Across the country, our state legislatures are negotiating new tax cuts and rebates to allow taxpayers to keep more of their hard-earned dollars and offset the sharp rise in inflation.
Sounds great, right? Well, slow down, there.
This may be a give-and-take kind of deal. Some experts claim that providing more spending money to taxpayers will heighten consumer demand and leave taxpayers with even more inflation.
The economy rebounded quickly after the pandemic shutdown, resulting in state revenues that increased upwards of 17 percent. New tax plans were implemented to help provide some inflation relief, including permanent and temporary changes and/or tax “holidays.” States are implementing reduced tax rates, rebates, or relief payments, and some states are considering suspending their gasoline taxes to give travelers a break at the pump.
This year, especially, our politicians want to stay on the “good side” of taxpayers. With many state legislators coming up for reelection in November, our representatives want to claim that they’ve helped implement tax cuts for the American people. However, if states keep picking up part of the tax tab, their revenue will decrease, and they may not be able to sustain the cuts. Add to that the volatile stock market and the Fed’s increase in interest rates, and we may be looking at the potential of an impending recession.
The Biden administration is focusing on strengthening the supply chain and attempting to prevent price gouging. We will continue to keep you posted on the give-and-take saga of inflation and tax cuts. Meanwhile, please call C&B for advice on all of your strategic tax planning at 201.787.6542.