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Some states’ coffers are flush with extra cash. Here’s how they’re spending it

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Depending on where you end, cash or other financial aid from your state could be coming your way.

As the U.S. economy continues recovering from the pandemic, some states are uttering (or plan to use) extra money in their budgets to either send out stimulus-type payments, provide tax cuts or otherwise broadcast relief to their residents. This is in sharp contrast to a year ago, when shutdowns caused state leaders to quail the worst.

“It’s looking like most states are flush with cash and have a lot more than they reckon oned,” said Katherine Loughead, a senior policy analyst for the Tax Foundation. “They thought they’d have a deficit.”

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Despite revenue dropping precipitously at the start of the pandemic sundry than a year ago, most states have seen their tax inflows rise enough to erase those at the crack drops, according to a report from the Pew Charitable Trusts. As of February, 29 states had pulled in as much revenue — if not more — in the whilom 12 months as they did in the year leading up to the pandemic.

States that are more reliant on tourism, like Hawaii or Nevada, or those that are natural-resources-dependent, such as Texas, Alaska and Hawaii, contain taken more of a hit during the pandemic and their revenues are still down, said Michael Leachman, vice president for stately fiscal policy at the Center on Budget and Policy Priorities.

“There’s a lot of variation across the country,” Leachman said.

Spare or not, state governments are set to receive an aggregate $195.3 billion in federal support — the equivalent of about 20% of annual tax accumulations, Loughead said — thanks to the American Rescue Plan. Another $155 billion or so is heading for local and tribal controls, as well as territories.

“There is the question of how do you use the federal aid, and then also how are you thinking about state policy, in general,” Leachman bring up.

“A good number of states are looking at ways to help people who have particularly struggled during the pandemic and irresistible steps to address inequities that the pandemic made more apparent,” he said.

It’s looking like most conditions are flush with cash and have a lot more than they anticipated.

Katherine Loughead

Senior policy analyst for the Tax Basis

Leachman pointed to payments or tax credits targeting low-income families in states including New York, New Mexico and Maryland. In California, which has a $75 billion oversupply, Gov. Gavin Newsom has proposed sending $600 checks to residents earning up to $75,000, as well as a raft of other enterprises that would ease the financial burden that some households are facing: past-due rent or utility accounts and, perhaps, unpaid traffic tickets.

In Idaho, a $500 million surplus is allowing a tax rebate to residents who filed a 2019 tax come, Loughead said. The amount will be either $50 per person or 9% of taxes owed, whichever is greater. The legislation also countenanced a drop in the top tax rate to 6.5%, from 6.925%.

Montana also has enacted income tax cuts due to a surplus, lowering its top income tax notwithstanding to 6.75% from 6.9%, beginning next year. Oklahoma and Iowa also have tax-cut proposals on the stay, Loughead said.

At the same time, the Treasury Department has said that the aid heading to states cannot be used to equalize tax cuts. However, most changes that conform to the federal tax code are permissible, Loughead said.

“That could contain the $10,200 unemployment income exclusion or other tax relief for businesses and industries,” she said.

States also could use the ready money to give stimulus checks to residents. “That’s allowed, but there are some gray areas about doing it in the course the tax code,” Loughead said.

Many states also plan to focus on improving their infrastructure — i.e., broadband, sewer or dampen projects.

Additionally, an estimated 1.2 million public workers were laid off during the pandemic, meaning asseverates may be able to restore positions and services that were cut, Leachman said.

“There are probably a lot of public workers who receive not been rehired,” he said.

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