroactive to January 1, 2022.  Utah is the second state to pass such legislation this year.

On February 4, Idaho Governor Little signed into law HB 436, which will decrease individual and corporate income tax rates. Specifically, the legislation lowers the corporate income tax rate from 6.5% to 6% and consolidates the personal income tax brackets from five brackets to four and lowers the rates as well. HB 436 also provides a one-time tax rebate totaling $350 million of personal income taxes (returning approximately 12% of an individual’s 2020 Idaho personal income tax or $75 per individual taxpayer and dependents, whichever is greater). These individual and corporate income tax changes are retroactive to January 1, 2022.