The COVID-19 pandemic has had a significant impact on state tax policies, with many states facing budget shortfalls and looking for ways to generate revenue. This report from KPMG explores the potential post-pandemic state tax policies that may emerge, including changes to corporate income tax, sales tax, and property tax. It also discusses the potential impact on businesses and individuals, as well as the importance of tax planning in this uncertain environment.
State legislatures, buoyed by burgeoning revenue and growing reserves, enacted some significant tax cuts during the coronavirus (COVID-19) pandemic recovery. From 2021 to 2023, 25 states reduced individual (personal) income tax rates, 13 cut corporate income tax rates, and two reduced sales tax rates. And that’s not counting the myriad tax cuts through structural changes in deductions, credits, and so on.
In 2023, however, state revenue growth tailed off substantially, particularly when the effects of inflation are factored in. The question for taxpayers is whether states can sustain ongoing tax reductions or whether some states overshot the mark and created a structural imbalance that may force tax and expenditure adjustments.
Read a February 2024 report* [PDF 213 KB] prepared by KPMG LLP tax professionals that examines factors taxpayers may need to consider as the state fiscal policy landscape shifts in response to falling state tax revenue: Post-Pandemic State Tax Policies Are a Kaleidoscope in Motion
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