Out with the old and in with the new. Each year, changes to taxes and laws go into effect on the first of the calendar year. This year is no different.
Among others, incoming business and personal income tax changes include:
- Some states made personal income tax reductions last year due to budget surplus. A drop in the individual income tax withholding means residents of Arizona, New Hampshire, Iowa, New York, the Carolinas, Mississippi, Nebraska, Kentucky, Idaho, and Indiana will see an increase in take-home pay.
- Working toward a flat tax rate, Iowa is revising its income tax brackets. As part of that measure, the Iowa legislature excluded retirement income for eligible taxpayers at the outset of this year. Alabama, Rhode Island, Nebraska, and Delaware are also exempting tax on part or all of retirement income or military pension income.
- Idaho and Mississippi are also moving to flat tax rates in January. Flat tax structures are considered straightforward and difficult to change because the rate impacts everyone. Flat taxes may also increase the wealth gap as a middle-ground flat tax will likely increase taxes for the lowest earners and decrease taxes for the higher-income earners.
- Other states made moves to tax wealth or speed of collection. The Fair Share Amendment passed in Massachusetts went into effect in January. Also called the “Millionaire’s Tax,” residents who earn more than $1 million will pay an additional four percent in income tax. The move was made to boost appropriations to public education institutions and infrastructure needs. The tax required a constitutional amendment which passed with 52 percent voter approval. According to media, in natural-resource-wealthy Wyoming, oil, gas, uranium, and coal producers are now required to pay monthly taxes, rather than delaying payment up to 18 months.
- Some states have enacted business tax reductions at the outset of 2023. Those states include Nebraska, New Hampshire, Pennsylvania, and Arkansas. According to the Tax Foundation, North Carolina and Louisiana are also working to reduce their capital stock taxes.
- Illinois will see a return to inflation-tied increases in the gas tax. In addition to an income tax reduction in New York, residents will see a resumption of sales tax on fuel, fuel excise tax, and the Metropolitan Commuter Transportation District sales tax.
When tax changes and the fluctuating economic environment impact your bottom line, speak with a qualified tax lawyer about wealth management and business tax strategies.
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