Thirty-four states will ring in the new year with notable tax changes, including 17 states cutting individual or corporate income taxes (and some cutting both). Generally, state tax changes take effect either at the start of the calendar year (January 1) or the fiscal year (July 1 for most states), with rate changes for major taxes typically implemented effective January 1—either prospectively, as in these cases, or retroactively, as may happen under legislation enacted in the new year.

The past several years have seen a wave of significant tax reforms, including rate reductions and tax cuts, as states emerged from the pandemic with revenue surpluses and stared down inflation. Whether and how this trend continues is yet to be seen, but evidence from the past three years indicates that many states understand and value the importance of creating and maintaining a stable, pro-growth, and competitive tax code.

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