Soaring tax revenue and billions in pandemic aid from the federal government have left many states with an unusual problem — too much money.
The result is one of the most broad-based movements in recent memory toward giving consumers and taxpayers a break. In red states and blue, lawmakers and governors are proposing to cut taxes and fees, create tax credits, or delay tax and fee hikes that had been planned before the COVID-19 pandemic struck.
Even high-tax states controlled by Democrats, from California to New Jersey, are dangling the possibility. Among those are Washington state, where one Democratic senator has proposed cutting the state sales tax from 6.5% to 5.5%.
“We need to get money back in people’s pockets if we’re to make a full recovery from the high public health cost and economic cost of this pandemic,” said state Sen. Mona Das, the Democrat who proposed the measure. Legislative leaders in her party are cool to the idea of using temporary revenue to finance permanent cuts, but some have rallied behind a one-time sales tax holiday proposal.
States coffers are overflowing after nearly two years of Congress pumping out trillions to help the U.S. economy stay afloat through the pandemic, including sending billions to state governments. Most are enacting or considering tax cuts even while considering big boosts on public schools and infrastructure.
Income and sales taxes are on the chopping block as are vehicle license fees, gas taxes and more.
In Maryland, Republican Gov. Larry Hogan has long pushed for a gradual elimination of income taxes for retirees, something he says will reduce the migration of people leaving the state to lower-tax places such as Florida when they’re finished working. He may finally have a window for striking a deal with the Democrat-controlled legislature.
