State Corporate Income Tax Legislation to Watch in 2024

States typically introduce up to 30 percent less tax legislation in an election year, but this year we’re still seeing lawmakers propose changes to the corporate income tax. States proposing increases often face budgetary stress and the need to raise funds for proposed infrastructure spending. On the flip side, states proposing cuts are often following the policy priorities or campaign promises of the governor. Here are the states most and least likely to change their corporate income tax rates over the next two years.

Corporate Income Tax Increase Proposals to Watch in 2024

Fiscal Difficulties: New York, Maryland, Illinois, and California

While most states continue to project strong revenues, some states are beginning to show significant deficit projections. New York’s projected budget deficit has been reduced to $4.3 billion, however, this is still alarming to some in the state. While Governor Kathy Hochul (D) has said she does not want to levy new taxes this year, Democrats in the legislature have indicated that they intend to levy new taxes, though the exact form that these taxes could take is still uncertain. Despite this general uncertainty, businesses will likely bear some additional tax burdens in this or next year’s budget. Due in part to New York’s systemic budget issues, Democrats have approved tax increases every year since 2012.

Maryland is facing a budget deficit due in large part to an educational reform package that lawmakers enacted in 2021. Governor Wes Moore (D) and Senate leaders have said that they are not interested in pursuing major tax increases this session, however, the state’s budget deficit is projected to grow to as much as $3 billion by 2028 and lawmakers could feel compelled to act sometime before then. If they decide not to act this year due to the political pressures of the election year, they are more likely to act in 2025.

 Illinois is facing significant systemic economic challenges, including having among the highest pension liabilities of any state in the country. There are currently no indications — either bill introductions or discussions about firm legislative plans — that lawmakers will act on these issues this year, but lawmakers in Springfield have shown a historic willingness to levy taxes, so such legislation could still emerge. If lawmakers decide not to act on these issues during an election year, they will likely choose to act next year as fiscal pressures continue to mount.

California is facing a multi-billion dollar revenue deficit as a result of their decision to increase overall spending by 50 percent over the course of the COVID-19 pandemic. Despite this, legislative leaders and Governor Gavin Newsom (D) have not indicated that they will seek to levy new taxes to balance their budget. Currently, the largest business tax change in the governor’s budget proposal is an 80 percent cap of the net operating loss deduction.  

Infrastructure Spending Needs: Minnesota and New Jersey

Two states are looking to increase infrastructure funding, leading to the potential for corporate tax increases. Minnesota Governor Tim Walz (D) said that one of his legislative priorities this year is a $1 billion infrastructure package, which lawmakers say will be paid for with new bonding. Even if the Democratic trifecta does not raise taxes this year, this new debt burden combined with their recent willingness to pass aggressive fiscal legislation, suggests that further tax increases are likely in the near term.

New Jersey lawmakers are under significant pressure to shore up funding for transportation infrastructure, but Governor Phil Murphy (D) and legislative leaders have said that they do not want to increase taxes this session. New Jersey will have an election year in 2025, which could dissuade lawmakers from increasing business taxes, but if pressure to provide more infrastructure funding mounts in 2024 or backlash to transit and toll hikes grows, then lawmakers might be persuaded to act next year. 

Wildcard: Vermont 

Vermont is not facing mounting deficits nor is it seeking new spending programs, however, lawmakers are still preparing several different bills that would impose new tax burdens on businesses. These bills include new wage taxes, worldwide combined reporting, applying new taxes on digital goods, and expanding the taxes on communications property. Governor Phil Scott (R) may veto these bills, but if Democrats are committed to passage, they have the votes to override him. 

States Likely to Lower Corporate Taxes in 2024

Campaign Promises: Utah, Louisiana, and Pennsylvania

Utah Governor Spencer Cox (R) said that he wants to prioritize income tax reduction this year and a bill (SB 69) cutting the corporate income tax rate by 0.1 percent has already passed the upper chamber. The Republicans’ supermajority in the House of Representatives makes the bill almost certain to pass. 

With the election of Louisiana Governor Jeff Landry (R), Republicans regained trifecta control over Louisiana’s government this year. Traditionally, when a party regains full control over a state’s government, they move quickly to pass the policies they were blocked from enacting during the period of divided control. In line with this, the Economic Development and Fiscal Policy Council recently released a report calling for elimination of the income and franchise taxes. While it is likely that Louisiana will push for income tax relief this year, technically lawmakers would need to convene a special session to consider a tax bill in 2024 (under state law, Louisiana can only consider fiscal legislation during the regular session of odd-numbered years). If they are unable to coalesce around a tax package and choose not to convene a special session, they will very likely try again during the 2025 regular session.

Pennsylvania Governor Josh Shapiro (D) campaigned on the promise of business tax relief, and he has supported legislation reducing the corporate net income tax rate and reforming the net operating loss deduction. While there does seem to be general support for income tax relief in the legislature, Democrats in the legislature have tried to pair these reductions with the imposition of mandatory unitary combined reporting, which is a deal that Republicans are currently unwilling to accept. Notably, Pennsylvania is the only state in the nation with a split legislature, with Republicans controlling the Senate and Democrats controlling the House. 

Gubernatorial Policy Priorities: Colorado and North Dakota 

Governors in at least two states, Colorado and North Dakota, have a shared desire to reduce the corporate income tax rate. Colorado Governor Jared Polis (D) is interested in reducing the corporate income tax rate, noting the large refunds the state has paid in recent years. Despite his interest, Democrats killed the first attempt at this proposal (HB 1065), saying that they would be introducing their tax reform package soon. 

Similarly, North Dakota Governor Doug Burgum (R) said during his State of the State address that he wanted to move towards eliminating the income tax. He did not specify how he would accomplish this or over what period of time he would make this change. 

Short Term Reform is Unlikely in Ohio and Indiana

In Ohio and Indiana, lawmakers are less likely to enact tax cuts this year, but we are watching these states for future changes. In Ohio, the Senate is considering a bill (SB 216) that would eliminate the corporate activity tax (CAT). The bill is unlikely to move forward this session, but it may give rise to other efforts to reduce business tax rates.

Indiana lawmakers have been working behind the scenes for several years to reduce income tax rates, and states often tackle this by attempting to expand the sales tax base. It’s unlikely the conversation will move forward this year, but discussions will likely continue in 2025. 

Track and Influence State Tax Policy

Tax policy can be one of the most challenging areas for government affairs executives. MultiState’s team understands the issues, knows the key players, and helps you effectively navigate and engage. We offer a customized, strategic solution to help you develop and execute a proactive multi-state tax legislative agenda. Learn more about our Tax Policy Practice.