Tax-cut fever hits multiple states as Biden tax hike takes effect Jan. 1

by WorldTribune Staff, December 30, 2022

As Joe Biden, via the so-called Inflation Reduction Act, is imposing massive tax increases starting Jan. 1, several states have moved to reduce the tax burden on their citizens.

Tax rates are set to decrease in a dozen state in what the Tax Foundation calls “an unprecedented wave of tax reductions and other tax cuts.”

The Tax Foundation reported that several states will change their tax regimens in 2023.

• Alabama, Delaware, Iowa, Rhode Island and Nebraska will exempt residents from taxes on some or all of their retirement income or military pension income.

• Arkansas, Colorado, Nebraska, New Hampshire and Pennsylvania will lower their corporate rates in 2023.

• Arizona, Idaho and Mississippi are converting from graduated-income tax rates to flat-rate structures.

Although most of the tax reductions were enacted by Republican-led state legislatures, states led by Democrats also caught tax-cut fever. Hawaii and Illinois agreed to expand their earned income tax credits starting Jan. 1.

“These past two years, states have experienced record levels of growth, and they’re sitting on an enormous amount of money,” Jared Walczak, Tax Foundation vice president of state projects, told The Washington Times. “At the same time, you have people struggling under the burden of inflation. It’s been a time when states have seen the benefit of relief and also recognized that taxpayers are more mobile than ever with the rise of remote and hybrid work.”

Iowa is seeing one of the most dramatic tax overhauls. Republican Gov. Kim Reynolds signed into law a measure lowering the top marginal income tax rate from a graduated 8.98% to a flat 3.9% rate, lowering the corporate rate, and eliminating the tax on retirement income.

“When Governor Reynolds took office, Iowa had the sixth-highest individual income tax rate in the nation,” the governor’s office said in a statement. “Now that the governor’s plan proposed this year has passed with bipartisan support, Iowa’s income-tax rate will be fourth lowest among all states that charge income tax, ranking among the most tax friendly states in America.”

Arizona Gov. Doug Ducey, a term-limited Republican, ordered the implementation of the latest phase of the state’s flat-tax conversion a year ahead of schedule, which will give the state the lowest flat-tax rate in the nation at 2.5% on Jan. 1.

There are exceptions to the tax-cutting trend. In Massachusetts, voters approved by 52% to 48% a tax-the-rich measure, adding a 4% tax on annual income over $1 million to the state’s 5% flat tax to help pay for infrastructure improvements.

California voters, however, defeated Proposition 30, which would have increased taxes on annual incomes over $2 million to subsidize electric cars.

Meanwhile, Americans for Tax Reform listed the following Democrat tax hikes which will take effect on Jan. 1, 2023

$6.5 Billion Natural Gas Tax Which Will Increase Household Energy Bills

A regressive tax on American oil and gas development. The tax will drive up the cost of household energy bills. The Congressional Budget Office estimates the natural gas tax will increase taxes by $6.5 billion.

The tax hike violates Biden’s tax pledge to any American making less than $400,000 per year.

A letter to Congress from the American Gas Association warned that the methane tax would amount to a 17% increase on an average family’s natural gas bill.

$12 Billion Crude Oil Tax Which Will Increase Household Costs

Democrats are imposing a 16.4 cents-per-barrel tax on crude oil and imported petroleum products that will be passed on to consumers in the form of higher gas prices. The tax hike violates Biden’s tax pledge to any American making less than $400,000 per year.

Democrats have pegged their oil tax increase to inflation. As inflation increases, so will the level of tax. The non-partisan Joint Committee on Taxation (JCT) estimates the provision will raise $12 billion in taxes.

$1.2 Billion Coal Tax Which Will Increase Household Energy Bills

The tax hike more than doubles the current excise taxes on coal production. Under the Democrat proposal, the tax rate on coal from subsurface mining would increase from $0.50 per ton to $1.10 per ton while the tax rate on coal from surface mining would increase from $0.25 per ton to $0.55 per ton.

JCT estimates that this will raise $1.2 billion in taxes that will be passed on to consumers in the form of higher electricity bills.

$74 Billion Stock Tax Which Will Hit Your Nest Egg — 401(k)s, IRAs and Pension Plans

When Americans choose to sell shares of stock back to a company, Democrats will impose a new federal excise tax which will reduce the value of household nest eggs. Raising taxes and restricting stock buybacks harms the retirement savings of any individual with a 401(k), IRA or pension plan.

Union retirement plans will also be hit. The tax will put U.S. employers at a competitive disadvantage with China, which does not have such a tax.

Retirement accounts hold the largest share of corporate stocks, accounting for roughly 37 percent of the outstanding $22.8 trillion in U.S. corporate stock, according to the Tax Foundation.

American companies will face significant compliance costs — a boon to expensive white-shoe law firms — the burden of which will be passed on to working households.

$225 Billion Corporate Income Tax Hike Which Will Be Passed on to Households

Democrats imposed a 15 percent corporate alternative minimum tax on the financial statement income of American businesses reporting $1 billion in profits for the past three years. These American companies employ millions of Americans.

The cost of this tax increase will be borne by working families in the form of higher prices, fewer jobs, and lower wages.

Preliminary cost estimates from the Congressional Budget Office found the provision would increase taxes by more than $225 billion.

According to JCT’s analysis, 49.7 percent of the tax would be borne by the manufacturing industry at a time when manufacturers are already struggling with supply-chain disruptions.

Tax Foundation also warned that current supply chain issues could be worsened by the book tax’s disproportionate burden on key industries. The report concluded that “the coal industry faces the heaviest burden of the book minimum tax, facing a net tax hike of 7.2 percent of its pretax book income, followed by automobile and truck manufacturing, which faces a 5.1 percent tax hike.”

Action . . . . Intelligence . . . . Publish