Five states had income taxes back then, with Massachusetts and Virginia both implementing them that January. The first flat tax was Massachusetts’ tax, which went into effect in 1917. The first state income tax, implemented in Wisconsin in 1912, had a two-rate structure. They joined five other states which already had flat taxes: Illinois, Indiana, Massachusetts, Michigan, and Pennsylvania. Next came North Carolina in 2014, as part of that state’s comprehensive reforms, and most recently, Kentucky implemented a single rate of 5 percent in 2019. It would take another 30 years for another state to follow suit, when Utah implemented a flat tax in 2007. In 1987, the 75th anniversary of state income taxation, Colorado replaced its half century-old graduated-rate income tax with a single-rate tax. In what is already a year of significant bipartisan focus on tax relief, 2022 is also launching something of a flat tax revolution. Another four adopted legislation doing so this year, and a planned transition in a fifth state is now going forward under a recent court decision. In more than a century of state income taxes, only four states have ever transitioned from a graduated-rate income tax to a flat tax.
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