Dueling Economic Theories Part II: Uses of State Tax Revenues

On a previous blog post I took a look at a Washington Post article that highlighted how arguments across state legislatures are heating when it comes to how best to spend surplus revenue due to the recent rebound in state revenue levels. It was noted that Republican-leaning states tended to use the surplus to cut taxes while Democrat-leaning states tended to use the surplus for social welfare benefits like education. This new Stateline article picks up where that Washington Post article left off and details how some of these states are going about their business. 

While the idea that Republican-leaning states tend to approach economic development through tax cuts is not a new one, a recent development seems to be increased resistence in conservative states to drastic cuts in tax rates. For example, Governor Jindal personally campaigned for a number of tax cuts early this year, but his proposals were rejected by other state leaders - both progressive groups and the business community. In Indiana, Republican Governor Mike Pence wanted a personal income tax cut of 10 percent but was only granted a 5 percent cut. In Kansas, Republican Governor Sam Brownback is actually pushing for a 5-year sales and income tax increase of $777 million to help offset the cost of a previous $4.6 billion dollar tax cut.

In many Democratically-leaning states like California, most of the projected revenue surplus is being saved for the next budget cycle. In Illinois a lot of the surplus went to paying down their debt. In states like Washington, Maryland, Vermont, Massachusetts, and Pennsylvania, leaders are actually pushing for slightly higher taxes (mostly gasoline taxes) to help fund infrastructure and transportation repair.  

Check out the Stateline article, As Revenues Rebounded, Many States Cut Taxes, to learn more.