Nine U.S. States to Cut Income Taxes in 2026, Providing Relief for Millions
Georgia, Kentucky, and Indiana among states implementing reductions as analysts weigh economic and public service impacts.
Nine U.S. states are set to implement individual income tax cuts starting January 1, 2026, according to a recent analysis by the Tax Foundation. The move could provide millions of taxpayers with financial relief at the start of the new year, amid ongoing debates about the effects of such policies on economic growth and public services.
As reported by CBS News, these tax reductions are part of a trajectory that began during the COVID-19 pandemic, when several states experienced budget surpluses supported by federal aid, encouraging legislators to ease the tax burden on individuals. Supporters argue that lowering income taxes enhances state competitiveness, encourages investment, and attracts both residents and businesses.
Key U.S. States Set for 2026 Income Tax Cuts
According to the analysis, the states set to implement tax cuts include Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio, and Oklahoma. The reductions vary from minor rate decreases to more significant cuts. For instance, Georgia’s income tax will drop from 5.19% to 5.09%, Indiana from 3% to 2.95%, while Kentucky will see the largest relative reduction, from 4% to 3.5%.
Mississippi will reduce its income tax to 4% as part of the final stage of a multi-year plan aiming to gradually reach 0% by 2030. In Nebraska, the rate will decline to 4.55%, despite warnings about the potential impact on the state’s budget, which faces an expected shortfall of hundreds of millions of dollars.
Flat-Rate Tax Systems and Potential Risks
Other states, such as North Carolina and Ohio, are moving toward simplified tax systems with flat rates. North Carolina will lower its rate to 3.99%, while Ohio will apply a flat 2.75% rate on non-business income above a certain threshold.
Conversely, nonpartisan research organizations, including the Center on Budget and Policy Priorities, have cautioned that reducing or eliminating income taxes could negatively affect investments in critical sectors, such as education and infrastructure, particularly in states facing future fiscal pressures.
These tax cuts come at a time when analysts expect additional savings for taxpayers due to broader federal tax adjustments, making 2026 potentially a transformative year for household tax burdens in multiple U.S. states.
