Stock Groups

Cash-rich states are slashing taxes amid revenue windfalls


E+| E+ | Getty Images

According to the, this year at least 12 states made or plan to make cuts, which could include temporary and permanent reductions. Tax Foundation.  

Richard Auxier is a senior policy associate with the Urban-Brookings Tax Policy Center. While some efforts have been made to reduce corporate and property taxes, income taxes “are at the heart of everything,” he said.

Brian Sigritz is the director of state fiscal studies with the National Association of State Budget Officers. He stated, “Overall, most of these tax reduction proposals have been relatively small and a handful have been targeted.”

“Overall, most of the tax cut proposals have been relatively modest, and a number have been targeted.

Brian Sigritz

Director of State Fiscal Studies, National Association of State Budget Officers

He stated that the targeted proposals he was seeing were aimed at reducing the inflation and pandemic effects.

Some of the changes include levies on retirement benefit, grocery taxes, earned income credit, small business relief and pausing gas tax.

Annual inflation grew by 7.9% in FebruaryAccording to the U.S. Department of Labor (measurement the costs of food, gas, housingMore.

Treasury Secretary Janet Yellen said that the “very uncomfortably low” inflation would likely continue for one more year. told CNBC.

Bipartisan push

State budget surpluses

This whiplash of “the sky is falling” to high growth was yours.

Richard Auxier

Urban-Brookings Tax Policy Center senior policy associate

According to the, collective state revenue increased by 14.5% between 2020 and 2021. a reportFrom the National Association of State Budget Officers.

The unexpected outcome was surprising given Covid-19 caseloads and local restrictions, as well as business closures,” stated Tim Speiss (a CPA) and EisnerAmper partner in New York.

Although much of the relief for individuals has been channeled through the local economy, growth is still higher than pre-pandemic levels.

According to the National Association of State Budget Officers’ report, 32 states project that fiscal year 2022 revenue will exceed original projections. 

‘Competitive environment’

It’s a very competitive world and states are seeking ways to stand out.

Katherine Loughead

Tax Foundation Senior Policy Analyst

Certain policy experts are worried about the long-term impact of permanent tax breaks.

Auxier stated that the troubling aspect of rate reductions is their high cost, explaining why future revenues might not be sufficient to support them.

But, income tax reductions will be gradualized over a few years depending on the future growth of revenue to balance budgets. 

Auxier stated that while tax cuts may seem popular during an election year states still have ample time to allocate funds from the American Rescue Plan and carefully spend them.