Report State Tax Actions: 2024

Despite a slowdown in state revenue growth compared to the last three years, state policymakers continued to cut taxes in 2024.

This marks an unprecedented period of state tax reform that began in 2021. Since then, all but two states have cut taxes in some way, shape, or form. The impetus for all these tax cuts is a surge in pandemic-era tax collections, which was driven by more than $800 billion in federal stimulus, increased consumer spending on goods subject to sales taxes, and a tight labor market that boosted incomes and lowered unemployment.

Now, after years of sky-high growth, state revenue collections are falling back to earth. Federal stimulus funding is winding down, public expenditures have increased, and states are beginning to feel the effects of past tax cuts. These factors, combined with slower revenue growth plus smaller surpluses than those seen in 2021 and 2022, present a more cautionary picture for states moving forward. Even so, most states remain on solid fiscal footing and state lawmakers spent another legislative session looking at ways to offer tax relief.

This report is based on a 2024 survey of state fiscal offices and includes enacted tax legislation with a revenue impact of at least $1 million. In conjunction with this report, NCSL maintains the State Tax Actions Database, which contains tax change information for multiple years in searchable form. This year, the survey identified the following tax trends:

• Property tax relief
• Income tax cuts
• Tax benefits for families with children
• Tax incentives for business investments
• Sales tax exemptions

Property Taxes

In contrast with the previous three years, which saw states primarily concerned with income tax relief, property tax relief came into focus in 2024. As of the second quarter of 2024, the median sales price of a house stood around $412,000—a 20% increase above the median price of $329,000 in the first quarter of 2020. While home values have come down from their peak values since the Federal Reserve raised interest rates and cooled the real estate market, they remain significantly higher than before the COVID-19 pandemic.

Although debate about precise causes rages on, the appreciation in home values would not have occurred without a strong demand for housing coupled with constrained housing supply. Historically low interest rates reduced the cost of borrowing, enabling many households to buy houses despite their rising values. In addition, decreased spending outside of the home and federal stimulus allowed many households to save more to afford down payments. Accompanying these demand pressures, a substantial reduction in homebuilding since the 2008 Great Recession has left the country with a deficit of homes relative to our population's needs.

As home values increase, so do assessed values for property tax purposes. State legislatures increasingly turned their attention to providing property tax relief to homeowners amid affordability concerns and the rise in cost of living. In 2024, NCSL tracked at least 12 states enacted some form of property tax relief-not to mention the countless other proposals seen across the majority of states: Alabama, Arkansas, Colorado, Iowa, Kansas, Minnesota, Nebraska, New Jersey, South Dakota, Ohio, Vermont, and Wyoming. Voters in at least eight states—Arizona, Colorado, Florida, Georgia, Louisiana, New Mexico, Noth Dakota, Virginia, and Wyoming—will consider property tax ballot initiatives in the upcoming 2024 General Election.

Homestead exemptions were the most common policy approach, with states providing targeted relief to populations like veterans or senior citizen homeowners or to all residential property owners. Homestead exemptions either function as a credit against the amount of property taxes due or as an exemption of a portion of the property's value from tax.

State Examples

• Arkansas enacted H.B. 1002 to increase the state's homestead property tax credit from $450 to $500.
• Colorado spent the bulk of the legislative session considering property tax relief, eventually enacting H.B. 233 and HB 24B-1001. The two pieces of legislation will decrease property tax rates, limit the growth in assessed values and rates over time, and cap the amount of revenue localities can raise from property taxes.
• Nebraska held a special legislative session to deliberate on property tax relief, culminating in the enactment of L.B. 34. This bill would end an income tax credit available for individuals and corporations in order to pay for a new property tax credit for all homeowners.
• Voters in North Dakota will decide whether to eliminate state and local property taxes, which fiscal analysts estimate could result in an increase in $3.15 billion in state expenditures over the 2025-2027 biennium.

Income Taxes

Federal aid to states and individuals following the COVID-19 pandemic created a unique economic landscape in which states saw strong revenue collections, large budget surpluses, and inflation at a rate not seen since the 1980's. In response, more than half of all states cut income tax rates beginning in 2021. Today, inflation has cooled and states remain on strong footing economically, but they have begun to experience slowing revenue collections and smaller budget surpluses INSERT NCSL SBA WHEN AVAILABLE. This decline has resulted in a shift of priorities for states during the 2024 legislative session. Less states enacted income tax rate cuts across the board and instead focused on enacting targeted income tax relief.

A total of five states—Hawaii, Iowa, Kansas, South Carolina, and West Virginia—reduced individual income tax rates. Six states reduced both individual and corporate income tax rates: Arkansas, Colorado, Georgia, Idaho, New Mexico, and Utah. In addition to reducing income tax rates, states used income tax credits to further offer targeted relief to individuals and businesses.

State Examples

• With the enactment of H.B. 2404, Hawaii increased the standard deduction amounts and widened the income tax brackets for taxpayers.
• During a special session to provide tax relief, the Kansas legislature passed SB1 which reduced the individual income tax, exempted Social Security income from taxes, and increased the tax credit available for household and dependent care expenses.
• Rhode Island H.B. 7225 increased the allowable modification of taxable retirement income from certain pension plans and annuities from $20,000 to $50,000.
• Idaho reduced the corporate and individual income tax rate to 5.695% with the enactment of HB 521.
• New Mexico enacted H.B, 252 to allow more health care workers to qualify for the Rural Healthcare Practitioner Tax Credit.

Tax Benefits for Families with Children

In recent years, both state and federal governments have shown increasing interest in using tax policy to help families with children address the rising costs of child care, among other child-rearing expenses. As these expenses continue to climb, policymakers are seeking ways to alleviate the financial burden on families, and tax benefits have become a primary tool. States may offer Child Tax Credits (CTCs) and/or Child and Dependent Care Tax Credits (CDCTCs) to working families with children to reduce tax liability and increase after tax incomes in recognition of higher expenses associated with raising children.

This year alone, states like Colorado, Minnesota, New York, and Utah enacted new or expanded existing CTCs, making these benefits more generous and accessible to families. These states joined the 15 others that already provide similar credits, highlighting the growing trend of using tax policy to assist families. Additionally, states like Kansas, Georgia, and Wisconsin have enhanced their CDCTCs, providing greater financial support to families managing child care expenses.

Beyond individual tax credits for families, some states are also incentivizing businesses to provide or partner with child care providers to offer services as an employee benefit. Recognizing the critical role employers can play in addressing child care challenges, states such as Alabama, Florida, and New Mexico have enacted or expanded incentives for businesses to offer child care services to employees this legislative session. These business-focused initiatives aim to encourage employers to help bridge the gap in child care access and affordability, benefiting both families and the workforce.

Looking ahead, federal action on these issues is expected to gain momentum. Discussions surrounding expanded CTCs and CDCTCs are anticipated to play a key role in prospective tax legislation in early 2025, potentially offering broader relief to families nationwide. State legislatures are also expected to introduce similar proposals, with some states already forming interim committees to study potential policies aimed at supporting families with children.

State Examples

• Florida created a child care tax credit for businesses that provide or contract out child care services on behalf of their employees with H.B. 7073.
• Utah passed H.B. 153 to raise the age of an eligible child a taxpayer may claim for the state child tax credit from four to five years old.
• Wisconsin increased the percentage of the federal CDCTC taxpayers could claim for as a state credit from 50% to 100% and increased the amount of expenses taxpayers can use to calculate the state credit with A.B. 1023.

Tax Incentives for Business Investments

States routinely enact and employ tax incentives to encourage business investments in new projects, technologies, and infrastructure. These incentives can be designed with specific goals in mind: fostering economic growth, supporting certain sectors of the economy, creating jobs, promoting innovation and attracting foreign investment. By reducing the cost of capital and providing favorable tax treatment, states may enhance the likelihood that businesses will expand their operations and explore new markets.

Capital investment has been negatively affected by recent economic conditions, particularly relatively high interest rates. Higher interest rates can discourage businesses from borrowing to finance new investments, leading to a slowdown in aggregate capital expenditures. States can proactively implement tax incentives to mitigate the effect of elevated costs in response. States often target incentives toward industries that align with state priorities, such as renewable energy, technology, and manufacturing. This targeted approach not only encourages immediate investment but fosters the development of industries policymakers deem critical for future competitiveness.

Legislatures in at least 10 states enacted tax incentives to encourage business investments: Colorado, Florida, Georgia, Maryland, Michigan, Missouri, Nebraska, New Jersey, South Carolina, Washington, and Wisconsin.

State Examples

• Georgia provided a corporate income tax deduction to businesses that use grants to invest in broadband infrastructure with S.B. 344.
• New Jersey enacted S. 3432 to create the Next New Jersey Program to encourage the development of artificial intelligence investments. The state will award up to $500 million in tax credits to businesses that invest a minimum of $100 million in capital for business facilities dedicated to artificial intelligence.

Sales Tax Exemptions

Going into the 2024 legislative session, states were not seeking revenue raising measures and still responding to consumers concerns over inflation on everyday goods. Likewise, businesses faced an increase in the cost of daily business operations. To minimize the financial strain on individuals and businesses, states responded by enacting sales tax exemptions on a variety of goods.

Arkansas, California, Florida, Illinois, Iowa, Oklahoma, South Carolina, and Washington passed sales tax exemptions for individuals. Florida passed legislation to renew multiple sales tax holidays: the disaster preparedness holiday, back-to-school sales tax holiday, recreational items tax holiday, and the power tools sales tax holiday. Arkansas authorized a one day back-to-school sales tax holiday. Other states took a permanent approach for the items they exempted from sales tax. For instance, Illinois and Oklahoma permanently exempted groceries from sales tax. In Utah, voters will be able to decide whether they want to exempt groceries from sales tax in November.

A total of nine states enacted sales tax exemptions for businesses—Arizona, Georgia, Indiana, Mississippi, Maine, Missouri, Nebraska, New Jersey, and Tennessee. Like consumers, businesses faced higher costs in their daily operations. States responded by enacting sales tax exemptions for businesses. In Georgia, a sales tax exemption on diesel for agricultural purposes was enacted. Meat processing services in Kansas were also exempted.

State Examples

• California passed legislation to exempt breast pumps from sales tax with A.B. 1203.
• South Carolina enacted H.B. 3563, a sales tax exemption on feminine hygiene products.
• In Indiana, S.B. 228 removed the number of sales transactions as a trigger for sellers to collect and remit sales taxes, thus reducing the number of sellers who’d be liable for taxes in the state.