Shock gas and rising grocery prices prompt states to seek tax relief
Donna Borak and Lillianna Byington/Bloomberg News (TNS)
Rapidly rising inflation in the United States is accelerating calls from governors and state leaders for immediate tax relief for cash-strapped residents facing higher prices on everyday goods such as gas, milk and electricity.
The governors of Maine and Kentucky this week joined a slew of states — including Illinois, California, Massachusetts, Florida, Alabama, Washington and Missouri — that are considering offering quick relief but temporary relief to taxpayers crushed by a relentless surge in inflation in recent months.
The Consumer Price Index – which measures what Americans pay for goods and services – hit another 40-year high last month, climbing to 7.5% on strong consumer and business demand. pandemic-related supply disruptions.
The swift bipartisan action by state leaders in recent weeks comes as congressional Democrats in Washington race to pass legislation that addresses rising costs for gasoline, medical care and food before the midterm elections. Democratic and Republican states teeming with cash due to higher-than-expected tax revenues, a booming stock market and millions in unspent federal pandemic aid are eager to move quickly to return surpluses to taxpayers.
“2022 is shaping up to be the year of bipartisan tax relief,” said Jared Walczak, vice president of state projects for the Tax Foundation. “Across the board, we see legislators trying to find ways to reduce tax burdens.”
Make ends meet
State lawmakers’ wish list for tax relief runs the gamut from shopping at grocery stores to property tax to relief at the pump, household cleaning supplies and even selling retail and vehicle sales. Although the adjustments are not uniform, all the proposals point in the same direction to save taxpayers, even temporarily, according to tax policy experts.
Alabama lawmakers on Thursday approved a bill that would allow families to avoid paying state income tax on monthly child tax credit payments they receive under of President Joe Biden’s economic aid package.
A day earlier, Democratic Kentucky Gov. Andy Beshear signed an executive order halting an increase in vehicle property taxes that have risen dramatically due to soaring car values. He also approved a plan by the state legislature to temporarily reduce the state sales tax by 1% for one year starting July 1 to help families with higher costs that are expected to continue d increase until 2023.
“A booming economy and the best state budget in 25 years means we can do more to help our working families and small businesses buy and sell the essential goods and services that cost more and need more money. price is just too high,” Beshear said.
Consumers have been hammered by higher costs across the economy, from food and apartment rents to plane tickets and electricity, negating wage increases.
In Maine, Democratic Gov. Janet Mills on Tuesday offered to return half of the state’s $411 million surplus in one-time $500 checks to help residents keep up with soaring prices. His supplemental fiscal plan also includes two other relief measures: a $1,000 refundable tax credit to about 100,000 low- and middle-income homeowners and renters, and the extension of the earned income tax credit from the state to families earning less than $57,414 a year.
Sales tax relief
State tax revenue has increased 26.3% since April 2021, according to the Tax Policy Center, due to increases in personal and corporate income taxes. Consumers helped by federal stimulus money also spent more, helping to bolster sales tax revenue for states.
Republican lawmakers in New York and Connecticut have introduced legislation to temporarily exempt or reduce the rate of state sales tax.
In New York, Deputy Minority Leader Steve Hawley (right) in the state Assembly has offered to relieve New Yorkers by waiving a 4% sales tax on gasoline, personal care products personal care, housekeeping supplies and ready-to-eat foods for two years.
“The windfall of additional state sales tax revenue from inflated goods prices should not be compounded on the backs of New York consumers,” the bill’s authors wrote. “New York State has significant revenue to account for the loss of sales tax revenue due to the suspension provided in this bill.”
In Connecticut, Republican lawmakers have also called for a portion of the state’s surplus to be returned to taxpayers by reducing the general sales tax from 6.35% to 5.99% and eliminating a $1 surtax. % on prepared foods, including restaurant meals.
As food prices rise
There are 13 states that tax groceries — and now Oklahoma, Kansas, Mississippi and Virginia are among several considering removing the levy on food purchases entirely or at least temporarily.
Earlier this month, Republican Oklahoma Gov. Kevin Stitt proposed eliminating the state’s 4.5% sales tax, which would save residents more than $250 million. dollars, according to a study commissioned by House Minority Leader Emily Virgin (D) last year.
Republican Utah Gov. Spencer Cox, as part of his $25 billion state budget, wants to give residents a $160 million grocery tax credit to help cover the hike food costs. The majority of the tax refund, he said, would go to households earning less than $100,000 a year.
In the Midwest, Democratic Illinois Governor JB Pritzker, who faces re-election this year, has offered inflation relief as part of his budget plan, saving consumers nearly $1 billion. in taxes for the coming year on groceries, gas and property taxes.
“The higher cost of basic necessities is making it harder to make ends meet,” Pritzker said earlier this month during a speech from the state Capitol building in Springfield. “The government should do more to ease the pain and put more money in the pockets of hard-working Illinois.”
Analysts say proposed tax relief efforts, like Pritzker’s, are only short-term.
“These proposals are too small and too localized to address the fundamental problem of inflation,” said David Merriman, a professor at the University of Illinois at Chicago.
Fuel pump help
State relief efforts come as Washington Democrats proposed bills in the Senate (S. 3609) and House this month to temporarily suspend the $18.4 federal gasoline tax cents per gallon through Jan. 1, 2023. Some Senate Republicans called it a “trick,” but the White House said it was keeping all options on the table.
The proposal has drawn swift opposition from transportation and construction groups who say it would hurt the already strained Highway Trust Fund, which is backed by the gas tax and funds federal highway and transportation programs. in common.
“These short-sighted solutions will increase debt financing by billions and bring greater uncertainty to the solvency of the surface transportation system,” said Michael Johnson, president of the National Stone, Sand & Gravel Association.
Some opponents, including House Transportation and Infrastructure Chairman Peter DeFazio (D-Ore.), also argue that energy companies will pocket the savings instead of lowering prices.
As Americans continue to pay high prices at the pumps, state lawmakers on both sides are also eager to offer a reprieve.
California Democratic Governor Gavin Newsom wants to delay a hike in the state’s gas tax, calling it “a modest $523 million gas tax holiday.” It was pushed back by Democratic state lawmakers who raised concerns about its impact on the economy.
Republican Florida Governor Ron DeSantis also wants to provide $1 billion in assistance to suspend the state’s gas tax for millions of Floridians for five months, helping the average family save $200. The state’s House Ways and Means Committee on Thursday proposed a tax package that would establish sales tax vacations, but does not include DeSantis’ proposal to suspend the US gas tax. State.
Meanwhile, states like Rhode Island hope to use their $600 million budget surpluses to completely eliminate the state’s gasoline tax in 2022.
“Our state budget benefits from inflation as the gas tax generates unexpected new revenue,” said Jessica de la Cruz, Rhode Island’s Republican Minority Whip. “Meanwhile, Rhode Islanders are struggling to balance their budgets with no relief in sight.”