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States Letting Tax Increases Expire

As Obama raises taxes, and Colorado considers doing the same, other states are letting their temporary measures expire:

In 2009  residents approved a two-year surcharge on income tax rates for those earning more than $125,000 a year. The legislature declined to extend it in 2012, producing an estimated $133 million tax cut despite pressure by some progressive legislators to make the tax permanent. “The people have voted, and they expect [the reduction to a lower rate] to happen,” Oregon House Republican leader Kevin Cameron told the press.

Delaware, New Jersey, Michigan, and Idaho have also cut taxes or let rates go back down, so it looks like a bipartisan inclination.

This may not last.  The feds are considering revoking the municipal bond interest deduction.  States & localities are now getting about 25% of their expenditures from the feds, up from less than 15% in 1987.  If the feds decide to start using that leverage more aggressively – and Obama has signaled a desire to do just that – states may be forced into raising taxes again.

Posted in Economics, Politics.