“Last week the Mississippi Legislature passed an income-tax phaseout plan that would completely eliminate the state’s income tax,” reports the Oklahoma Council of Public Affairs.
Mississippi has spent the last few years enacting various tax reform measures that have cut the state’s top income tax rate from 5 percent in 2023 to 4.4 percent this current year, with more planned cuts to drop the rate to 4 percent by 2026.
HB 1 furthers those cuts by enacting annual quarter-point reductions from 2027 to 2030, bringing the top rate down to 3 percent. After that, a phaseout plan goes into effect that, if certain revenue thresholds are met, could eliminate Mississippi’s income tax entirely by as early as 2040. Mississippi would become the first state in history to get rid of a state-levied income tax.
While conservative Mississippi is reducing income taxes, progressive Maryland is raising them. Maryland is moving to add two new higher tax brackets for households making over $500,000 or $1,000,000, and increasing capital gains taxes on Marylanders by 2%. “Those who make $500,000 per year will be taxed at 6.25%, while those making $1 million will be taxed at 6.5%. Currently, Marylanders who make over $250,000 are taxed at 5.75%.” That’s in addition to local income taxes levied by cities and counties in Maryland on top of the state income tax. For example, Maryland’s Montgomery County has a 3.2% income tax on its residents. So under recent Maryland legislation, a household in Montgomery County making over $1 million will pay a marginal tax rate of 6.5% to the state, plus 3.2% to Montgomery County, plus an additional 2% on capital gains income (like income you receive from selling a stock or bond or mutual fund).
Other states have reduced state income tax rates in recent years. For example, a decade ago, Arizona taxed most income at a 4.5% tax rate, but since 2023, it has had a flat 2.5% state income tax. That tax reduction has helped attract prosperous retirees, who still pay more in to state coffers than they cost in government services. North Carolina’s top marginal tax rate, which was 7.75% in 2013, is now 4.5%.
Reducing tax rates is one way for a state to attract rich people to move into the state. Lowering tax rates also attracts middle-class people, although for the middle class, housing costs are usually a bigger factor than state income tax rates.
The high cost of housing resulted in some people moving from expensive northern Virginia to other parts of the state, especially as remote work from home became more common.
California’s high housing costs have been a key factor in hundreds of thousands of Californians leaving for other states where housing is much cheaper.
Loosening zoning restrictions can make housing much cheaper. Rents have fallen in Austin as liberal zoning rules facilitated a building boom that made housing more affordable.
California’s rules inhibiting housing construction made housing there much less affordable. As the California Policy Center noted seven years ago, when housing was not nearly as expensive in California as it is today,
There are obvious reasons the median home price in California is $544,900, whereas in the United States it is only $220,100. In California, demand exceeds supply. And supply is constrained because of unwarranted environmental laws such as SB 375 that have made it nearly impossible to build housing outside the “urban service boundary.” These laws have made the value of land inside existing urban areas artificially expensive. Very expensive. Other overreaching environmentalist laws such as CEQA have made it nearly impossible to build housing anywhere. Then there are the government fees attendant to construction, along with the ubiquitous and lengthy permitting delays caused by myriad, indifferent bureaucracies with overlapping and often conflicting requirements. There is a separate fee and a separate permit seemingly for everything: planning, building, impact, schools, parks, transportation, capital improvement, housing, etc. Government fees per home in California often are well over $100,000; in the City of Fremont in 2017, they totaled nearly $160,000 on the $850,000 median value of a single family home.
Today, the median home price in California is even higher. “As of December 2024, the median home price in California reached $861,020,” “according to the California Association of Realtors.” People unable to afford a decent home in California continue to move to neighboring states like Arizona where housing is cheaper.
