NCPA - National Center for Policy Analysis

States' Tax-Cutting Enthusiasm is Waning

May 13, 1999

On the whole, states are likely to cut taxes again this year. But on average the cuts won't be as large as those enacted last year. Legislators in some states -- and even an occasional governor -- are finding projects to spend money on and appear to have lost their zeal for giving taxpayers a break or two.

  • The GOP-controlled legislature in Kansas recently rejected Gov. Bill Graves (R) plea for a four-year, $200 million car property tax cut and handed him instead higher gasoline taxes which offset some minor cuts -- resulting in an overall increase.
  • Texas Gov. George W. Bush (R) is struggling to get legislators -- determined to raise teachers' pay -- to agree to a $2.6 billion tax-cut package before the session ends this month.
  • New Ohio Gov. Bob Taft (R) wants next year's expected $450 million surplus to be devoted to school funding -- rather than temporary income- tax reduction.
  • New California Gov. Gray Davis (D), who ran on a tax-cutting platform, has done an about-face and announced he'll spend surpluses on increasing the state's emergency reserve, on infrastructure projects or "other sound investments."

States have been cutting taxes for the past six years running, but reductions are expected to be less in 2000. Analysts say the combined state total could be as low as $3 billion -- down from $7 billion last year.

A recent survey of state budget officers showed that nationwide higher spending on education is now the priority of governors, far outranking tax cuts. Also, the massive highway funding bill passed by Congress last year is encouraging governors to come up with money to get a share of promised federal matching funds.

Source: Mitchel Benson and Jacob M. Schlesinger, "State's Tax-Cutting Binge Is on the Wane," Wall Street Journal, May 13, 1999.


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