Nine states to cut income taxes in 2026
A Tax Foundation analysis, cited by CBS News, finds that nine U.S. states — including Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina and Ohio — will reduce individual income tax rates on January 1, 2026 under previously enacted laws, continuing a post‑pandemic trend of state tax cutting. The changes include new flat or lower top rates, multi‑year phase‑downs and mechanisms tied to revenue or reserve thresholds, even as groups like the Center on Budget and Policy Priorities warn that shrinking income taxes is contributing to emerging budget shortfalls and may constrain funding for services such as education.
📌 Key Facts
- Georgia will cut its flat income tax rate from 5.19% in 2025 to 5.09% in 2026 and then by 0.10 percentage point annually until reaching 4.99%.
- Indiana’s flat individual income tax will fall from 3.00% to 2.95% on January 1, 2026, with a further cut to 2.90% scheduled for 2027.
- Kentucky’s rate will drop from 4% to 3.5% in 2026 under a 2022 law with revenue and reserve 'triggers' that allow additional annual cuts.
- Mississippi’s individual income tax will decline from 4.4% in 2025 to 4.0% in 2026, with a new law aiming to reach 3% by 2030 and potentially to 0% thereafter.
- Montana’s top marginal income tax rate will be reduced from 5.9% to 5.65% in 2026 and 5.4% in 2027, while expanding eligibility for the lowest bracket.
- Nebraska’s individual income tax rate will fall from 5.2% to 4.55% in 2026 and is scheduled to drop to 3.99% by 2027, even as CBPP notes the state has shifted from a $1.9 billion surplus in 2023 to a projected $432 million shortfall.
- North Carolina’s flat income tax rate will decline from 4.25% to 3.99% starting in 2026.
- Ohio’s latest budget sets a flat 2.75% state income tax on nonbusiness income above roughly $26,000 beginning in 2026.
📊 Relevant Data
In Georgia, the median household income for Asian-headed households in 2023 was $105,123, compared to $57,694 for Black or African American-headed households and $85,384 for White-headed households, with the White population constituting 52.46% of total residents.
Georgia Median Household Income By Race - 2025 Update — Neilsberg
In Indiana, the median household income for Asian-headed households in 2023 was $82,077, compared to $45,022 for Black or African American-headed households and $73,680 for White-headed households, with the White population constituting 78.51% of total residents.
Indiana Median Household Income By Race - 2025 Update — Neilsberg
In Kentucky, the median household income for Asian-headed households in 2023 was $82,022, compared to $45,862 for Black or African American-headed households and $64,547 for White-headed households, with the White population constituting 83.68% of total residents.
Kentucky Median Household Income By Race - 2025 Update — Neilsberg
In Mississippi, the median household income for Asian-headed households in 2023 was $73,272, compared to $37,897 for Black or African American-headed households and $68,018 for White-headed households, with the White population constituting 56.31% of total residents.
Mississippi Median Household Income By Race - 2025 Update — Neilsberg
In Montana, the median household income for Some Other Race-headed households in 2023 was $72,841, compared to $52,798 for Black or African American-headed households and $71,397 for White-headed households, with the White population constituting 85.68% of total residents.
Montana Median Household Income By Race - 2025 Update — Neilsberg
In Nebraska, the median household income for Asian-headed households in 2023 was $83,105, compared to $48,201 for Black or African American-headed households and $77,418 for White-headed households, with the White population constituting 79.88% of total residents.
Nebraska Median Household Income By Race - 2025 Update — Neilsberg
In North Carolina, the median household income for Asian-headed households in 2023 was $113,412, compared to $50,191 for Black or African American-headed households and $77,601 for White-headed households, with the White population constituting 63.26% of total residents.
North Carolina Median Household Income By Race - 2025 Update — Neilsberg
In Ohio, the median household income for Asian-headed households in 2023 was $98,223, compared to $42,433 for Black or African American-headed households and $74,650 for White-headed households, with the White population constituting 77.82% of total residents.
Ohio Median Household Income By Race - 2025 Update — Neilsberg
State income tax cuts in states like Kentucky, Nebraska, and Mississippi have led to significant budget shortfalls, with Kentucky's cuts costing $1.3 billion annually, Nebraska shifting from a $1.9 billion surplus to a $432 million shortfall, and Mississippi's projected to cost one-third of its general fund, resulting in disinvestment in public services such as education and health care.
Tracking the Fallout From State Tax Cuts — Center on Budget and Policy Priorities
Income tax cuts disproportionately benefit wealthy households, exacerbating inequality; for example, in Mississippi, nearly 40% of benefits go to the top 5% of earners, in Iowa the top 1% receive cuts averaging $23,471 versus $24 for low-income households, and in Nebraska low-income families pay five times more in sales taxes as a share of income than the top 1%.
Tracking the Fallout From State Tax Cuts — Center on Budget and Policy Priorities
Tax cuts have demographic impacts, with Nebraska's property tax cuts leading to less funding for districts serving large numbers of students of color and low-income students ($3,500 less per student), and Ohio's cuts entrenching white wealth as white households hold 87% of national wealth and receive higher average benefits than Black households.
Tracking the Fallout From State Tax Cuts — Center on Budget and Policy Priorities