State Tax Actions 2011

Introduction

For the first time in 10 years, states cut taxes more than they increased them. But readers should not draw hasty conclusions about what this means for states’ fiscal health. Most states continued to face substantial budget shortfalls during their 2011 legislative sessions. The net state tax reduction is a result of temporary tax increases expiring in a handful of states, not the result of strong fiscal conditions. When the impact of those temporary taxes is removed from the mix, the outcome is substantially different with a state net tax increase of nearly $9 billion. But again, this is misleading because large tax increases in only two states (Connecticut and Illinois) accounted for nearly all of the gains. In short, the aggregate figures are skewed by a handful of states where tax increases and tax cuts were large and extensive. This report includes tax actions taken during regular and special legislative sessions in 2011, as well as actions approved by voters, mostly affecting FY 2012 tax collections. Fifty states provided information, which was obtained through the National Association of Legislative Fiscal Offices.