Tax actions: a mixed bag.

• Author: Rafool, Mandy
• Position: TRENDS & TRANSITIONS - Tax reform

Early on, 2013 looked like it would be a big year for tax reform. Governors in several states spoke of bold tax cuts in their state-of-the-state addresses, and in March, 34 states and the District of Columbia reported to NCSL that tax reform measures were on their 2013 legislative calendars. As it turned out, the year was more of a mixed bag. Thirteen of the 34 states enacted tax reforms, but in many cases the adopted measures were significantly pared down from what was introduced. The reforms generally did one of three things: reduced income taxes, broadened the sales tax base or increased transportation funding.

Overall, seven states cut net taxes by more than 1 percent, five states increased them by more than 1 percent, and 36 states made no significant changes. Collectively, states cut taxes by $1.3 billion, a modest sum compared to past years and about 0.2 percent of the prior year's collections. (Data for Georgia, Missouri, Puerto Rico, the U.S. Virgin Islands and Washington, D.C., were not available.)

Most of the cuts were to personal income taxes, and will start with FY 2014 revenue collections. The biggest decreases were in Iowa, Maine, North Carolina, North Dakota, Ohio and Wisconsin. Maine and Wisconsin applied previously enacted rate cuts, and Iowa created several new credits. In addition, sales tax rates dropped in two states: Arizona will see a $900 million reduction because voters in November declined to extend a temporary rate increase, and the Kansas...