“State-of-the-States” Snapshot for the New Fiscal Year

Today marks the first day of the New Year; or at least the new fiscal year in 46 states. Only Alabama, Michigan, Texas, and New York have fiscal years that are different from the traditional July 1 through June 30 time frame. Looking back at what the governors proposed at the beginning of this calendar year can be helpful in determining what the new fiscal year might bring.

The American Legislative Exchange Council (ALEC) recently released its annual State-of-the-States report. The report is a compilation of summary analyses of governors’ annual speeches on the current condition of the state and the governors’ plans for the future of the state in regards to tax and fiscal policy.

Most of the governors’ addresses were optimistic, stemming from growing revenues brought about by the strengthening of the economy. For the first time in a long time, most states are feeling confident about their financial stability and are not struggling to close current year budget deficits, although there were some notable exceptions.

Governors are using this newfound financial stability in different ways. Some want to use this time of prosperity to increase taxes and expand government spending; while others want to cut rates and return surpluses back to the taxpayer in order to remain economically competitive.

Here is a quick snapshot of some of the best and worst ideas from the 2015 State-of-the-State addresses.


Maine: Governor LePage unveiled his comprehensive tax reform plan. In an effort to be the beacon of sensible taxes in the Northeast, Governor LePage is proposing to takes steps toward eliminating the state’s income tax and estate tax and in turn he proposes broadening the tax base for the state sales tax.  LePage also wants a constitutional amendment that directs any revenue growth toward reducing the state’s income tax.

Texas: Governor Abbott is striving to make Texas even more business friendly in an effort to attract out of state companies and support new business startups. He is requiring any budget to include tax cuts for residents and businesses, particularly the margins tax and the property taxes in an effort to maintain Texas’ status as a booming economic powerhouse.

Florida: Governor Scott noted progress in reducing taxes for Floridians and paying down the states debt. In addition to calling for lower higher education costs and more funding for K-12 education, Governor Scott called for a reduction in the state’s cell phone tax.

Policy Update: Since the State-of-the-State addresses, Texas lawmakers passed a tax relief package that will reduce property taxes and the state’s margins tax by 25 percent and save Texans more than $4 billion in total. Florida lawmakers passed a tax relief package that will reduce cell phone taxes and a few other state taxes by a total of more than $400 million.


Nevada:  Governor Brian Sandoval is taking a different approach. Governor Sandoval used his address to call for an extension of surcharges on the sales and payroll taxes that were scheduled to sunset and wants to expand the Business License Fee to implement a type of gross receipts style tax, all of which would raise revenues. These would amount to the largest single tax increase in the state’s history. In return for the tax hikes, he hopes to increase education spending across the board and invest in new transportation initiatives.

Washington:  Governor Jay Inslee proposed a host of ideas to increase spending in his State of the State Address. His ideas included a new capital gains tax, eliminating several tax exemptions and a new carbon pollution fee levied on businesses. He aims to boost spending as well, in the form of a tax credit for low income individuals and proposed a significant increase in education spending.

Hopefully states will use the new fiscal year and growing tax receipts to pay down debt, reduce unfunded liabilities and build up their rainy day fund. States should also consider reducing taxes to remain economically competitive and allow their citizens and businesses to save and invest.