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States Offer Lesson in Tax Cut Strategy

Associated Press - January 16, 2017 9:29 am

President-elect Donald Trump and congressional Republicans have pledged to cut federal taxes to boost the economy. But some GOP-controlled states have already adopted similar strategies, only to see growth falter and budget gaps widen.

The situation is particularly worrisome in Kansas, Oklahoma and Indiana, where lawmakers are now debating whether to reverse course and raise taxes. And in states that have seen expanded Republican control, such as Arkansas and Iowa, political leaders are signaling caution about any new tax-cut proposals.

The reforms show that tax changes always carry an element of uncertainty – about the economy, government needs and even the prices of commodities such as oil. Although the federal and state tax systems are significantly different, both are subject to forces beyond lawmakers’ control.