![]() ![]() Since the Arizona Supreme Court refused to suspend the law while a lower court adjudicates details pertaining to the measure’s revenue allocation, the surtax remains in effect. ![]() Pending the outcome of Proposition 307, Arizona’s top marginal rate will be capped at 4.5 percent, even though a final decision on Proposition 208 is still pending judicial review. ![]() However, enough signatures were gathered via petition that voters will now be required to approve the flat tax via ballot measure (Proposition 307) in the November 2022 election. Pending revenue triggers, the tax would eventually have been reduced to 2.5 percent, regardless of income level. ![]() Any taxable income exceeding that amount would have been taxed at a rate of 2.98 percent. Single tax filers with taxable income up to $27,272 (double if filing jointly) would have been taxed at a rate of 2.55 percent. The transition would have initially collapsed the four current tax brackets into two. Senate Bill 1828 would have started the state’s conversion from a graduated individual income tax to a flat individual income tax on January 1, 2022. They simultaneously adopted revenue triggers that could create a lower, single-rate tax. Lawmakers effectively undid the ratification through legislation, lowering the base rates to ensure that the combined top rate never exceeded 4.5 percent. Proposition 208 (2020) had created a 3.5 percent high earners tax atop the state’s existing 4.5 percent top marginal income tax rate, functionally yielding a new top rate of 8 percent, with the additional proceeds earmarked for education. 2022 State Tax Changes ArizonaĪrizona’s 2022 tax changes are among the nation’s most complex, as they involve-among other things-the unwinding of a prior ballot measure. Some revisions adopted in 2021 legislative sessions will start at a later date (often July 1st, the beginning of the fiscal year in most states), while a substantial increase in New York’s individual and CIT rates was implemented retroactive to 2021. In addition to the tax changes mentioned here, many states will see automatic adjustments to a range of tax rates, from inflation-indexing of gas taxes or income tax rates and brackets to formula-driven adjustments to unemployment insurance tax rates. And Washington is attempting to implement a 7 percent capital gains tax under a constitution which defines income as a form of property and allows no property to be taxed at a rate greater than 1 percent.Īll 22 jurisdictions with significant changes are highlighted below. Meanwhile, five new states will join the list of those that allow pass-through businesses to be taxed at the entity level to sidestep federal limits on state and local tax (SALT) deductions. Some states will implement tax changes adopted by elected representatives while others will implement changes adopted through ballot measures.Īmong the more novel tax policy “experiments” to be implemented in 2022 is Maryland’s first-in-the-nation digital advertising tax. Other states, uncertain as to the impact of the pandemic on state revenue, opted to raise taxes. Some states have chosen to respond to budget surpluses associated with the pandemic recovery by enacting individual and corporate income tax (CIT) cuts. States, as Justice Louis Brandeis once wrote, are the laboratories of democracy, and those laboratories have been remarkably busy in recent years as, 90 years since Justice Brandeis coined the phrase, states continue to produce unique responses to policy challenges and opportunities.Īs the nation enters 2022, 21 states and the District of Columbia have significant tax changes taking effect. Iowa is phasing out its inheritance tax, while Maryland and Washington face litigation over new taxes on digital advertising and capital gains income respectively.Five states (Arizona, Colorado, Georgia, Illinois, and Oregon) implemented a pass-through entity election to serve as a workaround to the federal state and local tax (SALT) deduction cap.Florida is the only state to increase corporate income tax rates, as a temporary reduction expired. Four states (Arkansas, Louisiana, Nebraska, and Oklahoma) saw corporate income tax rates decrease.The District of Columbia was the only jurisdiction to increase income taxes. Five states (Arizona, Arkansas, Louisiana, North Carolina, and Oklahoma) cut individual income taxes effective January 1.Twenty-one states and the District of Columbia had significant state tax changes take effect on January 1, 2022.State Tax Changes Taking Effect JKey Findings ![]()
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