Tax cuts are all the rage in 2022. Americans used to hearing complaints from politicians about budget deficits might be shocked to learn that many states are swimming in cash — and lawmakers want to share the wealth in reducing taxes on groceries, gas, income and more.
According to an analysis by nonpartisan public policy research group Pew Trusts, states collected 19% more tax revenue from March to November 2021 compared to the same period in 2019. gasoline and a booming real estate market that has made buying a home or just renting a lot more expensive.
Basically: right now, states are rich and people are suffering.
To provide some relief — in what happens to be an election year in many places — state lawmakers are tossing out a slew of proposals that would cut all manner of taxes.
Although reducing tax rates or offering tax holidays are the most popular initiatives, at least a few states may simply hand out cash to taxpayers. In Minnesota, which has an estimated $9.3 billion budget surplus, Governor Tim Walz recently offered payouts of $500 to most single filers and $1,000 to married couples. California is also considering $400 taxpayer rebates. No one officially refers to these payments as new stimulus checks, but that’s the gist of what they are.
As for the range of state tax cuts, most are still in the planning stages, and some will surely not become a reality after political battles and vote counting. But some proposals have already been approved and residents can expect to take a breather.
Here are some of the major areas targeted for tax cuts:
Inflation has driven up the price of cars, meat, Starbucks and more. But arguably the most painful and immediate cost increase Americans face is at the pumps. Gasoline prices hit a record high the week of March 7, and on Friday the national average remained high at $4.27 a gallon, up $1.39 from a year ago.
To help drivers, several states are suspending gasoline taxes or considering similar proposals. Florida has already approved a one-month gasoline tax break of 26.5 cents for October. The Georgia Legislature on Thursday voted to suspend its gasoline tax of about 30 cents through the end of May, and Maryland lawmakers are sending a bill to Governor Larry Hogan on Friday that will remove its fee of 36 cents for one month. It also seems likely that a gasoline tax holiday in Connecticut will go into effect until the end of June.
In California, where gas prices are regularly the highest in the country due to a series of taxes and requirements, lawmakers have unveiled a proposal that would give ratepayers rebates of $400. “This proposed $400 rebate would cover the current gasoline tax of 51 cents per gallon for a full year, 52 trips to the pump for most vehicles,” lawmakers wrote in a letter Thursday to the governor of California, Gavin Newsom. But the money would be paid to anyone who pays income taxes in the state, not just drivers.
Nationally, Congress is considering the Gas Price Relief Act of 2022, which would eliminate the federal fuel tax of 18.4 cents through the end of the year.
State income tax
Workers’ wages have soared amid high inflation and the “Great Resignation,” and the booming stock market has boosted the incomes of many who have recently withdrawn from investments. This widespread increase in employee incomes, alongside record corporate profits, is translating into increased tax revenue collected by states.
Leaders in many of these states say they want to give some of that money back to voters and hopefully attract new workers and businesses through lower tax rates.
“We’ve collected billions of dollars in overtaxation,” Jack Whitver, the Republican majority leader in the Iowa Senate, told Des Moines television station KCCI in January.
A Republican bill that replaces the state’s progressive tax system with a flat 3.9% tax rate — and cuts corporate taxes — was recently signed into law by Gov. Kim Reynolds. “Iowa is now the fourth lowest for personal income tax rates in the nation,” Reynolds said at the signing.
Iowa’s new tax structure, which will be phased in over four years, has been criticized by Democrats as a giveaway to the wealthy that hurts funding for schools, job training, health programs and other initiatives.
Similar clashes over tax reform are taking place across the country. According to the Tax Foundation, as of February 1, income tax reduction legislation was proposed in 13 states: Colorado, Idaho, Indiana, Michigan, Mississippi, Missouri, Nebraska, New York, Oklahoma, South Carolina, Utah and West Virginia. besides Iowa.
New Jersey is often credited with having the highest property taxes in the country. The average property tax bill in the Garden State is now over $9,000 a year, so any break is welcomed by homeowners. In early March, Governor Phil Murphy unveiled a new program that would provide an average property tax rebate of $700 to homeowners earning up to $250,000 a year. Renters who earn $100,000 or less and face higher monthly bills would qualify for rebates of up to $250.
Governors of neighboring New York and Connecticut — also known for their high taxes — have called for property tax relief in 2022 through new or expanded credits and rebates.
In Illinois, Governor JB Pritzker says he wants to take funds given to the state by the federal government and pass them on to homeowners in the form of property tax refunds worth about $300 each. . “I am proposing immediate property tax relief funded by state surplus,” Pritzker said earlier this year. “If we double the property tax deduction for Illinois homeowners, we can relieve nearly 2 million Illinois taxpayers.”
Finally, a Republican plan in Idaho calls for the total elimination of property taxes on most owner-occupied homes. To make up for lost revenue, the plan — if approved — would raise sales tax in Idaho from 6% to 7.85%.
Many states have annual tax-free shopping days, where people can buy supplies for school or hurricane season without local taxes. Now, state legislators like Connecticut, Florida, Georgia and Kansas want to create new duty-free shopping holidays or expand the types of purchases eligible for the exemption.
On Wednesday, U.S. Sen. Raphael Warnock, D-Ga., introduced the Relief for Families Act, which would allow cities and states to use federal funding to offset income lost during local sales tax holidays. “I hear every day from Georgians saying that they are suffering. Basics like groceries, clothing and medicine are more expensive than ever,” Warnock said in a press release.
Other states, such as South Dakota and Kansas, are considering proposals that would reduce general sales tax year-round. And still other states are exploring programs that would exempt certain types of goods from sales tax, such as diapers, feminine hygiene products and items made primarily in America or at least purchased from local stores.
In most states, groceries are already exempt from sales tax. Today, at least eight of the 13 states that still charge some kind of food tax are considering removing or suspending them.
Total elimination of grocery tax is on the table in Alabama, Kansas, Missouri, Oklahoma, Utah and Virginia, while a proposal in Illinois would remove the 1% tax for a year and a bill in Mississippi calls for a reduction in the tax on groceries from 7% to 5%.
Tax cuts in general are popular with voters, and most like the idea of eliminating taxes on groceries, which disproportionately affect low-income people. “Sales taxes on groceries have a particularly detrimental impact on income and racial inequality because low-income families tend to spend a greater share of their income on groceries,” says the Center on Budget and Policy Proposals.
Proposals to cut food taxes are complicated because some states are simultaneously trying to cut income taxes, and funding for schools and infrastructure could suffer. Politics will play a big part in any decisions that will be made.
“Republican supporters of tax cuts generally prioritize income tax rate cuts, and Democratic opponents of the food tax are often hesitant to scrap it if it would squeeze the budget,” he said. writes Richard C. Auxier, senior policy associate at the Urban Institute & Brookings Institution’s Tax Policy Center. recently. “As a result, grocery tax cuts may not reach the end of the queue in many states this year.”
More money :
What soaring gas and oil prices mean for your investments
The 8 Best Mortgage Lenders of 2022
A “rude awakening” is coming for millions of new investors