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business Thursday 1 sepTember 2022
States tapping historic surpluses for tax cuts and rebates

JEFFERSON CITY, Mo. (AP) to be paid next year but
— Stoked by the largest is being distributed now
surplus in state history, Mis- — along with a letter from
souri's Republican-led Leg- Democratic Gov. Jared
islature devised a $500 mil- Polis touting it as inflation
lion plan to send one-time relief.
tax refunds to millions of Polis, who is up for re-elec-
households. In a shock to tion in November, had
some, GOP Gov. Mike Par- been a previous critic of
son vetoed it. the automatic refund pro-
Parson's objection: He vision. His Republican chal-
wanted a bigger, longer- lenger, Heidi Ganahl, is ac-
lasting tax cut. cusing him of "hypocrisy."
"Now is the time for the Idaho Gov. Brad Little, a
largest income tax cut in Republican, has called the
our state's history," Parson Legislature back for a spe-
declared as he called law- cial session starting Thurs-
makers back for a Septem- day to consider more tax
ber special session to con- breaks.
sider a $700 million perma- Colorado State Treasurer Dave Young holds up a replica of a check sent to resident joint tax filers He's proposing to use part
nent tax reduction. as part of the "Colorado Cashback" refund Tuesday, Aug. 30, 2022, in Denver. of the state's projected $2
Upon its likely approval, Associated Press billion budget surplus for
Missouri will join at least 32 a $500 million income tax
states that already have year, meeting one informal states except New York, rebates do little to fight in- rebate this year. He also
enacted some type of tax sign of a recession. where Democrats who flation and "may actually wants to cut more than
cut or rebate this year — "Quite simply, relying on wield power accelerated be counterproductive" by $150 million annually by
an astounding outpour- the current surplus to fund the timetable for a previ- enabling additional con- creating a flat 5.8% income
ing of billions of tax dollars permanent tax changes ously approved tax rate re- sumer spending on items tax rate starting next year.
back to the people. Idaho isn't fiscally sustainable, or duction. in scarce supply and thus That comes after the state
lawmakers are convening responsible, and will ulti- Republican-led Arkansas contributing to higher pric- reduced the top tax rate
Thursday to consider more mately require cuts to state was the most recent to es, said Hernan Moscoso each of the last two years.
tax breaks, and Montana services," said Amy Blouin, take action during an Au- Boedo, an economist at "Folks, this is conservative
lawmakers also are weigh- president and CEO of the gust special session. A new the University of Cincinnati. governing in action," Little
ing a special session for tax Missouri Budget Project, a law will speed up a gradual Still, big surpluses coupled said while asserting the
relief. nonprofit that analyzes fis- income tax rate reduction with inflation make rebates tax cuts still would leave
Flush with federal pandem- cal policies. enacted last year and pro- a tempting option for politi- enough money to boost
ic aid and their own surging For some states, the cur- vide a one-time inflationary cians, especially during an education funding by hun-
tax revenue, states have rent surpluses are unlike tax credit. Republican Gov. election year. dreds of millions of dollars.
cut income tax rates for anything they've previously Asa Hutchinson described Georgia Gov. Brian Kemp, Montana lawmakers are
individuals and businesses, seen. the $500 million package a Republican facing a re- weighing whether to con-
expanded tax deductions The 2022 fiscal year, which as "a transfer of wealth election challenge from vene a special session later
for families and retirees, ended June 30 for most from the government to Democrat Stacey Abrams, in September to provide
pared back property taxes, states, marked the sec- the taxpayer" that "could has been among the most tax breaks from a budget
waived sales taxes on gro- ond straight year of large not have come at a more aggressive tax-cutters. He surplus. A proposal calls for
ceries and suspended mo- growth in tax collections important time." signed legislation gradually giving $1,000 rebates to ho-
tor fuel taxes to offset infla- after economic shutdowns Nationwide, inflation is at a reducing the income tax meowners who paid prop-
tionary price spikes. Many triggered declines early in 40-year-high, raising prices rate from 5.75% to 4.99%. erty taxes during the past
also have provided imme- the coronavirus pandemic. on most good and services He also signed a measure two years. It also would pro-
diate tax rebates. Many states reported their and squeezing incomes. providing a $1.1 billion tax vide income tax rebates of
Republicans and Demo- largest-ever surpluses, ac- At least 15 states have ap- rebate, with up to $250 for $1,250 for individuals and
crats alike have joined the cording to the National As- proved one-time rebates individuals and $500 for $2,500 for couples.
tax-cutting trend during a sociation of State Budget from their surpluses, includ- couples. He has proposed Montana's Republican
midterm election year. Officers. ing 10 led by Democratic an additional $2 billion in House and Senate major-
Yet divisions have emerged "I don't think there's been a governors and legislatures, income and property tax ity leaders said in a joint
about how far to go. While time in history where states four by Republicans and rebates. And after a law statement that the re-
Democrats generally have are better equipped to ride one — Virginia — with split temporarily suspending the bates would offer help "as
favored targeted tax out a potential recession," partisan control. state's gas tax expired in soon as possible with ex-
breaks and one-time re- said Timothy Vermeer, se- Democratic-led California, May, Kemp extended the penses such as gas, gro-
bates, some Republicans nior state tax policy ana- which posted a record $97 gas tax break through mid- ceries, school supplies and
have pressed for perma- lyst at the Tax Foundation, billion surplus, is sending September. so much more." But some
nent income tax rate re- a Washington, D.C.-based rebates of between $200 "We're trying to help Geor- lawmakers, including term-
ductions that could lower think tank. "A majority, if not and $1,050 to individuals gians fight through this limited GOP Rep. Frank
tax bills — and state rev- all, of the rainy day funds earning less than $250,000 tough time," Kemp said. Garner, have expressed re-
enue — for years to come. are in a really healthy posi- annually and households In Colorado, legislative staff luctance. "My first concern
Parson describes it as "real, tion." earning less than $500,000. estimate it will cost $2.7 mil- is if this proposal is driven by
lasting relief." Income tax rate cuts have All four GOP-controlled lion to carry out legislation an imminent emergency or
Some budget analysts passed in 13 states this states providing rebates — expediting an income tax by those wanting to write
warn that permanent tax year, already equaling last Georgia, Indiana, Idaho refund of $750 for individu- checks to voters because
cuts could strain states dur- year's historic total, accord- and South Carolina — also als and $1,500 for couples. their emergency is mere-
ing a future recession. The ing to the Tax Foundation. made permanent income The constitutionally man- ly an imminent election,"
U.S. economy has shrunk Republicans control the tax rate cuts. dated refund of surplus Garner wrote in an opinion
for two straight quarters this legislatures in all of those Though often popular, tax revenue was originally due column.q