On January 1, 2023, 38 states had noteworthy tax changes. 37 of the changes put extra money in people’s pockets. Here’s the result in pictures.
The Tax Foundation noted State Tax Changes Taking Effect January 1, 2023
On January 1, 2023, thirty-eight states have noteworthy tax changes taking effect. Most of these changes represent net tax reductions, the result of an unprecedented wave of rate reductions and other tax cuts in the past two years as states respond to burgeoning revenues, greater tax competition in an era of enhanced mobility, and the impact of high inflation on residents.
Eleven states have individual income tax rate reductions taking effect on January 1: Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire (interest and dividends income only), New York, and North Carolina. Three of these states—Arizona, Idaho, and Mississippi—are converting from graduated-rate income tax structures to flat tax structures on New Year’s Day.
One state, Massachusetts, has an income tax rate increase taking effect. Massachusetts’s individual income tax will convert from a flat to a graduated-rate tax with a new rate of 9 percent on income exceeding $1 million.
Five states—Alabama, Delaware, Iowa, Rhode Island, and Nebraska—are newly exempting all or a portion of retirement income or military pension income from income taxation.
Two states, Hawaii and Illinois, will expand their earned income tax credits (EITCs).
Personal Income Three Ways
Personal Income Chart Notes
- Disposable income means after tax
- Real means adjusted for inflation
- The three spikes, one in 2020 and two in 2021, are free money Covid fiscal stimulus payments, the third of which was under Biden and fueled inflation.
In January of 2023 disposable personal income surged. The first chart shows how much extra money people had to spend each month thanks to tax cuts. And spend they did.
Real Income and Spending
It’s real (inflation adjusted) spending that drive GDP and the surge is easy to spot (yellow highlight).
Real hourly wages rose less than one percent. But on top of the tax cuts, more people held multiple jobs.
Multiple Jobholders to the Rescue
The index of average hourly earnings rose from 109.8 in 2020 to 131.2 in December of 2023. That’s a gain of 19.5 percent.
Adjusting for inflation wages rose from 103.2 to 103.8. That’s a gain of 0.6 percent total for three years.
4th Quarter GDP Blows Past Consensus
The Bloomberg consensus estimate for fourth-quarter GDP was 2.0 percent. Instead GDP rose 3.3 percent annualized.
On January 25, I noted 4th Quarter GDP Blows Past Consensus, Up a Strong 3.3 Percent
Moral of the Story
If you tax less, people will spend more.
Now, if Congress can just do something about massive deficit spending and $34 trillion in debt.
Debt Soaring Out of Sight
GDP is fueled by both consumer debt and government debt. Regarding government debt, Republicans are in on the deal.
For example, The GOP Supports a Child Tax Credit Boost and Affordable Housing Expansion
Without passing anything but continuing resolutions, we went from a House Speake Kevin McCarthy’s proposal of $1.471 trillion bill to Mike Johnson’s $1.66 trillion bill that does not include, Ukraine, Israel, or the US border with Mexico.
And not only did consumers spend their tax cuts, they also racked up credit card debt.
Consumer Credit Hits Record $5 Trillion
For discussion, please see Retail Sales Surge 0.6 Percent, Beating Economist’s Expectations
Consumers keep spending more and more, and much of that spending is online.
Also see How Did Covid Change Your Propensity to Buy Things Online?
So, if you were at all inclined to think Bidenomics is to credit for anything good, please think again.
The inflation enriched the upper middle class and higher. They are spending these gains.
Spending the “gains“ on what?
I don’t understand how anybody comes out ahead if everything cost more because dollars are worth less?
Area news print said people are very angry that there property taxes are going up 20% to 30%, also home insurance is increasing terribly, so lower one raise the other
It’s election year NatGas is $2. Oil at $75 is $24 in real terms (Bloomberg). Since
2016 real oil prices osc at the lows. If SPX [1M] RSI enters a bearish territory the glut might cont another decade. Exogenous events forced the states to cut income tax.
There is a difference between killing 3 US troops in Jordan and Syria. Flexibility &
stretching to keep a good balance after unexpected moves. Flexibility avoids pain.
Power training causes pain to build bigger muscles. Doing nothing, after Iran shot down a US drone in 2019, invited troubles. US and NATO shot down 300 drones and missiles in the red sea, in the last 2 months. No sinking. The Eisnhower stands tall..
“Debt Soaring Out of Sight”
Debt has been creating an illusion. It is taking more and more of it to maintain the illusion, thus debt curves up and away from GDP. Thus the WEF elitists and their Great Reset agenda. What can’t continue, won’t. The WEFers know it is coming to and end and they want to control how it ends.
“So, if you were at all inclined to think Bidenomics is to credit for anything good, please think again”
Birxonomics created a huge mess out of the economy. She was the one who wanted it shut down, resulting in what has followed after. Brownstone Institute wrote about Fauci and Birx smirking to each other behind Trump’s back as he was talking to reporters questioning him about things such as shutting down restaurants to mitigate the spread of Covid.
Birx and Fauci didn’t have a care in the world about the harm they were promoting on the American people.
Cutting taxes and spending more is just pure Keynesian economics. Amp up demand and the private sector will increase hiring and production, which puts upward pressure on wages and inflation.
They left out Washington States carbon tax that started in 2023. It added on to the gas tax in a big way. We had the highest gas prices in the country for a while.
Since most households finance their cars and homes, should the cost of that be included in a cost of living adjustment? Or is that presumed to be already reflected in the prices of the referenced goods?
If this theory is true then shouldn’t GDI show it? Why is there a discrepancy then between GDI and GDP?
Bidenomics may not be working for everyone but it’s working great for me and until that breaks it’s Biden in 2024.
The cult will be displeased with your insolence,
The 4 quarter % change in GDP is 2.9% and GDI is -0.1%. The average if the two, GDO, is +1.4%. Philly Fed reports GDP+ to filter out the noise and is +0.7%.
Don’t forget the huge increases in borrowing; both government and personal.
What happened to saving money for a rainy day? Seems like a major economic storm over the horizon.
To be fair, many are struggling just to put food on the table. However, the basic answer to your question is, in my view, that we are a wants = needs society. Prudence is no longer practiced. In fact, it’s frowned upon and ridiculed.
My wife and I are South Dak residents: NO income taxes.
Correction: No STATE Income taxes. You still have federal, property, and sales.
…and various “fees” and “adjustments” and “assessments” and…
Yes, South Dakota is a very tax friendly state. I will be taking an overnight stay in your state to establish residency a month before I retire to the Philippines. Thus avoiding CA state income taxes once I start pulling from my tax deferred accounts.
One MAJOR adjustment now, since I have Prime account (for the Video Streaming), I do not buy from Amazon until I check Walmart and also a “GOOGLE SHOPPING” search also. Amazon is no longer price leader. In fact, they are often 20% more expensive on Electronics Goods. The same SALE Bluetooth Buds I bought at Wmt would have costed $29 and at WMT: $9.00
Amazon has been overpriced for a few years now. I use Amazon to compare products. Once I figure out what I want, I buy somewhere else.
I noticed this as well, and have been buying from other vendors lately. Stuff also seems to take longer to arrive with Amazon too. With the addition of “limited” commercials being added to prime video streaming beginning today, I’m beginning to wonder if the prime fee is worth it anymore?
So what states have tax reductions for 2024?