Tax Trends From the Recession

Source: Mandy Rafool, State Legislatures Magazine, June 2013

For state budgets, the fiscal challenges of the Great Recession have been enormous and widespread. And their effects linger today.

Although revenues began to dry up in 2008, the severe drought began in 2009 and continued into 2010. No matter how pessimistic forecasts were, actual revenue collections were even worse, over and over and over again. Lawmakers scrambled to address not only lower revenue growth rates, but also year-over-year declines in actual collections. The picture improved slightly in 2011 and 2012 as states reported slow but steady revenue grow.

Now, in most states, revenue growth has finally returned to the peak levels of 2008, eliciting a different emphasis in tax policy debates. With all the tax talk swirling around state capitols, it’s worth taking a look back at five tax trends that emerged from the economic downturn as lawmakers struggled to fill severe budget shortfalls. Many continue to have an impact today:
Targeting High Income Earners…
Taking the Temporary Tack…
Focusing on Businesses…
Turning to Health Care Providers…
Cutting Back on Exemptions and Credits…