U.S. States Face Fiscal Challenges as Tax Cuts Slow and Revenues Decline

As the pandemic-era revenue surge recedes, states are grappling with budget deficits and the impacts of widespread tax cuts.

Almost every U.S. state has cut at least one broad-based tax, such as income, sales, property, or gas taxes, over the past three years, with the exception of Alaska and Nevada.
The trend of tax cuts may be slowing as 2024 legislative sessions begin due to the receding pandemic-era revenue surge fueled by federal spending and inflation.
California is facing a projected budget deficit of a record $68 billion, exceeding its reserves, and other states are also seeing tax revenues decline and spending exceed forecasts.
State-level tax reductions are projected to result in $13.3 billion less in general revenue this year compared to what states otherwise would have collected, following a $15.5 billion net tax reduction from the 2023 fiscal year.
Though fewer states may pursue income tax cuts this year, more may be looking to provide property tax relief due to pressure from constituents about dramatically higher property tax bills and assessments.