state tax

Despite what people thought at first, the years of the pandemic were good for state and local tax collections. The big jumps in 2021 and 2022 haven't carried over into 2023, but most states' earnings are still strong and well above levels before the pandemic, even when inflation is taken into account.

Some states also have their own estate taxes or transfer taxes on top of the federal estate tax, which has a top rate of 40%. There are estate taxes in 12 states and the District of Columbia, and transfer taxes in 6 states. Maryland is the only state that has both a succession tax and an estate tax.

Retail sales taxes account for 32% of state tax collections, 13% of municipal tax collections, and 24% of all tax collections, making them a crucial component of most states' revenue strategies. Additionally, since they generate fewer economic distortions than the individual income tax, the other significant state tax, they are more pro-growth.

With the passing of the June solstice, summer officially began and most state legislative sessions came to a conclusion. Many states are starting to put new policies into effect now that were passed during this year's legislative session (or are being phased in gradually).

As congressional sessions end in many states, it's clear that 2023 will be the third year in a row with big changes to and relief from state taxes. Since 2021, 24 states have cut individual income tax rates (including 22 cuts to the top marginal rates), 13 states have cut corporate income tax rates, two states have cut sales tax rates, and many more have made structural improvements like getting rid of capital stock taxes, making full expensing permanent, raising the filing and withholding thresholds for nonresidents, improving how businesses treat tangible property, getting rid of throwback and throwout rules, and more.