Tax & Budgets
Progressive Cities Could Indicate Future of State Taxation
August 13, 2020 | Ryan Maness
State revenues have had a hard recovery, with about half of the states facing budget deficits or shortfalls, according to a recent report from the National Association of State Budget Officers. Based on a new data analysis, we anticipate that 31 states will face some kind of revenue imbalance in the upcoming legislative session.
Some of the states on this list — such as Illinois, Connecticut, Louisiana, and Kansas — are in the midst of protracted, years-long debates about how to deal with their structural fiscal problems. Other states, like South Dakota, are in better shape and will be able to close their budgetary gaps without resorting to deep spending cuts or broad tax increases.
But the news isn’t entirely bad. Recent economic data suggest that California is no longer in deficit and Virginia’s deficit is significantly lower than we previously reported.
The Iowa Legislative Services Agency recently announced that the state is facing a $132 million budget gap for the current fiscal year. The announcement came a few days after Governor Terry Branstad (R) announced that his office was anticipating the need to cut $100 million from the state budget. The governor did not provide any specifics about what those cuts could entail, saying that the governor’s office will present a more formal plan in January. In response to the state’s financial difficulties, legislators have said they will seek pro-growth policies that will put the state on the path of fiscal stability.