July is a big month for barbeques, beaches and cutting taxes…Taxes?! That’s right, July 1 is the start of most states’ fiscal year, and legislators across the country kicked it off by cutting local taxes.
For the first time in years, an improving economy is giving states the leeway to lessen some of the tax burdens businesses feel. Indiana and Rhode Island will see a drop in corporate tax rates. Maryland is handing out tax credits for biotech and research and development as they push for more companies to set up in the state.
The tax code is the one of the factors businesses look at closely before setting up shop. “Cutting corporate taxes is a great opportunity for businesses. Corporations pay a lot of taxes both directly and indirectly,” Says David Selig, founder of Selig & Associates and Truetaxhelp.com.
288,000 jobs were added in June and the unemployment rate dropped to 6.1% according to the BLS. As the economy improves, states are making a bid to businesses to pitch tent by cutting them tax breaks. Rhode Island will slash its levy on corporations from 9% to 7%. This is a reversal from 2010, when the economy was struggling and local governments charged extra fees and taxes to shore up revenues.
But some analysts say tax breaks are a zero-sum game. One state’s gain is another’s loss. Still, it hasn’t stopped Indiana from moving forward with its long-term, phased plan of cuts and just lowered corporate taxes from 7.5% to 7%.
Consumers are also getting a break in some states. In Connecticut, nonprescription drugs will be from sales taxes. In Florida, youth bicycle helmets, child restraint systems and booster seats will be tax exempt. Selig says “Florida wants people to have their children wear safety helmets, protect them in their vehicles. So they decide not to charge taxes on these items. It’s positive social policy.”
Still some states are pushing up sales taxes and fees: North Carolina residents will pay more for electricity and natural gas, while drivers in New Hampshire will be charged 4.2 cents extra per gallon of gas to fund highway improvements.
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