Under current law, the state income tax rate imposed on the
taxable income of individuals, estates, trusts, and corporations is 4.4%; except that, for the income tax year commencing on January 1, 2024, the income tax rate is 4.25% and for any income tax year commencing on or after January 1, 2025, but before January 1, 2035, the income tax rate is temporarily reduced if state revenue exceeded the limitation on state fiscal year spending imposed by section 20 (7)(a) of article X of the state constitution for the state fiscal year that ended during the income tax year. The extent to which the rate is temporarily reduced depends on the total amount of excess state revenues remaining after homestead exemption reimbursements and qualified-senior primary residence reimbursements are paid.
The bill makes the 4.25% tax rate permanent beginning with the
income tax year commencing on January 1, 2025, makes any additional temporarily reduced income tax rate permanent for subsequent income tax years, and eliminates the state income tax on individuals, estates, and trusts for income tax years commencing on or after January 1, 2035.
