Since 1990, state lawmakers have cut top personal and corporate income tax rates far more often than they have raised them, shifting more responsibility onto working families
State lawmakers have spent the past several decades repeatedly cutting taxes for high-income households and profitable corporations while increasing taxes on consumer purchases, according to a new brief and historical database released today by the Institute on Taxation and Economic Policy.
This new database and analysis provides a long-term view of changes in state personal income, corporate income and sales tax rates. The data reveal that since 1990, lawmakers have cut top personal income tax rates 210 times and top corporate tax rates 168 times. By comparison, states raised those rates only 73 and 42 times, respectively. States also increased sales tax rates 68 times while reducing them just 29 times.
You can download the historic rate data here or use our new interactive State Tax Rate Explorer.
Other key findings include:
- The median top state personal income tax rate has fallen from 6 percent in 1990 to 4.6 percent today.
- The median top corporate income tax rate has declined from 7.2 percent to 5.9 percent.
- Among states with a sales tax, the median state rate has increased from 5 percent to 6 percent.
- Eleven states have cut both their top personal and corporate income tax rates while also increasing their sales tax rates since 1990.
“Looking at these decisions over more than three decades reveals a clear and troubling pattern,” said Sarah Austin, ITEP Senior Analyst and author of the brief. “Many state lawmakers have reduced taxes on the households and corporations with the greatest ability to pay while relying more heavily on sales taxes that take a larger share of income from working families.”
Repeated cuts to top income tax rates have made many state tax systems less responsive to taxpayers’ ability to pay and, in some cases, reduced the revenue available for schools, infrastructure, healthcare and other essential services. At the same time, higher sales tax rates affect nearly every household, including families whose incomes are far below the threshold at which top income tax rates apply.
North Carolina offers one of the clearest examples of the broader tax shift. Since 2000, its top personal income tax rate has fallen from 7.75 percent to 3.99 percent, its corporate rate has dropped from 6.9 percent to 2 percent, and its sales tax rate has increased from 4 percent to 4.75 percent. Sales taxes now provide a substantially larger share of state and local revenue, while the income tax share has declined.
The brief notes that some states have recently pursued a more progressive approach. Massachusetts, Minnesota, and New Mexico have raised top income tax rates and expanded refundable tax credits, while Washington, Rhode Island, Hawai‘i, and Maine enacted higher rates on income exceeding $1 million this year. More than half of states now offer Earned Income Tax Credits, and more than a dozen have adopted state Child Tax Credits.
“States face a fundamental choice about who will pay for the services their residents depend on,” Austin said. “Strengthening taxes on high-income households and profitable corporations can help states sustain critical investments without asking working families to shoulder even more of the cost.”
