US States Experience Decline in Tax Revenues Despite Previous Cuts

Analysts have suggested that the US IRS's revamped tax brackets could lead to increased income for taxpayers, while also highlighting the country's significant portion of global debt. Over the past three years, nearly all states in the US have implemented reductions in at least one major tax category, apart from Alaska and Nevada. These reductions range from permanent tax cuts to one-time rebates, reflecting a growing trend of tax reduction nationwide. However, with the decline of the pandemic-induced revenue surge, the enthusiasm for tax cuts is expected to wane as the 2024 legislative sessions commence. Income, sales, property, and gas taxes have all been subject to reductions in nearly every US state due to budget surpluses over the past three years. While some states made lasting tax adjustments, others opted for temporary measures such as one-time rebates or suspensions. Despite this widespread tax reduction trend, the fiscal outlook for 2024 appears challenging, with projected budget deficits in several states. California, for instance, is grappling with a record $68 billion deficit, starkly contrasting with a previous surplus of $100 billion. Similar fiscal challenges are evident in states like Arizona, Maryland, and Minnesota, where projected shortfalls loom without significant revenue increments or spending cuts. In light of this, the projected shortfalls are potentially linked to the tax rebates or reductions enacted by each state, as the impact of widespread tax cuts becomes increasingly apparent with slowing tax collections. Overall, state-level tax reductions are expected to result in $13.3 billion less in general revenue this year compared to previous collections, reflecting the substantial scale of tax reductions across the states. However, despite the projected slowdown in tax cuts, various states are now considering property tax relief measures in response to significant increases in property tax burdens.