5 states that just cut taxes in 2022

The annual inflation rate in the U.S. ramped up to 7.5% in January. That’s the highest rate since 1982 and the eighth consecutive month above 5%.

Here are the five states where taxes have dropped for some earners — plus the one place where income taxes are getting higher.

Arizona

Before 2022, some earners in the Grand Canyon State were paying income tax as high as 8%. Wealthier Arizonans faced an extra 3.5% charge on top of the existing 4.5% top income tax rate.

But lawmakers lowered the state’s base tax rates so an individual’s combined rate won’t exceed 4.5%, the nonprofit Tax Foundation explains.

The state is also planning more changes that could, over time, create a 2.5% individual tax rate regardless of income — the lowest flat tax in America. Currently, 2.59% is the lowest rate Arizona residents pay.

“Every Arizonan — no matter how much they make — wins with this legislation,” Gov. Doug Ducey said when the move cleared the legislature. “They will get to keep more of the money they earn under this tax plan.”

However, voters will need to approve the flat tax through a ballot measure in the November 2022 election.

Arkansas

Legislation in the Natural State will lower the top income tax rate for individuals from 5.9% to 4.9% over the next four years. For the 2022 tax year, the top rate has been reduced to 5.5%.

The law also gives low-income taxpayers a $60 tax credit, which Gov. Asa Hutchinson says will reduce taxes owed for about 28% of Arkansas taxpayers and eliminate it for more than 100,000 people.

Hutchinson, who signed the reduction into law in a December special session, says the tax cut will still benefit the state’s coffers over time.

“For the average Arkansas family, this tax break could mean groceries on the table, a new set of tires or a less stressful Christmas,” Hutchinson said.

“It allows hard-working Arkansans to keep more of their hard-earned money and also makes Arkansas more competitive with our surrounding states, spurring job creation and economic growth for years to come.”

Louisiana

Taxpayers in the Bayou State can also expect to see a bit less money withheld from their paychecks this year.

Voters approved several tax changes that took effect Jan. 1, including the top individual income tax rate falling from 6% to 4.75%.

Also, individual income tax rates went from 2%, 4% and 6% to 1.85%, 3.5% and 4.25%, respectively.

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North Carolina

If you live in the Tar Heel State, your income tax rate fell to 4.99% on Jan. 1.

The decrease from 5.25% is the first of six incremental reductions that, by 2027, will reduce the individual tax rate to 3.99% — one of the country’s lowest.

The budget that ushered in the tax cuts — along with higher education funding and raises for teachers and other public employees — moves North Carolina forward as the state emerges from the pandemic, says Gov. Roy Cooper.

“Our schools, communities, small businesses and families need our help right now, especially as we recover from this pandemic,” Cooper said on Twitter.

Oklahoma

Lawmakers implemented a 0.25% income tax rate reduction, as the top rate fell from 5% to 4.75%.

Another piece of legislation reduced the corporate income tax from 6% to 4%, giving the state more of a competitive advantage, Gov. Kevin Stitt’s office said in a statement.