Establishing a flat individual income tax rate. (FE)

Under current law, there are four income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons, and the brackets are indexed for inflation. The rate of taxation under current law for the lowest bracket for single individuals, certain fiduciaries, heads of households, and married persons is 3.54 percent of taxable income. The rate for the second bracket is 4.65 percent.

The rate for the third bracket is 5.3 percent. And the rate for the highest bracket is 7.65 percent. After bracket indexing for taxable year 2022, the four brackets for individuals, certain fiduciaries, and heads of households, to which the above rates apply, are as follows: 1) taxable income from $0 to $12,760; 2) taxable income exceeding $12,760 but not exceeding $25,520; 3) taxable income exceeding $25,520 but not exceeding $280,950; and 4) taxable income exceeding $280,950.

The bill establishes the following rates of taxation for taxable year 2023:

1. For the lowest tax bracket, 3.47 percent.

2. For the second bracket, 4.3 percent.

3. For the third bracket, 4.79 percent.

4. For the highest bracket, 6.55 percent.

The bill establishes the following rates of taxation for taxable year 2024:

1. For the lowest tax bracket, 3.4 percent.

2. For the second bracket, 3.95 percent.

3. For the third bracket, 4.28 percent.

4. For the highest bracket, 5.45 percent.

The bill establishes the following rates of taxation for taxable year 2025:

1. For the lowest tax bracket, 3.32 percent.

2. For the second bracket, 3.6 percent.

3. For the third bracket, 3.76 percent.

4. For the highest bracket, 4.35 percent.

Under the bill, for taxable year 2026 and after, the rate of taxation is 3.25 percent for all taxable income. The bill also requires the Department of Revenue to update, by October 1 before the start of the applicable tax year, the individual income tax withholding tables to reflect the tax rates, brackets, and sliding scale standard deduction that are in effect for taxable years 2024, 2025, and 2026.