What’s Driving This Year’s Ambitious Tax Cuts: Jonathan Williams in Governing Magazine
"We’ve seen 2023 as yet another banner year for state tax cuts."
Jonathan Williams, ALEC Executive Vice President of Policy and Chief Economist, was featured in Governing Magazine, speaking on the ongoing state actions in cutting taxes and promoting economic growth.
When Congress sent $175 billion to states as part of the American Rescue Plan Act in 2021, one of the major strings attached was that the money could not be used for tax relief. More than 20 red states sued, contending this was an unconstitutional restriction. They needn’t have worried. States have been cutting taxes nearly nonstop ever since.
No fewer than 43 states enacted tax cuts in 2021 or 2022, according to the Tax Foundation. With revenues starting to slow, recession fears on the rise and the federal largess starting to run out — along with the fact recent tax cuts have barely had a chance to kick in — states have been a little bit more hesitant about continuing to cut rates this year. But not by much. Multiple states have passed legislation that will send hundreds of millions back to taxpayers.
“We’ve seen 2023 as yet another banner year for state tax cuts,” says Jonathan Williams, chief economist at the American Legislative Exchange Council. “In our view, in many cases states are focusing on the right kind of taxes to cut, income and capital-based taxes.” Some states passed highly specific reductions. Arkansas created a new sales tax exemption for qualifying data centers, while Kentucky decided to phase out, over 18 years, the property tax on bourbon aging in barrels. For the most part, though, states cut broad-based taxes, such as income and property taxes. No state this year has raised broad-based taxes.