State tax changes in 2017 were varied. Rather than continuing the trend of net reductions in personal and corporate income taxes, there was a significant net increase in personal income taxes. There were net tax increases in all categories except for sales and use taxes. This could be because of the slow revenue growth that was reported in NCSL’s Fall 2016 State Budget Update. A total of 10 states began fiscal year (FY) 2018 without a budget in place.
This report includes tax actions taken during regular and special legislative sessions in 2017, as well as actions approved by voters. Fifty states provided information, which was obtained through a survey of the National Association of Legislative Fiscal Offices. Highlights include:
- Collective actions taken by the 50 states resulted in a net tax increase of $6.9 billion, representing 0.75 percent of the prior year’s tax collections. This displays a slight uptick in activity compared to the $2.3 billion, or 0.3 percent, increase in 2016 and relatively little activity in 2015.
- Illinois enacted its first budget in two years for FY 2018. It passed an extensive tax package that represented a net revenue increase for the state of $5 billion, or 13.1 percent, compared to 2016 collections. This increase placed Illinois at the top relative to change as a percentage of 2016 collections, followed by Kansas at 7.2 percent and Delaware at 5.1 percent.
- The multiyear trend of lowering personal and corporate income taxes was interrupted. Tax increases took place in all tax categories, excluding sales and use taxes. Personal income taxes saw the largest increase, followed by motor fuel taxes and miscellaneous taxes.
- Of the 50 reporting states, 10—Connecticut, Delaware, Illinois, Kansas, Montana, Oklahoma, Oregon, Washington, West Virginia and Wyoming—increased net taxes by more than 1 percent, while two—New Jersey and Tennessee—reported a net tax decrease of more than 1 percent. Thirty-eight states made no significant net tax changes in 2017.
- In addition to tax changes, states approved nontax revenue changes, including fee increases or decreases, revenue accelerations or decelerations, and tax compliance initiatives for a net increase of $1.8 billion. This resulted in a combined total revenue increase of about $8.7 billion in 2017.
This annual report is a cooperative effort of the National Association of Legislative Fiscal Offices (NALFO) and the National Conference of State Legislatures’ (NCSL) Fiscal Affairs Program. Without the advice, expertise and timely assistance of legislative fiscal staff from around the country, the report would not be possible.