Burning Issues: Mad Dash on State Income Tax
January 26, 2022
In the next installment of our “Burning Issues” series, we’re looking into some of the major issues hitting state legislatures this year. While Washington languishes in a legislative logjam, state legislatures across the country are hungry for a base-pleasing, grandstanding, election-year session.
Flush with budget from higher than expected revenues and massive federal spending from ARPA and beyond, legislatures are all grappling with the same question: What do we do with all this cash?
Here at Firehouse, we’re in particular watching the mad dash to become the 10th state to eliminate income taxes.
In the last two weeks alone, we’ve seen the Mississippi House of Representatives pass a bill to repeal the state income tax, Governor Reynolds in Iowa endorse a 4% flat tax, moving the state closer to total elimination, and major political figures like former senator and current gubernatorial candidate David Perdue grab onto the idea as a major plank in his campaign platform.
This is not new: Republican-held legislatures have been chomping away at income taxes for years, but this current push to be the next Florida or Texas presents a whole host of long-term fiscal issues for states that can’t rely on revenues from big home-state industries like tourism and energy.
Why this matters
In the short-term, to offset new income tax cuts, we’re looking at major hikes in sales and property taxes that will impact retailers, realtors, and virtually every other business operating in these states. But those revenues alone can’t cover the shortfall. Already we’re seeing advocates in states vie for more equity in the tax burden, calling for new taxes on things like video streaming and software as a service.
For business sectors that will be potentially affected, the time to act is now. Unexpected new taxes at the state level can be detrimental to innovation and expansion, and can grow over time – especially once federal stimulus runs dry.
Firehouse is mobilizing to help stop new taxes. Our bipartisan team of former political operatives is active in all 50 states and has the unrivaled ability to rapidly deploy groundbreaking campaigns at the state and national level on behalf of our client’s interests. If this is something we can assist you with, please contact us.