States Talk Taxes Amid Economic Uncertainty
Tax-relief measures on the table in more than a dozen states vary widely but the trend cuts across political divides: Governors and state lawmakers are using surpluses to give residents a break, despite concerns about a possible recession.
As I reported last week in The Wall Street Journal, New Jersey Gov. Phil Murphy on Tuesday proposed another $2 billion in property-tax rebate checks as part of a $53 billion state budget, continuing a program that was enacted in 2022. Massachusetts Gov. Maura Healey, a Democrat, proposed a reduction in the state’s capital-gains tax as well as a new $600 tax credit for dependent children and seniors. Ned Lamont, the Democratic governor in Connecticut, recently proposed the first income-tax rate cut for that state in almost 30 years.
A year ago, states were swimming in cash from federal pandemic relief programs and higher-than-projected sales and capital gains levies. Reserve funds have collectively grown to historically high levels, according to the National Association of State Budget Officers, or Nasbo.
Now, budget officials in New York and California are predicting that revenue growth will slow in the coming months. Fiscal analysts are unsure whether they are outliers or the leading edge of a municipal downturn. Tax cuts, they said, should be considered with caution.
The sector outlook for state governments in 2023 is deteriorating but stable, Eric Kim, the head of U.S. state ratings for Fitch Ratings, said recently. “Enacting significant tax policy changes amid an uncertain economic environment increases the risk of unexpected consequences,” he said.
MEANWHILE, IN ALBANY: Democratic New York Gov. Kathy Hochul has been holding events around the state to rally support for her plan to spur housing development — a controversy baked into budget talks.
As Newsday reports, Hochul said housing prices on Long Island have increased 66% in the past 10 years. She said Long Islanders can no longer afford to buy homes and are spending more than 30% of their incomes on mortgages or rent.
"You won't be able to afford the house you're living in right now," the governor said. "Your kids can't afford to live in the same neighborhood. Your own kids will never be able to grow up around you."
Lawmakers struck back at a budget hearing in Albany. According to Newsday, Long Island reps peppered housing commissioner RuthAnne Visnauskas with questions about the governor’s proposal, which would mandate denser zoning around train stations and create a state board to consider projects in localities that don’t meet housing quotas.
“We see it as an attack on our suburban communities,” said Republican State Sen. Jack Martins, who noted his home community of Mineola built housing near an LIRR station without a state mandate.
THE QUESTION: Which U.S. state has the highest top income tax rate?
Know the answer? Drop me a line at jimmy.vielkind@gmail.com. Or just write with thoughts, feedback or to say hi.
THE LAST ANSWER: The Golub Family runs Market 32 / Price Chopper.