States across the country are beating revenue expectations as the new fiscal year begins, according to a survey released by the National Association of State Budget Officers (NASBO).
The GOP tax cuts, the first major overhaul of the federal tax code in 31 years, continue to expand the U.S. economy at historic rates. The tax cuts lowered income tax rates across the board for small businesses and workers. Additionally, the new tax code includes a nearly doubled standard deduction and a first-ever 20 percent deduction for pass-through business income.
House Ways and Means Committee Chairman Kevin Brady (R-TX) has long-said that increased revenue at the state level was just one of the many benefits of the tax cuts. Chairman Brady has called on high-tax states to pass on these increased revenues to their constituents, rather than focusing on finding ways to slow down this economic progress by trying to circumvent the cap placed on the state and local tax deduction.
The Chairman said earlier this year:
“It’s unfortunate that some politicians are still trying to discredit this new economic momentum in defense of high taxes and stagnant growth. There are many mayors and governors who do a good job of balancing budgets and creating jobs in their communities without high taxes.”
Chairman Brady added:
“For states and communities that insist on taxing their families and businesses at brutally high levels, I urge you to pass on these new state revenues to local taxpayers through lower taxes rather than pocket them in your state capitols. That is, if you’re truly serious about fairness and remaining economically competitive.”
Faster growth, propelled by a more competitive tax code, has led to a surge in state revenues. Additionally, tax revenues are rising in states nationwide due to more workers entering the labor market – unemployment remains at a 50-year low and workers hit hardest by the Recession are finding good-paying jobs again.
This report shows that the majority of states are either beating or meeting revenue expectations, with workers taking home higher salaries and families spending more of their money.
As the Wall Street Journal noted, “states’ personal income-tax collections grew by a median 7.9 percent in fiscal 2018… [and] general-fund collections from personal-income taxes outperformed forecasts by 3.6 percent.”
Meanwhile, numerous economic indicators continue to show that tax reform is driving newfound economic momentum: consumers are spending more, jobless claims remain near historic lows, wages are rising at their fastest pace since before the Recession, and the economy is on track to achieve 3 percent annual growth for the first time since 2005.