2021 ct income tax brackets4/15/2024 Based on our estimates, such future losses will be substantial: by 2028, the annual price tag from the 2021-2023 tax-cutting wave could grow to $29 billion a year nationwide. įurthermore, because these rate changes are permanent barring future legislative action, unlike one-time or temporary changes such as a sales tax holiday, the revenue losses will continue and grow each year unless future policymakers reverse course. The combined costs of all tax changes states adopted for the 2023 budget year (including income tax rate cuts and other policies, such as sales tax holidays), as well as those proposed in governors’ 2024 budgets, exceed the tax cuts enacted after the Great Recession and are comparable to those passed from the late 1990s through fiscal year 2001, after adjusting for inflation. Before that, more than half of the states cut income tax rates during a period of strong economic growth from 1994 to 2001, only to see revenues plummet and budget cuts ensue when the dot-com bust ushered in a recession. In the decade after the Great Recession took hold in 2008, for example, 18 states cut their personal and/or corporate income tax rates these policies led to sharp increases in public college tuition, cuts in school funding, and a weakening of income supports like unemployment insurance, which both harmed people and communities and contributed to a slower economic recovery. The combined costs of all tax changes states adopted for the 2023 budget year, as well as those proposed in governors’ 2024 budgets, exceed the tax cuts enacted after the Great Recession. While no comprehensive accounting exists of state income tax rate cuts over time, available evidence indicates that the COVID-era wave of 26 states cutting rates (see Figure 1), while not unprecedented, is historically large and will lead to substantial damage for public services. Rate Cutting Is Historically Large in Size, Scope All told, 48 states and the District of Columbia passed some sort of tax cut from 2021 to 2023, according to the Tax Policy Center. These sums don’t include lost revenues from a wider swath of tax reductions enacted during this time, such as one-time rebates and senior tax breaks. Rate cuts in Arizona, North Carolina, and West Virginia are especially large and could shrink their general funds by about 11 percent over the next five years, losses comparable to the disastrous Brownback tax cuts in Kansas during the 2010s.This 3.6 percent share is equivalent to more than a third of states’ general fund spending on higher education and more than half of what goes to state correctional systems. That means, together, rate-cutting states will collect an estimated 3.6 percent less in general revenue over the next five years than if they had not enacted the cuts. Combined, the cuts will cost those 26 states an estimated $124 billion by 2028, including $13 billion that they have already lost (2022-2023) and $111 billion over the next five years (2024-2028).Permanent cuts to tax rates are especially harmful to state balance sheets since they reduce revenues every year going forward absent further legislative action, in contrast to temporary or one-time tax cuts. Twenty-six states cut their personal income tax rates and/or corporate income tax rates, 13 of them multiple times.The tax cuts - most of which are both permanent and tilted toward wealthy households and corporations - will weaken state revenues by large and growing amounts over time, limiting these states’ ability to maintain support for schools and other vital public services or make new investments that can strengthen the economy and promote opportunity. State policymakers nationwide have embarked on a tax-cutting spree over the past three years, using the cover of temporary budget surpluses stemming from robust federal aid in response to COVID-19 and the economic recovery that followed.
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