Americans are moving from high‐tax states to low‐tax states. The smart states know this and are cutting income tax rates, as discussed in the forthcoming Fiscal Policy Report Card on America’s Governors.
One group that states want to attract with tax cuts are seniors and retirees. Just this year, 10 states cut their taxes on retirement income, which means income from Social Security, defined‐benefit (DB) plans, and defined contribution (DC) plans, such as 401(k)s. Currently, about three‐quarters of the states fully exempt Social Security benefits from taxes. About a dozen states fully exempt DB and DC benefits from taxes, and about half the states partly exempt it. …