The states that reduced tax rates during the COVID-19 period are encouraged to either roll back these cuts or minimize them in order to avert further revenue losses which could result in significant budget deficits for educational institutions and other vital services, suggests a report released by the Center on Budget and Policy Priorities (CBPP), a progressive think tank based in Washington, D.C. The CBPP focuses its research and policy analysis on reducing poverty and inequality, advancing opportunity, and promoting fiscal responsibility.
In the report titled "States’ Recent Tax-Cut Spree Creates Big Risks for Families and Communities" published on November 30th, it was revealed that 26 states have reduced personal or corporate income tax rates, with 13 of them implementing such reductions more than once. As per the CBPP's estimates, these cumulative cuts will lead to $124 billion revenue loss by 2028. It includes an anticipated loss of $13 billion between 2022 and 2023. States including Arizona, North Carolina, and West Virginia that implemented substantial cuts may witness their general revenue fund decrease by around 11% by 2028.
The report from the CBPP highlights that majority of these state tax reductions not only favor taxpayers who are already affluent but also critically undermine states' capability to finance services. In extreme cases, such revenue shortfalls might compel states to cut spending beneath current levels for schools, hospitals, libraries or other supports for children, families, seniors or vulnerable populations as mentioned in the report.
The CBPP's recommendation for states that have implemented tax cuts is either revert them or scale them back. For those considering such reductions, it advises against joining the latest round of fiscal recklessness. Instead they should opt for protecting and increasing adequate revenues to meet their current responsibilities and tackle new challenges to ensure a brighter future for all residents.
