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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
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State Tax Changes Effective
January 1, 2021
• Twenty-six states and the District of Columbia had notable tax changes take
• Arkansas and Iowa reduced their corporate income tax rates and made other
substantive changes to their corporate income tax base.
• Arizona and New Mexico increased their top marginal individual income tax
rates by adding another bracket.
• Arkansas reduced its top marginal individual income tax rate by eliminating
the top income tax bracket.
• Tennessee joins seven other states that do not levy any individual income tax.
The Hall Tax, which previously taxed interest and dividend income but not
wage income, has been completely phased out.
• Arizona and Illinois made changes to their economic nexus laws governing
sales and use tax collection requirements for remote sellers.
• Connecticut, Vermont, and the District of Columbia will see adjustments to
their estate tax exemptions and/or rates this year.
• Connecticut began the phaseout of its capital stock tax; Illinois and
Mississippi are continuing their phaseout processes; and New York’s capital
stock tax has been completely repealed.
• Colorado and Oregon increased their cigarette taxes; Colorado, Georgia, and
Oregon created new taxes on vapor products.
• Arizona, Montana, and New Jersey recently legalized recreational marijuana
and set up a preliminary tax structure for when legal in-state sales begin.
• North Carolina took legislative action to prevent an automatic rate reduction
to its motor fuel tax at the beginning of the