Tax Policy

States Have Surpluses, Expect Tax Cuts

States across the nation are flush with surplus cash. But a survey reveals that, in a change in philosophy from past decades, they are using surpluses cautiously while saving for a possible economic downturn.

  • Today 32 states have surpluses equal to at least 5 percent of their budgets.

  • Ten have more than $1 billion each.

  • At least 30 states expect a boost in revenues this year from a strong economy.

The surpluses are expected to lead to a fifth straight year of tax cuts:

  • Legislatures in at least 16 states are expected to consider cuts this year.

  • About half the states cut taxes last year by a total of $4.6 billion, the largest reduction is more than 20 years.

  • Forty-four cut taxes at least once in the past three years and 20 cut taxes in each of those years.

At least 21 states increased the size of their reserve funds last year, and at least six reduced debt.

Source: Richard Wolf, "Surpluses Give States Enviable Fiscal Options," USA Today, January 5, 1998.

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