Summer has arrived and states are beginning to implement policy changes that were enacted during the legislative session (or are being phased in over time). Generally, most individual and corporate state tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. changes take effect on January 1, the beginning of the calendar year, for consistency through the tax year. However, some important changes take effect on July 1, the beginning of the fiscal year for all states except Alabama, Michigan, New York, and Texas.
This summer, notable tax changes will take effect in several states. Property owners in Maine will see property tax A property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. changes. Marketplace facilitators and remote sellers who sell into Wyoming will see an update to the state’s economic nexus thresholds. Seven states—Colorado, Georgia, Idaho, Indiana, Kansas, Utah, and West Virginia—enacted tax changes during this year’s legislative sessions that are retroactive to January 2024. And several more states have important excise tax An excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. changes taking effect.
Here, we provide an overview of important tax policy changes taking effect in the various states. Importantly, this list is not exhaustive, and it does not capture changes to certain credits, exemptions, definitions, administrative procedures, calculations, or provisions that are relatively minor or that only affect a small share of taxpayers. Rather, this report focuses on structural changes, including rate and threshold adjustments, the implementation of new taxes, and other changes in the tax bases of major statewide taxes.
Georgia and Utah enacted retroactive individual and corporate income tax A corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate cuts. In the case of Georgia, the legislature had previously adopted a flat individual income tax An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rate which took effect January 1, 2024, which was further reduced this legislative session. Colorado taxpayers will see a lower individual income tax rate this year, as part of a Taxpayer’s Bill of Rights (TABOR) refund. Kansas also adopted individual income tax changes that are retroactively effective as of January 1.
One state, Wyoming, will alter its economic nexus threshold on July 1, while Indiana made a similar change retroactive to January 1. Florida will begin a sales tax holiday A sales tax holiday is a period of time when selected goods are exempted from state (and sometimes local) sales taxes. Such holidays have become an annual event in many states, with exemptions for such targeted products as back-to-school supplies, clothing, computers, hurricane preparedness supplies, and more. on July 1, and Tennessee lawmakers have reformed the state’s sourcing rules.
Maine taxpayers will see property tax changes taking effect in July, while Alabama has a change taking effect after July but before January 2025. Colorado legislators quickly passed a property tax relief package during the past session, but it is conditioned upon voters rejecting two property tax initiatives slated for the November ballot and is therefore not detailed here.
Several states have excise tax changes. These include definitional changes, additional fees, and rate changes. For example, Maryland, Maine, and Colorado, residents will see increases in excise taxes levied on alcohol products. Minnesotans will see an additional fee levied on some retail deliveries and New Jersey residents will see an increased gas tax A gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. . Finally, New Hampshire increased the threshold for its state timber tax.
These and other tax changes taking effect are detailed below. Many states have routine or less notable tax changes taking effect that are not mentioned here. These include, but are not limited to, annual adjustments to income tax brackets, standard deductions, and personal exemptions; automatic formula-based changes to unemployment insurance taxes; changes in interest rates on taxes owed; administrative changes; and changes to tax credits and other narrow-based taxes or tax provisions.
California will begin to levy the nation’s first separate state excise tax of 11 percent on any retail sale of firearms, ammunition, or precursor part in the state. This will be in addition to the federal excise tax and the revenues will be directed toward various public health and safety programs in California.
Scheduled changes from Colorado’s Proposition EE will increase the tax rates applied to several tobacco and nicotine products. The tax on cigarettes, excluding those that are classified as modified risk tobacco products, will increase from $0.065 per cigarette to $0.08 per cigarette, or from about $1.94 per pack to $2.24 per pack. The tax on modified risk tobacco products will increase from $0.0325 per cigarette to $0.04 per cigarette. The minimum price, including taxes, the state imposes for a pack of cigarettes will also increase from $7 to $7.50 per pack of 20 cigarettes.
The tax levied on all tobacco products except modified risk tobacco products will increase from 30 percent of the manufacturer’s list price to 36 percent of the manufacturer’s list price, and from 15 to 18 percent if the product qualifies as a modified risk tobacco product. The minimum moist snuff tax will increase from $1.48 per 1.2 oz to $1.84 per 1.2 oz. The tax on other nicotine products will increase from 50 percent of the manufacturer’s list price to 56 percent of the manufacturer’s list price (from 25 to 28 percent for modified risk products). Nicotine products are those that contain nicotine but not tobacco (e.g., e-cigarettes, vapes, nicotine pouches, and other modern oral products). The tax increases are set to provide $20 million to tobacco education programs, with the remainder being directed to preschool programs in the state.
The Maryland State Budget included tax increases for tobacco products, including an increase to the tax on cigarettes from $3.75 to $5.00 per pack, or $0.25 per cigarette in packages of more than 20. The tax rate for other tobacco products, like chewing tobacco, will increase from 53 percent to 60 percent. The tax levied on electronic smoking devices (other than vaping liquid in containers of 5 milliliters or less) will increase from 12 percent to 20 percent.
Minnesota will impose a $0.50 retail delivery fee on certain transactions over $100 involving retail delivery within the state, with some exemptions for drugs, medical supplies, and food. The fee does not apply to curbside delivery, items delivered electronically, or to deliveries by food and beverage service establishments. The fee will show as a separate line item on receipts as a “Road Improvement and Food Delivery Fee.”
Mississippi will increase its bailment fee charged to manufacturers of spirits and wine from $1.00 per case to $1.50 per case stored in the state’s Alcohol Beverage Control warehouse. The fee is designed to place the burden for funding the state’s new public warehouse on private manufacturers, but no mechanism was provided for its sunset once that new warehouse has been paid for.
Senate Bill 514 provides a 50 percent increase to the amount of wood and wood chips that are exempt from the state’s timber tax, provided the wood and wood chips originate from trees felled for listed purposes.
New Jersey will increase its gas tax by about $0.02 per gallon and will do so again for each of the next five years to total $0.10 per gallon. New Jersey will also impose an additional annual registration fee of $250 upon all zero emission vehicles, which will similarly increase $10 per year until totaling $290 in 2028.
The tax levied on moist snuff in Oregon will increase from $1.80 per ounce to $1.86 per ounce, and the minimum tax will increase from $2.17 per retail container to $2.24 per retail container.
In 2023, House Bill 323 became law and contained a provision effective July 1, 2024, which adopted a majority of the sourcing provisions consistent with the Streamlined Sales Tax A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. and Use Agreement. Tennessee will now apply destination sourcing for interstate sales of services performed on tangible personal property and computer software. In addition, similar treatment will apply to leased property including licensed software or digital products, where the “primary property location” is relocated out of Tennessee during the lease period. Once this property is moved out of state, recurring periodic payments are no longer sourced to Tennessee. This does not apply to the sale of other specified property.
The latest annual omnibus liquor bill in Utah increases the markup the state charges for spirits, wine, and malt liquor from 88 percent to 88.5 percent. Similarly, the markup the state charges for heavy beer will also increase from 66.5 percent to 67 percent. Utah is a control state which grants itself a monopoly on the sale and distribution of liquor and alcoholic products, so the state can increase the markup of the sale price instead of levying a traditional excise tax. Utah will also increase the tax on beer incrementally from $13.10 per barrel to $13.35 per barrel after July 1, 2024, and eventually to $14.10 per barrel in 2027.
House Bill 464 increases the minimum threshold for gross annual revenue of a nonprofit entity that allows the Department of Taxation to require such entity to provide a financial audit A tax audit is when the Internal Revenue Service (IRS) conducts a formal investigation of financial information to verify an individual or corporation has accurately reported and paid their taxes. Selection can be at random, or due to unusual deductions or income reported on a tax return. before receiving a Retail Sales and Use Tax exemption A tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax. to $1.5 million, up from $1 million.
The Virginia state budget provides for an increase to the tax on liquid nicotine products from a rate of $0.066 per milliliter of liquid nicotine to $0.11 per milliliter of liquid nicotine. Virginia will also enact a tax on liquid nicotine in open systems of 10 percent of the wholesale price.
House Bill 197 updates the state’s economic nexus rules by removing the 200-transaction threshold, leaving only the sales threshold of $100,000.
Senate Bill 24-228 adjusts the mechanisms used to refund the state’s TABOR obligations to taxpayers. The bill reinstates a temporary individual income tax cut and creates a new refund mechanism—a reduced state sales and use tax rate conditioned on revenue targets.
To refund a portion of the FY 2023-2024 revenue surplus, the 2024 flat individual income tax rate will be reduced from 4.4 percent to 4.25 percent. This is retroactive to January 1, 2024; however, for future years, the rate reduction is dependent on the amount of the TABOR surplus remaining after reimbursements to local governments for homestead property tax exemptions.
Starting with the FY 2024-2025 surplus, a reduction in the statewide sales tax rate will be instituted as an additional TABOR refund mechanism. This means that the statewide sales and use tax will be reduced by 0.13 percent in the following year. This mechanism becomes operative if the TABOR surplus is projected to be at least $1.5 billion (and exceeds the projected amounts of refunds issued to local governments and through the temporary income tax cut) based on the March revenue forecast selected by the Joint Budget Committee.
Senate Bill 24-1134 makes several changes that become operational in future years. However, relevant to the 2024 tax year, Coloradans will see the state earned income tax credit A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. raised from 38 percent to 50 percent of the federal credit.
On January 1, 2024, Georgia implemented a flat individual income tax rate of 5.49 percent, down from the state’s previous top marginal rate of 5.75 percent. Through House Bill 1015, the Peach State retroactively reduced the flat rate to 5.39 percent. Beginning in 2025, the rate will be reduced by 0.1 percent annually until the rate reaches 4.99 percent.
Similarly, lawmakers passed House Bill 1023 which ties the corporate income tax rate to the individual income tax rate. For 2024, this means the corporate income tax rate will be 5.39 percent, down from 5.75 percent. In future years, this rate will continue to be reduced commensurate with reductions to the individual income tax.
In March 2024, Gov. Brad Little (R) signed House Bill 428 which reduces the unemployment insurance fund multiplier from 1.3 to 1.2. This was done to provide further unemployment insurance tax relief after years of a frozen fund multiplier. The bill is estimated to save Idaho businesses $44 million this year.
In March 2024, Gov. Eric Holcomb (R) signed Senate Bill 228 which retroactively removes the transactions threshold for remote seller nexus under the sales tax. Now, remote sellers and marketplace facilitators will only be required to collect and remit sales taxes if gross sales from all transactions into Indiana exceed $100,000, rather than also incurring the obligation if they exceeded 200 sales (regardless of value).
In a June special session, Kansas lawmakers enacted Senate Bill 1, which provides various forms of tax relief. Most of the tax relief provisions in this new law are retroactively effective as of January 1, 2024, including provisions to reduce individual income tax rates; increase the standard deduction The standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act (TCJA) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes. , personal exemption, and dependent exemption; exempt Social Security benefits from the individual income tax; increase the tax credit for household and dependent care expenses; reduce privilege tax rates; and increase from $40,000 to $75,000 the amount of residential property appraised value that is exempt from the statewide uniform school finance levy.
Specifically, the law consolidates three individual income tax brackets A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. into two, reducing the top marginal rate from 5.7 to 5.58 percent and the lower rate from 5.25 to 5.2 percent. The law also increases the standard deduction from $3,500 to $3,605 for single filers, from $8,000 to $8,240 for married couples filing jointly, and from $6,000 to $6,180 for those filing as head of household. Further, it increases the personal exemption from $4,500 to $18,320 for married couples filing jointly and from $2,250 to $9,160 for all other filers, and it increases the dependent exemption from $2,250 to $2,320 per dependent. Finally, it increases the tax credit for household and dependent care expenses from 25 to 50 percent of the federal credit amount for tax year 2024.
Senate Bill 69 reduces the individual and corporate income tax rates from 4.65 to 4.55 percent. The bill became effective on May 1, 2024, but the rate reductions are operationally retroactive to January 1, 2024. This follows reforms in 2023 when the state reduced the same rates to 4.65 percent, down from 4.85 percent.
Through House Bill 4880, signed by Gov. Jim Justice (R) on March 27, 2024, the state is on the path to fully exempt Social Security payments from state individual income tax. For tax year 2024, individuals will receive a 35 percent exemption, which increases to 65 percent in 2025, with complete elimination by 2026. This builds on 2019 legislation which began phasing down the exemption for single filers with federal adjusted gross income For individuals, gross income is the total pre-tax earnings from wages, tips, investments, interest, and other forms of income and is also referred to as “gross pay.” For businesses, gross income is total revenue minus cost of goods sold and is also known as “gross profit” or “gross margin.” under $50,000 and joint filers with federal adjusted gross income under $100,000.
Additionally, through House Bill 5024, West Virginia will exempt licensed private trust companies (entities that offer fiduciary and trustee services to a single-family group) from state individual income tax.
In previous years, Alabama did not have assessment limitations on residential or commercial property. Beginning October 1, 2024, through House Bill 73, the state will institute a 7 percent assessment growth cap on commercial and residential property subject to several important caveats. The limitation will not apply to new construction, properties with significant home repairs, or transfers of property (unless such transfer occurs between family members).
Senate Bill 309 changes the additional state sales tax rate on the sale of alcoholic beverages at Alcoholic Beverage Control stores from 2 percent to the combined county and municipal general sales tax rates levied or assessed in the county or municipality where the transaction occurs. According to the Department of Revenue, the combined average of the county and municipality tax rates is 5.33 percent. Based on a legislative fiscal note, the bill will increase revenue to county governments by an estimated $5.1 million and municipalities by an estimated $6.7 million. This change is effective October 1, 2024.
In 2005, through Legislative Document 1, Maine lawmakers limited municipal property tax levy growth to the municipality’s property growth factor plus Maine’s average personal income ( inflation Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. adjusted). This was done to curb local government spending and reduce burdens on the state’s taxpayers. Legislative Document 2102, signed April 9, 2024, repeals this limitation, opening the door to increased property taxes.
Additionally, beginning on August 9, 2024, the definition of “tobacco products” for the purposes of Maine’s tobacco products tax will now include any products made from or derived from tobacco, or that contain nicotine. This will apply the state’s 43 percent wholesale tax on tobacco products to new categories of products, particularly 100 percent tobacco-free modern oral nicotine products. Legislative testimony on behalf of the Northeast Wholesalers Association estimates a resulting $3 million in new taxes from nicotine pouches and an increase in their price of about $2 per tin. This undermines the harm-reduction potential of tobacco-free nicotine products.
The 2022 amendment to Missouri’s state constitution which legalized recreational marijuana authorized “any local government” to charge up to 3 percent sales tax. Missouri courts, through a string of rulings, have established that both county and municipal governments can each levy the 3 percent sales tax on the same sales. This will likely result in new local taxes on cannabis.
In February 2024, Gov. Kevin Stitt (R) signed House Bill 1955, exempting groceries from the state sales tax. The law will take effect in August 2024.
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