The same paycheck covers less goods, services, and bills. In addition to the tax changes mentioned here, many states will see automatic adjustments to a range of tax rates, from 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. Under a constitution which defines income as a form of property and allows no property to be taxed at a rate greater than 1 percent.Īll 22 jurisdictions with significant changes are highlighted below. Capital gains taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. And Washington is attempting to implement a 7 percent capital gains tax A capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. Meanwhile, five new states will join the list of those that allow pass-through business A pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates.Įs to be taxed at the entity level to sidestep federal limits on state and local tax (SALT) deductions. Some states will implement tax changes adopted by elected representatives while others will implement changes adopted through ballot measures.Īmong the more novel tax policy “experiments” to be implemented in 2022 is Maryland’s first-in-the-nation digital advertising tax. Other states, uncertain as to the impact of the pandemic on state revenue, opted to raise taxes. Some states have chosen to respond to budget surpluses associated with the pandemic recovery by enacting individual and corporate income tax (CIT) cuts. States, as Justice Louis Brandeis once wrote, are the laboratories of democracy, and those laboratories have been remarkably busy in recent years as, 90 years since Justice Brandeis coined the phrase, states continue to produce unique responses to policy challenges and opportunities.Īs the nation enters 2022, 21 states and the District of Columbia have significant tax changes taking effect. , while Maryland and Washington face litigation over new taxes on digital advertising and capital gains income respectively. Unlike estate taxes, inheritance tax exemptions apply to the size of the gift rather than the size of the estate. Iowa is phasing out its inheritance tax An inheritance tax is levied upon an individual’s estate at death or upon the assets transferred from the decedent’s estate to their heirs. ![]() The Tax Cuts and Jobs Act (TCJA) capped it at ,000 per year, consisting of property taxes plus state income or sales taxes, but not both. Five states (Arizona, Colorado, Georgia, Illinois, and Oregon) implemented a pass-through entity election to serve as a workaround to the federal state and local tax (SALT) deduction The state and local tax (SALT) deduction permits taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments.Florida is the only state to increase corporate income tax rates, as a temporary reduction expired. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. ![]()
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