Within the first century of state earnings taxation, solely 4 states transitioned from a graduated-rate to a single-rate, or flat, particular person earnings taxA person earnings tax (or private earnings tax) is levied on the wages, salaries, investments, or different types of earnings a person or family earns. The U.S. imposes a progressive earnings tax the place charges improve with earnings. The Federal Revenue Tax was established in 1913 with the ratification of the sixteenth Modification. Although barely 100 years outdated, particular person earnings taxes are the biggest supply construction. However the previous 4 years have introduced vital deal with earnings taxA tax is a compulsory cost or cost collected by native, state, and nationwide governments from people or companies to cowl the prices of common authorities providers, items, and actions. reform and aid, and with that, one thing of a flat tax revolution.
Between 2021 and 2025, eight states enacted legal guidelines to transition to a flat particular person earnings tax construction whereas offering earnings tax aid to taxpayers throughout the earnings spectrum. Six of these flat taxes have already been carried out, whereas two others are set to take impact sooner or later.
Particularly, Arizona enacted a flat taxAn earnings tax is known as a “flat tax” when all taxable earnings is topic to the identical tax charge, no matter earnings stage or belongings. legislation in July 2021, adopted by Iowa in March 2022, Mississippi and Georgia in April 2022, and Idaho in September 2022. Louisiana joined them in December 2024, adopted by laws adopted in Kansas in April 2025 and Ohio in June 2025.
The flat taxes in Kansas and Ohio haven’t but been carried out however are scheduled to take impact in future years. In Kansas, the timing of the transition to a flat charge of 4 % is contingent upon particular income development and Finances Stabilization Fund triggers. Ohio is scheduled to implement a low, flat charge of two.75 % in January 2026.
Just lately, legislators in a number of further states have significantly thought of transferring to a flat tax and could possibly be on the cusp of constructing such a transition. In Kansas, varied flat tax payments had been vetoed by the governor in each 2023 and 2024, and it wasn’t till 2025 that legislators’ override makes an attempt had been profitable. In Missouri and Oklahoma—two states with practically flat bracket buildings—lawmakers have just lately thought of the chance of transferring to a single-rate system. Flat tax deliberations proceed in South Carolina as properly.
At present, 14 states have single-rate particular person earnings tax buildings, whereas 9 states don’t levy a person earnings tax on wage or wage earnings in any respect. Twenty-seven states and the District of Columbia have graduated-rate buildings, however two of these states (Ohio and Kansas) are on observe to part in a single-rate construction sooner or later.
A Temporary Historical past of State Revenue Tax Construction
In 1987, the seventy fifth anniversary of state earnings taxation, Colorado changed its half-century-old graduated-rate earnings tax with a single-rate tax. It will take one other 30 years for one more state to observe swimsuit, when Utah carried out a flat tax in 2007. Subsequent got here North Carolina in 2014, as a part of that state’s complete reforms, adopted by Kentucky in 2019. They joined 5 different states that already had flat taxes: Illinois, Indiana, Massachusetts, Michigan, and Pennsylvania. (Massachusetts’ flat tax has since been dismantled, with voters’ adoption in November 2022 of a constitutional modification imposing a 4 share level surtaxA surtax is a further tax levied on prime of an already present enterprise or particular person tax and may have a flat or progressive charge construction. Surtaxes are usually enacted to fund a particular program or initiative, whereas income from broader-based taxes, like the person earnings tax, usually cowl a large number of packages and providers. on earnings exceeding $1 million as of January 2023.)
The primary state earnings tax, carried out in Wisconsin in 1912, had a two-rate construction. The primary flat tax was Massachusetts’ tax, which went into impact in 1917. 5 states had earnings taxes again then, with Massachusetts and Virginia each implementing them that January. Solely 5 years handed between the primary progressive earnings tax and the primary flat earnings tax, however 75 years handed between the primary progressive earnings tax and the primary time one was transitioned from a graduated-rate to a single-rate construction. It took greater than a century for the primary 4 states—Colorado, Utah, North Carolina, and Kentucky—to make the transition from a graduated-rate to a single-rate construction, making it all of the extra notable that eight states—Arizona, Iowa, Mississippi, Georgia, Idaho, Louisiana, Kansas, and Ohio—enacted legal guidelines to make that very same transition inside a matter of solely 4 years between July 2021 and June 2025.
Eight States Enacted Flat Tax Legal guidelines from 2021-2025
In July 2021, Arizona lawmakers enacted laws to part in a flat tax charge of two.5 % utilizing tax triggers that made the timing of such a transition topic to income availability. This legislation was briefly held up in litigation however acquired court docket clearance in 2022 to transfer ahead, and, upon the tax triggers being met, a flat charge of two.5 % was carried out in January 2023.
Iowa, as a part of a complete tax reform legislation enacted in March 2022, started the method of phasing in a flat charge in 2023, with the preliminary aim of reaching a flat charge of three.9 % by 2026 to carry the state additional and additional away from the graduated-rate tax that not way back topped out at 8.98 %. In Might 2024, in response to the state’s robust continued fiscal situation, Gov. Kim Reynolds (R) signed into legislation S.F. 2442, which accelerated the implementation of the flat tax by a 12 months—to January 1, 2025—and decreased the speed additional than initially deliberate, to three.8 %.
Mississippi’s flat tax, which took impact in 2023, was initially set at a charge of 5 %, however that charge was decreased to 4.7 % in 2024 and 4.4 % in 2025 and is now scheduled to part right down to 4.0 % in 2026, 3.75 % in 2027, 3.5 % in 2028, and three.25 % in 2029. Lawmakers have additionally adopted further triggers that might yield additional reductions topic to income availability in later years.
Georgia’s flat tax legislation, which was additionally adopted in 2022, took impact on January 1, 2024, transferring the state to a single charge of 5.49 %. Subsequent laws adopted in 2024 retroactively decreased the speed to five.39 % for tax 12 months 2024, and a legislation enacted in 2025 decreased the speed to five.19 %, retroactively efficient as of tax 12 months 2025. Topic to tax triggers which might be contingent upon income availability, this charge could possibly be decreased by 0.1 share factors in future years till it reaches 4.99 %.
In a 2022 particular session, Idaho adopted a 5.8 % flat tax, changing the four-bracket tax construction that was beforehand in impact. This alteration was efficient beginning with the 2023 tax 12 months. In 2024, the speed was retroactively decreased to 5.695 %, and in 2025, the speed was retroactively decreased to 5.3 %.
In December 2024, Louisiana lawmakers enacted a complete tax reform legislation that moved the state to a single-rate particular person earnings tax as of January 1, 2025. Particularly, this legislation consolidated Louisiana’s three brackets into one and decreased the speed to three %, a big discount from the earlier prime marginal charge of 4.25 %.
In April 2025, Kansas legislators overrode the governor’s veto of SB 269, setting the stage for the state’s future phase-in of a flat earnings tax. Particularly, this legislation dedicates particular person and company earnings taxA company earnings tax (CIT) is levied by federal and state governments on enterprise income. Many corporations should not topic to the CIT as a result of they’re taxed as pass-through companies, with earnings reportable underneath the person earnings tax. collections development above an inflationInflation is when the final value of products and providers will increase throughout the economic system, decreasing the buying energy of a forex and the worth of sure belongings. The identical paycheck covers much less items, providers, and payments. It is typically known as a “hidden tax,” because it leaves taxpayers much less well-off as a consequence of increased prices and “bracket creep,” whereas growing the federal government’s spendin-adjusted FY 2024 baseline for use to scale back earnings tax charges by a commensurate quantity, starting with the person earnings tax. On the finish of every fiscal 12 months, whether it is decided that actual earnings tax income development above the inflation-adjusted FY 2024 baseline has occurred and the Finances Stabilization Fund stability is not less than 15 % of the prior fiscal 12 months’s common fund tax revenues, the state’s two marginal particular person earnings tax charges of 5.2 % and 5.58 % can be decreased proportionally till a single charge of 4 % is carried out.
Lastly, in Ohio, H.B. 96, enacted in June 2025, retroactively decreased the state’s particular person earnings tax charges for 2025 and scheduled a discount to a flat charge of two.75 % to take impact on January 1, 2026.
Advantages of Shifting to a Flat Tax Construction
Supporters of flat taxes usually determine their simplicity as certainly one of their salient options. That is true, however it’s vital to cease and ask what is supposed by this. It’s not sufficient to merely state {that a} single charge is less complicated than a number of charges, as a result of, whereas trivially true, that tells us comparatively little. It’s not notably troublesome to make use of tax tables to determine one’s tax legal responsibility.
Flat taxes are meaningfully easy, nevertheless, in a number of methods. State income forecasting—in addition to projecting the income results of potential tax adjustments—is much extra simply completed underneath a single-rate tax construction. Flat taxes additionally make it simpler for taxpayers to estimate their tax legal responsibility and the way it might change underneath totally different earnings situations, enhancing tax transparency and probably bettering some taxpayers’ financial decision-making.
Flat taxes additionally accord higher with taxpayers’ impressions of tax burdens primarily based on headline charges. People and small companies could also be extra interested in a state with a comparatively decrease flat charge than one with a graduated-rate system, even when the 2 methods yield related liabilities. Flat taxes additionally simplify the operate by which taxpayers resolve whether or not to work or make investments extra on the margin, since all marginal returns to labor and funding are uncovered to the identical charge.
Of larger significance for taxpayers, nevertheless, is that flat-rate earnings taxes are inclined to operate as a bulwark in opposition to pointless tax will increase, and to supply larger certainty for particular person and enterprise taxpayers. Financial choices are made on the margin; selections about investments, labor, or relocation can be made on the premise of the impact on the subsequent greenback of earnings, not the prior ones. A aggressive prime marginal charge issues most for financial development, and flat earnings taxes—given their “all-in” nature—not solely imply a decrease charge on that all-important margin, however they are usually more durable to boost sooner or later, whereas extremely graduated taxes are extra prone to focused, however usually economically inefficient, tax hikes. Notably, all 4 states that transitioned from a graduated-rate to a single-rate particular person earnings tax earlier than 2023 now have flat charges which might be between 0.6 and 1.55 share factors decrease than they had been when the transition to a flat tax first occurred.
Taxpayers appear to sense this intuitively: in Illinois, as an illustration, voters in November 2020 lopsidedly rejected a constitutional modification that will have permitted a graduated-rate construction though the charges initially proposed by the Common Meeting wouldn’t have elevated tax legal responsibility for the overwhelming majority of voters and would, in actual fact, have initially decreased tax legal responsibility for some. Illinoisans appeared to acknowledge that, as soon as the precept of a graduated-rate construction is established, it might change into far simpler for lawmakers to boost earnings tax charges on an increasing number of taxpayers sooner or later—even setting apart the unfavorable implications transferring away from a flat tax would have had for the state’s financial competitiveness.
That is one purpose why states with practically flat earnings taxes ought to think about ending the job, as Georgia, Idaho, and Mississippi have just lately completed. In Alabama, as an illustration, the present three-bracket system, with the highest charge kicking in at $3,000 of earnings for single filers, solely gives $40 in tax financial savings in comparison with taxing all earnings on the prime charge. Elevating the normal deductionThe usual deduction reduces a taxpayer’s taxable earnings by a set quantity decided by the federal government. Taxpayers who take the usual deduction can’t additionally itemize their deductions; it serves in its place. would simply present the identical progressive advantages whereas embracing the simplicity and—extra importantly—the understanding and stability of a single-rate tax. Three different states—Arkansas, Missouri, and Oklahoma—likewise have prime charges that kick in at or under $10,000 for single filers, and these are all states wherein continued earnings tax reform and aid stay a precedence.
Three States Have Almost Flat Graduated-Charge Revenue Taxes
Supply: State statutes; Tax Basis calculations.
These states now current a chance for reform culminating in a flat tax, however additionally they function a cautionary story concerning the implications of not indexing a graduated-rate earnings tax. When Alabama adopted its graduated-rate earnings tax in 1935, the vast majority of taxpayers had been totally exempt, and few taxpayers had been topic to the highest marginal charge of 5 % on earnings above $3,000, which is equal to roughly $69,000 in 2025, increased than in the present day’s median family earnings within the state and a small fortune in Melancholy-era Alabama. Over time, the shortage of inflation indexing has subjected the overwhelming majority of taxpayers’ earnings to the highest marginal charge, making it much like a single-rate tax.
Of the 14 states that have already got flat taxes, 4 enshrine that standing of their state constitutions, locking within the profit and making it more durable for lawmakers to boost taxes by switching to a progressive taxA progressive tax is one the place the common tax burden will increase with earnings. Excessive-income households pay a disproportionate share of the tax burden, whereas low- and middle-income taxpayers shoulder a comparatively small tax burden. regime. This can be a notably vital safety for small enterprise homeowners, since about 95 % of all companies are pass-through companies topic to particular person, not company, earnings taxes, and the overwhelming majority of pass-through enterpriseA pass-through enterprise is a sole proprietorship, partnership, or S company that will not be topic to the company earnings tax; as an alternative, this enterprise reviews its earnings on the person earnings tax returns of the homeowners and is taxed at particular person earnings tax charges. earnings is earned by corporations uncovered to states’ prime marginal earnings tax charges. In Illinois, as an illustration, the place lawmakers in 2020 championed a failed constitutional modification to allow a graduated-rate earnings tax, 93 % of pass-through enterprise earnings was on returns with greater than $200,000 in adjusted gross earningsFor people, gross earnings is the entire of all earnings acquired from any supply earlier than taxes or deductions. It consists of wages, salaries, ideas, curiosity, dividends, capital features, rental earnings, alimony, pensions, and different types of earnings.
For companies, gross earnings (or gross revenue) is the sum of complete receipts or gross sales minus the price of items offered (COGS)—the direct prices of manufacturing items (AGI), and over half of all pass-through enterprise earnings was reported on returns displaying greater than $1 million in AGI. Climbing the highest marginal charge isn’t just concerning the rich; it’s concerning the state’s small companies, too, and about offering a larger stage of certainty for entrepreneurs making location choices.
States that at present have flat taxes however that haven’t but constitutionally protected their single-rate tax buildings ought to think about doing so. The next desk exhibits states that at present have a flat tax, their date of implementation, and whether or not a single-rate tax is constitutionally mandated. Of the 4 states which have had flat taxes from the beginning, three enshrine this standing of their structure. Of the ten that transitioned, just one does.
Fourteen States Have Flat Revenue Taxes
Sources: State statutes; Tax Basis analysis.
From 2021 to 2025, throughout the span of 4 years, extra states enacted legal guidelines changing graduated-rate particular person earnings tax buildings into single-rate earnings tax buildings than did so in the entire 108-year historical past of state earnings taxation up till that time. In a number of further states, lawmakers are working to see that this momentum continues. For states that wish to take away limitations to upward mobility and enterprise funding whereas selling long-term financial development and enhancing their aggressive standing, transferring from a graduated-rate to a single-rate particular person earnings tax construction whereas decreasing the highest marginal charge is among the many Most worthy tax reforms lawmakers may undertake.
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