Special Briefing: State Tax Cuts

With their revenues and cash reserves at record highs after unprecedented federal aid to offset the impact of COVID-19, dozens of states embarked on the biggest wave of tax cuts in decades, slashing levies by at least $124 billion on everything from personal income to groceries and gasoline. Tune into this Special Briefing as the authors of the forthcoming Volcker Alliance issue paper, State Tax Cuts after the Pandemic: Strategies to Sustain Fiscal Health, and an expert panel discuss whether these reductions can be sustained as revenues have begun to weaken despite the strong US economy. 

Our panel of experts includes the paper’s authors Can Chen, associate professor, Andrew Young School of Public Policy at Georgia State University (GSU), and Alex Hathaway, senior research associate, Center for State and Local Finance at GSU; as well as Geoffrey E. Buswick, managing director and government sector leader, S&P Global Ratings-US Public Finance; and Natalie Cohen, founder and president, National Municipal Research.

 Notable Quotes:

 “When governments use one-time budget surpluses for permanent tax cuts, they may face long term budget challenges. This is why we wanted to specifically look at the long term fiscal implications of permanent expansions of tax cuts.” - Can Chen

 “States that have opted for permanent tax cuts recently could face depleted safety net funds and less generous aid in the future. Our report proposes four strategies that states can consider going forward when they implement future tax reductions.” - Alex Hathaway

 “As the paper highlights, thanks to a stronger than projected growth across many revenue streams the past few years and the ability to build the reserves to all time levels — typically well above policy — most states passed tax cuts and relief in some form.” - Geoff Buswick

 “You never know when that black swan event is going to hit, whether it's climate change or some major crisis in the world, geopolitical issues can rear their heads and suddenly put a state on its back foot in terms of revenue changes.” - Natalie Cohen

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 Special Briefing is published by the Volcker Alliance, as part of its Public Finance initiatives, and Penn IUR. The views expressed on this podcast are those of the panelists and do not necessarily reflect the position of the Volcker Alliance or Penn IUR.