Kentucky to a flat 5%

[Medlin Software, Dennis]

KY appears to be going to a flat 5% tax rate (instead of brackets).  In addition, sales tax has been added to 17 prior exempt items, and cigarette tax nearly doubled, which most wonks have calculated will raise income for the state.  Interestingly, one of my customers wanted to argue how I "bought the kool-aid of the liberals" because I too see it as an actual tax raise (overall) on all but the very highest earners.  I foolishly tried to explain taxation NEVER goes down as government has a cost, and the cost never goes down, so taxes or debt (income) has to go up...  Most reports show the result as a tax hike on all but the top 5% of KY earners.  I found a few who claim it will reduce KY's income, but those are the ones I do not believe...

[Edsel]

You can bet it is not a decrease or the Kentucky State government would not have done it.

It appears that some will call the income tax "regressive" because those at the upper end of the income scale will get a tax reduction at the expense of those on the lower end.  I'm up there occasionally doing bluegrass but not plugged in to the political scene like in Tennessee.

[Medlin Software, Dennis]

"You can bet it is not a decrease or the Kentucky State government would not have done it."

That is always my point.  There is no chance a government will ever approve anything which in some way does not give the government a raise.  Just the reality, not a comment on any business (government is a business).

[Abby Normal]

MD realized they had a windfall due to fewer people itemizing for federal purposes and decided to keep 2/3 of the windfall and only give us a minor break. They increased the standard deduction by 500 per person which at an average state/county rate of 7.5% is a whopping $37.50. Meanwhile they're keeping about 200 million per year, supposedly in reserve for future education needs.

It's the first time in 30 years the standard deduction has been increased, but they did at least index it for inflation going forward.

As the federal standard deduction has increased over the years, we've had to start calculating whether it's better to force itemized on federal to save MD taxes. And also whether it's better to force sales tax instead of income tax to save MD taxes. When you force sales tax for a MD taxpayer, it increases MD itemized deductions and makes the state tax refund not taxable for federal the following year. It's a lot to think about!

[Medlin Software, Dennis]

Several states actively "took" the perceived federal savings.  At least one state, by doing nothing, also got a "raise".  That's the rub, so many only look at one piece of the puzzle, and some think taxes can actually go down.

Tax planning has to take all items into account, such as I am learning from a specialized group who live in their RV full time, and can domicile wherever they wish.  The one caveat for the RV perspective is health care, especially if not yet on Medicare.  The main states RV'ers use are the obvious, the ones with no income tax.  Those states generally also have lower vehicle registration fees, among other things beneficial to those not worried about actually living in their domicile state.