No state has ended personal income taxes since 1980, but Mississippi and Kentucky may change that

About 45 years have passed since an American country has canceled the income tax on wages and salaries. But with the recent measures in the Mississippi state and Kentucky, two states are now on the way to do so, if their economies continue to grow.

Payment to zero income tax may be the most aggressive example of the tax reduction that swept the countries during their recovery from the Covid-19 pandemic with high historical revenues and surplus.

However, this comes during the period of uncertainty in countries, where they are waiting to find out whether to reduce the costs of President Donald Trump and the definitions of definitions lead to a decrease in federal funding for states and contraction in the public economy.

Some financial analysts also warn that canceling income taxes may let countries depend on other fees, such as sales taxes, which are not proportional to the poor.

What governments receive income tax?

The sixteenth amendment to the American constitution gives congress the authority to impose income taxes. It has been ratified by the states in 1913. Since then, most states have adopted their own income taxes.

Eight states are currently not receiving any personal income tax: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas and Woewang. The ninth country, Washington, does not receive any personal income tax on wages and salaries, but it increases the taxes of some income on the capital more than $ 270,000.

When Alaska canceled the personal income tax in 1980, she did so because state treasures were overflowing with billions of oil money.

Despite the suggestion of getting rid of the income tax elsewhere, it did not succeed.

“It is much easier to go without an individual income tax if it has never imposed one,” said Catherine Logid, chief analyst and research director at the Non -profit tax institution. “But once you rely on these revenues, it is very difficult to get rid of this tax or cancel this tax.”

What do Mississippi do?

Republican governor of Mississippi Tate Reeves has recently signed a law gradually reduces the state’s income tax rate from 4 % to 3 % by 2030, and set the state’s income growth standards that can lead to additional additional discounts until the tax is canceled. The law also reduces sales tax on grocery stores and raises gasoline tax.

If cash reserves are fully funded and revenue players are met every year, the Mississippi income tax can disappear by 2040.

We hope that the income tax supporters will hope to attract both companies and residents, which raises the state’s economy to the likes of Florida, Tennessee and Texas. Their theory is that when people pay less income taxes, they will have more money for spending, thus enhancing sales tax groups.

Reeves said in a statement that the tax cancellation “puts us in a rare category of competitive elite countries.” He added: “Mississippi has the ability to be a magnet for opportunity, investment, and talent- and for families looking to build a better life.”

Mississippi is among the most poor states and relies heavily on federal financing. Democratic lawmakers have warned that the state may face financial crises if the discounts in federal financing come at the same time that it abandons the state’s income tax.

“The income tax provides” a large percentage of what the state brings to finance things such as schools, health care and services that everyone relies on. “

What did Kentucky do?

Kentucky 2022 has reduced the state’s income rate and set a series of revenue -based operators that can gradually reduce the tax to scratch. But unlike Mississippi, the operators are not automatic. Instead, the Kentucky General Assembly must approve every additional tax rate.

This has led to a series of tax cutting measures, including two new filths this year. One of them executes the next tax rate from 4 % to 3.5 % starting in 2026. The second makes it easy to continue to reduce the tax rate in the future by allowing smaller gradual discounts if revenue growth is not enough to operate a decrease of 0.5 percent.

Democratic ruler, Andy Bishr, signed the legislation to reduce taxes for the next year, but let the other measure approved by the legislative legislative body legally without signing it. Beshear called it the “bait and switching” bill, as legislators who confirmed that the handrails of income tax discounts will remain valid while pressing the tax reduction of 2026, then later in the session changed the operators for the future years.

What measures have other countries have taken?

New Hampshire and Tennessee have already imposed income taxes from wages and salaries, but both countries imposed taxes on some income.

In 2021, Tennessee ended the income tax on the benefit of bonds and stock profits that have been imposed since 1929.

New Hampshire stopped its tax on interest and profits at the beginning of this year.

Some other countries also pay to cancel income taxes. The Oklahoma Council issued legislation in March, which would gradually reduce the rate of personal income tax to zero if the criteria for revenue growth are met. This is the draft law now in the Senate.

The new governor of Missouri, Mike Kiho, a Republican, wants to gradually get rid of income tax. The House of Representatives and the Senate possesses advanced legislation that will take a gradual step by exempting the income of capital gains from taxes.

This story was originally shown on Fortune.com

2025-04-06 15:01:00