2022 could be a big year for tax cuts
Most state legislatures are currently in session. Normally, having thousands of politicians at work is cause for alarm. But according to the Tax Foundation, there may be good tidings ahead for many taxpayers. The reason? A lot of states are considering tax cuts:
Individual income tax rate reductions are the most common proposal. At present, 11 states have legislation worth watching that would cut individual income tax rates: Colorado, Idaho, Indiana, Iowa, Michigan, Mississippi, Missouri, Nebraska, New York, South Carolina, and Utah. Additionally, eight states—with significant overlap—have noteworthy proposals to cut corporate income taxes: Arizona, Colorado, Idaho, Indiana, Iowa, Michigan, Missouri, and Utah. Both lists are likely to grow as sessions continue.
Meanwhile, five states—Connecticut, New Mexico, Tennessee, West Virginia, and Washington—have legislation or governor’s proposals to cut sales tax rates. While most, but not all, of the proposals to cut income taxes are championed by Republicans, all four serious efforts to cut sales taxes have come from Democratic lawmakers. Both Republicans and Democrats, however, have proposed exempting groceries from sales tax bases, or expanding current exemptions, in Alabama, Colorado, Illinois, Kansas, and Mississippi.
Many state and local pols are reluctant to cut taxes because it means they have fewer opportunities to play Santa Claus – showering this, that, and the other special interest with gifts and goodies. And because of balanced budget requirements in most states, a tax cut means imposing fiscal discipline over the long term. That’s even less popular with the usual statehouse crowd.
But sometimes, there’s just too much money in the treasury for even the most jaded politician to spend. If that translates into some tax relief at the state level? Good. That’s more of your money in your pocket, and a little more discipline in the capitol.