Income tax cuts in recent years have often been pared with offsetting sales tax base broadening efforts, but that has not been the case in 2021.Īrizona’s legislature approved a significant personal income tax cut as part of the annual budget the governor is expected to sign. Coming out of the Great Recession, at least 14 states cut income tax rates and that trend continued well into the recovery, with six states cutting income taxes in both 2018 and 2019 as well. Several other states, such as Arkansas, North Carolina, and Ohio are still considering income tax cuts and another three states, Mississippi, Missouri, and West Virginia, all had conversations about completely eliminating personal or corporate income taxes that ultimately fizzled out before the end of the session.Ĭutting income taxes is a continuation of a long-standing trend that was put on hold last year. At least nine states passed measures to do so. The most significant tax relief efforts have generally involved reductions in personal or corporate income tax rates. There were still tax increases here and there, but tax relief has been the primary focus of state legislatures in 2021. A new and improved revenue outlook led states to reconsider their priorities a bit.
However, revenues began to perform better than expected and, in tandem with improving budget conditions, there was another round of federal funding for states in the form of the American Rescue Plan Act (ARPA). It seemed highly likely states would need to seriously consider a slate of potential revenue increases during 2021 legislative sessions. Just last summer, states were looking down the barrel of a historic revenue drop as the spread of the coronavirus disrupted large parts of the economy and set off a recession.