HILL TAX BRIEFING: Inflation Disrupts State Budget Surplus Plans

For months, states across the US benefited from inflation, drawing in more tax revenue from higher-priced goods and rising wages.

That helped further fuel state budget surpluses, which various state legislatures have been relying on to advance tax cuts, direct rebates, and additional spending. Recent data showing lower year-over-year sales tax revenue in 26 states serves as an early warning sign that trouble may be coming.

“Moving forward, people are going to be a lot more mindful with their money and spend much less on non-necessary, discretionary items, which means we’ll see further weakness in state sales tax revenue,” said ...