2 states lowering taxes due to federal reform

It’s not just your federal income tax bill that stands to be impacted by the recent federal tax code overhaul. Your state income tax tab could change, too.

A couple of states have already enacted legislation to lower taxes, and more are expected to follow, the Tax Foundation reported recently.

These changes stem from the fact that state tax codes generally conform to many federal tax code provisions. Because of federal tax reform, states may experience higher collection rates — largely due to things like the repeal of the personal exemption, reduction of itemized deductions, and limitations on the interest deduction.

RELATED: States where Americans pay the highest in state income taxes

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States where Americans pay the highest in state income taxes
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States where Americans pay the highest in state income taxes

California

State income tax: 1% to 13.3% 

Maine

State income tax: 5.8% to 10.15%

Oregon

State income tax: 5% to 9.9%

Minnesota

State income tax: 5.35% to 9.85%

Iowa

State income tax: 0.36% to 8.98%

New Jersey

State income tax: 1.4% to 8.97%

Vermont

State income tax: 3.55% to 8.95%

Washington, DC

State income tax: 4% to 8.95%

New York

State income tax: 4% to 8.82%

Hawaii

State income tax: 1.4% to 8.25%

Wisconsin

State income tax: 4% to 7.65%

Idaho

State income tax: 1.6% to 7.4%

South Carolina

State income tax: 0% to 7%

Connecticut

State income tax: 3% to 6.99%

Arkansas

State income tax: 0.9% to 6.9%

Montana

State income tax: 1% to 6.9%

Nebraska

State income tax: 2.46% to 6.84%

Delaware

State income tax: 2.2% to 6.6%

West Virginia

State income tax: 3% to 6.5%

Georgia

State income tax: 1% to 6%

Kentucky

State income tax: 2% to 6%

Louisiana

State income tax: 2% to 6%

Missouri

State income tax: 1.5% to 6%

Rhode Island

State income tax: 3.75% to 5.99%

Maryland

State income tax: 2% to 5.75%

North Carolina

State income tax: 5.75%

Virginia

State income tax: 2% to 5.75%

Oklahoma

State income tax: 0.5% to 5.25%

Massachusetts

State income tax: 5.1%

Alabama

State income tax: 2% to 5%

Mississippi

State income tax: 3% to 5%

Utah

State income tax: 5%

Ohio

State income tax: 0.495% to 4.997%

New Mexico

State income tax: 1.7% to 4.9%

Colorado

State income tax: 4.63%

Kansas

State income tax: 2.7% to 4.6%

Arizona

State income tax: 2.59% to 4.54%

Michigan

State income tax: 4.25%

Illinois

State income tax: 3.75%

Indiana

State income tax: 3.3%

Pennsylvania

State income tax: 3.07%

North Dakota

State income tax: 1.1% to 2.9%

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As a result, states may see more tax revenue, according to the foundation:

“How these provisions affect revenues varies from state to state, but most states can expect higher collections because of federal tax reform.”

Some states have decided to give these new revenues back to taxpayers in the form of a tax cut.

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In Idaho, for example, conforming with the new federal tax code will increase that state’s tax revenue by an estimated $97.4 million this year, according to the Idaho State Tax Commission.

By far the biggest factor contributing to that increase is the state’s conforming with the federal government’s killing of the personal exemption. In other words, Idaho taxpayers won’t be able to claim that tax deduction on their federal or state tax returns.

The upside is that Idaho lawmakers responded by lowering state income tax rates a tad. The recently adopted House Bill 463 lowers Idaho’s income tax rate for individuals by 0.475 of a percentage point across the board and lowers the corporate income tax rate by 0.475 of a percentage point, among other changes.

Georgia is the other state that so far has adopted legislation to lower state income taxes. Georgia’s House Bill 918 will lower the top individual and corporate income tax rates from 6 to 5.5 percent by 2020, among other changes.

State legislation that would have similar impacts is also being actively considered in other states, according to the Tax Foundation.

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