Tax Cuts: 50% of States Are Pushing For Reductions or Eliminating Taxes Altogether

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While the federal government is dealing with a debt ceiling crisis, many local states have a cash surplus: so-called “rainy day funds.” In fact, 27 states are now considering cutting taxes (or eliminating them altogether) as a result.

According to the National Association of State Budget Officers, there’s been two straight years of widespread budget surpluses amid “recent state policy actions to strengthen their reserves,” including billions in federal aid because of the pandemic. In 2020, reserves totaled $70 billion; by 2023, they’re projected to reach $136 billion, or nearly double.

The Institute on Taxation and Economic Policy (ITEP) suggested many states now have “tax cut fever” and are looking at offering property tax cuts and rebate checks, reducing the amount of income taxes paid — and in the case of Mississippi and Arkansas, cutting state income tax altogether.

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Per CBS, there are a number of reasons state lawmakers have provided for the move: “To make their states more economically competitive with others; to boost economic growth; or to boost taxpayers who are struggling with inflation.” In particular for Mississippi and Arkansas, having no state taxes would also be a boon to attract businesses as well as new households.

Though, some experts question who the tax cuts would benefit, noting that the highest earners in the 27 states would get much of the reward while lower- to middle-income families still struggle. As well, some analysts told CBS that the timing is worrisome — though states have budget surpluses now, what happens if the U.S. goes into a full-blown recession?

Per CBS, here are the 27 states eyeing tax cuts and their suggested proposals:

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