States Have Cut taxes for the WealthY and Corporations Nearly 300 times This Century
As states begin their 2026 legislative sessions, legislators are grappling with massive federal budget cuts to fund tax cuts in the ironically named One Big Beautiful Bill (H.R. 1). These cuts, in addition to potential revenue shortfalls, could trigger major healthcare, hunger, and education crises in states.
Based on a new comprehensive database of state tax rates from the Institute on Taxation and Economic Policy (ITEP), the State Revenue Alliance (SRA) has released an analysis of historical state tax data, which shows that in a majority of states, the wealthiest households and/or corporations are paying lower personal and corporate tax rates today than they were 26 years ago. At the same time, sales taxes have also increased in 11 states.
The numbers show a state policy environment increasingly tilted to the rich. Since 2000, states have cut the top income and corporate tax rates nearly 300 times. This loss of revenue has caused state budgets to come up short in too many states across the country: for example, in Nebraska and Idaho, where, according to ITEP, revenue shortfalls “were created largely by income tax cuts for high-income households,” favoring the wealthy over everyone else.
The Institute on Taxation and Economic Policy (ITEP) analysis of state top tax rates is compiled from various national and state sources. Please note that 42 states have income taxes, 44 have corporate profit taxes, and 45 have a sales tax. Also note that these rankings compare states across a wide range of data. They do not create a full picture of life in any state and this examination is not an endorsement of any state’s tax system, as our vision is that all communities in every state have the resources they need to thrive, and that those who can afford to pay the most contribute their fair share.
For most of the 20th century, states taxed wealthier residents at higher rates than goods and services. But since the mid-90s, the median state sales tax rate has been higher than the median personal income tax rate.
From 2000 to today,
A majority of states (28) have cut their top corporate income tax rate.
Twenty-five states have cut their top personal income tax rate.
Collectively, states have lowered the top personal income tax rate 172 times, compared to raising it only 44 times.
States have lowered the top corporate income tax rate 127 times and only raised them 21 times since 2000.
Regressive taxes, like general sales taxes, affect people with lower and middle incomes more, raising costs on everyday items and exacerbating inequality.
States have raised their sales tax rates 48 times since 2000, while lowering them only 18 times.
When comparing today's tax rates to those in 2000, twelve states have lower top tax rates and have raised general sales taxes, which adversely affects people with low and moderate incomes: Arkansas, Idaho, Iowa, Indiana, Kansas, Louisiana, Nebraska, New Mexico, North Carolina, Ohio, Utah and Vermont.
Another 10 states cut both personal and corporate rates but left their sales tax rates unchanged. Those states were: Arizona, Colorado, Georgia, Kentucky, Mississippi, Missouri, North Dakota, Oregon, Rhode Island, and West Virginia.
Some states have made deep cuts to their tax base since 2000.
Ohio has been the most aggressive in moving toward a regressive tax code by slashing its personal tax rate by 62% and repealing its corporate tax, while increasing the state sales tax by 15%.
Most of these 12 states have tumbled down the Institute for Taxation and Economic Policy’s Inequality Index, which measures the overall regressivity of state tax codes.
In 1996, North Carolina’s tax code was the 8th most progressive in the nation; Ohio was 11th. In the 2024 version of ITEP’s Inequality Index, North Carolina had fallen to the 24th most regressive tax code, Ohio is now the 15th most inequitable.
Kansas was the 17th most progressive tax code in 1996 and is now 24th.
Vermont stands apart from the other 11 states. While it has seen small reductions in its top marginal income and corporate tax rates, and raised its sales tax from 5 to 6%, these regressive changes have not affected its overall ranking as the second most progressive tax system in the country.