US State Tax Rates Held Steady In 2006

by Leroy Baker, Tax-News.com, New York

31 January 2007

A study by advocacy group the Tax Foundation has come to the surprising conclusion that not a single US state increased its individual income tax rates during 2006.

"Primarily, strong economic growth and low unemployment helped keep rates from rising," observed Curtis Dubay, author of the Tax Foundation's State Business Tax Climate Index.

"The trend across states continues to be to lower rates and broaden brackets," Dubay noted.

According to the Tax Foundation, advocates for sound tax policy have reason to cheer as lawmakers across the nation are seeing the benefits of broad tax bases, low rates, and stable tax structures.

"Currently, there are several states that are looking at improving their tax structures," announced Dubay, continuing: "Lowering tax rates is an easy way to keep a state competitive, attract new business, and promote growth."

States which brought about notable tax cuts in 2006 included: New York, which allowed two temporary income tax rates of 7.375% over $100,000 and 7.7% over $500,000 to expire; Arizona which cut its rates across the board, lowering its top rate from 5.04% to 4.79%; Ohio, which lowered its top rate now rests at 6.87%, down from 7.185% for tax year 2005; and New Mexico dropping its top rate from 5.7% to 5.3%.

Nebraska increased the size of its top two brackets, while Oklahoma and Utah also widened their brackets. Washington, D.C. lowered its rates and widened its top bracket.

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