Special Briefing: State Tax Cuts

With their revenues and cash reserves at record highs after unprecedented federal aid to offset the impact of COVID-19, dozens of states embarked on the biggest wave of tax cuts in decades, slashing levies by at least $124 billion on everything from personal income to groceries and gasoline. Join our next Special Briefing as the authors of the forthcoming Volcker Alliance issue paper, State Tax Cuts after the Pandemic: Strategies to Sustain Fiscal Health, and an expert panel discuss whether these reductions can be sustained as revenues have begun to weaken despite the strong US economy.

Our panel of experts will include the paper’s authors Can Chen, associate professor, Andrew Young School of Public Policy at Georgia State University (GSU), and Alex Hathaway, senior research associate, Center for State and Local Finance at GSU; as well as Geoffrey E. Buswick, managing director and government sector leader, S&P Global Ratings-US Public Finance; and Natalie Cohen, founder and president, National Municipal Research.

Moderated by William Glasgall, Volcker Alliance senior director, public finance and Susan Wachter, co-director of the Penn Institute for Urban Research, this briefing is the forty-ninth in a series of sixty-minute online conversations featuring experts from the national research networks of the Volcker Alliance and Penn IUR, along with other leading academics, economists, and federal, state, and local leaders.

Special Briefings are made possible by funding from The Century Foundation, the Volcker Alliance, and members of the Penn IUR Advisory Board.

Recordings of the entire Special Briefings series are available on the Volcker Alliance website: SPECIAL BRIEFING SERIES ARCHIVE.

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STATES THAT IMPLEMENTED TAX CUTS FOLLOWING FEDERAL PANDEMIC AID NOW FACE "BALANCING ACT" AS REVENUES WEAKEN

 Authors of a New Issue Paper by the Volcker Alliance and Panel of Fiscal and Budget Policy Experts Discuss Whether Tax Cuts Can be Sustained

The paper’s co-authors, Can Chen, Associate Professor of the Andrew Young School of Public Policy at Georgia State University, and Alex Hathaway, Senior Research Associate at the Center for State and Local Finance at Georgia State University, joined Geoffrey E. Buswick, Managing Director and Government Sector Leader at S&P Global Ratings-US Public Finance, and Natalie Cohen, Founder and President of National Municipal Research, in a discussion on whether these tax reductions can be sustained as revenues have begun to weaken, despite the strong U.S. economy.

To read or download the the full report, click here.

“Because of unexpected revenue growth and large federal aid, many states had an unexpected revenue surplus. This puts them in a very strong position to cut taxes,” said Can Chen, Associate Professor of the Andrew Young School of Public Policy at Georgia State University. “When governments use one-time budget surpluses for permanent tax cuts, they may face long term budget challenges. This is why we wanted to specifically look at the long term fiscal implications of permanent expansions of tax cuts.”

“States that have opted for permanent tax cuts recently could face depleted safety net funds and less generous aid in the future. Our report proposes four strategies that states can consider going forward when they implement future tax reductions,” said Alex Hathaway, Senior Research Associate at the Center for State and Local Finance at Georgia State University. “That is a balancing act that requires careful attention and adjustment as new information comes in. Overall, states should be careful in their approaches to enacting tax relief measures and do their best to consider long-term sustainability.”

“The state sector is the highest-rated sector within public finance ratings,” said Geoffrey E. Buswick, Managing Director and Government Sector Leader at S&P Global Ratings-US Public Finance. “As the paper highlights, thanks to a stronger than projected growth across many revenue streams the past few years and the ability to build the reserves to all time levels — typically well above policy — most states passed tax cuts and relief in some form.”

“I think the recommendations and the discussion around being cautious and prudent and being careful not to embed permanent tax cuts [are correct],” said Natalie Cohen, Founder and President, National Municipal Research. “You never know when that black swan event is going to hit, whether it's climate change or some major crisis in the world, geopolitical issues can rear their heads and suddenly put a state on its back foot in terms of revenue changes.” 

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Can Chen is an associate professor in the Andrew Young School of Policy Studies at Georgia State University. He founds and leads the Infrastructure Finance & Policy Lab (iFPL). His core research agenda is developing and promoting innovative, efficient, and effective infrastructure financing to support critical infrastructure that is sustainable and resilient in its financing and funding, use, performance, and maintenance. Dr. Chen’s substantive research topic interests include infrastructure finance & policy, fiscal transparency, disaster finance, and the intersection between public finance and public management & policy. His methodological interests are causal research designs and computational social sciences. His professional website is available at https://sites.google.com/view/canchen/home.

Dr. Chen has published a book on innovative infrastructure finance (Palgrave Macmillan, 2022). His journal publications appear in Public Budgeting & Finance, Public Finance Review, Journal of Public Budgeting, Accounting & Financial Management, Municipal Finance Journal, Policy Studies Journal, Journal of Comparative Policy Analysis, Transport Policy, Public Works Management & Policy, Public Administration, American Review of Public Administration, Public Management Review, International Public Management Journal, International Review of Administrative Sciences, State and Local Government Review, and others. He has received three national research awards: the ASPA’s William J. Petak Best Paper Award, the ASPA’s Garcia-Zamor Best Paper Award, and the NASPAA’s Best Doctoral Student Manuscript Award. His research was supported by grant funding from the World Bank, GASB, ICMA, Lincoln Institute of Land Policy, and Open Government Partnership.

Professionally, Dr. Chen serves as the chair of the American Society of Public Administration (ASPA) Section on Transportation Policy and Administration (STPA) and an Executive Board Member for the Association of Budgeting and Financial Management (ABFM).  He is a certified research associate at the Mineta Transportation Institute, a friend of the Economics, Revenue, and Finance (AJE50) committee on the Transportation Research Board (TRB), and an affiliated faculty member for the Center for State and Local Finance at GSU. He is the Associate Editor for the Journal of International Review of Public Administration (IRPA) and the Journal of Chinese Public Administration Review. 

Alex Hathaway is a senior research associate in the Public Finance Research Cluster, specializing in state fiscal health. He is the principal investigator on the center’s multi-state evaluation of budgeting and financial management practices for the Volcker Alliance’s Truth and Integrity in Government Finance project. Hathaway also contributes to the cluster’s economic development, tax policy, and education policy research. He holds a BA and MA from the University of Georgia, an MPP from Georgia State University, and a professional doctorate from Life University. His other areas of interest include healthcare systems and finance, aging policy, and program evaluation. 

Geoffrey Buswick is a Managing Director and Government Sector Leader in the U.S. Public Finance department at S&P Global Ratings. He’s interested in credit conditions, market changes, evolving technologies, and Ratings’ views on emerging risks in the public finance sector. He chairs state, local government, utility, and transportation committees and is an active primary analyst in the sectors, as well. Along with credit work, Geoff focuses on market outreach, developing research, and analytical education about S&P Global’s approach to rating government entities.  Geoff has held various senior analytical and management roles in Ratings. From October 2010 to February 2015, Geoff was the Lead Analytical Manager for the Public Finance Infrastructure Group.  From 2005 to September 2010, he served as the Boston office head for S&P Global Ratings.

Prior to joining Ratings, Geoff served as the Finance Director for the City of Gloucester, Mass., and previous to that was the Administrative Officer for the City of North Adams, Mass. Geoff served two stints on the board of governors of the National Federation of Municipal Analysts (NFMA) (2020-2022 & 2010-2013) and was the co-chair for the 2012 and 2013 NFMA Annual Conferences.  In 2017, he received the “Award for Excellence” from the NFMA for his work to improve market-wide disclosure of alternative financings.  

Natalie Cohen is President and founder of National Municipal Research, a consulting and research company focused on U.S. state and local government finance. She publishes on these topics at The Public Purse. A seasoned analyst, writer and speaker, she started her career at New York City OMB, worked at a rating agency, several bond insurers and is known for her published work on municipal bond defaults. She most recently spent eight years building and branding municipal research at Wells Fargo Securities. She was awarded the Lifetime Achievement award by Smith’s Research and Gradings and the Women Trailblazers award from the Bond Buyer.

She has an MPA from New York University's Wagner School of Public Service and a BA from Hampshire College in Amherst, Massachusetts. She has been a member of the Government Accounting Standards Advisory Council, a former Board member of the National Federation of Municipal Analysts. She served two terms on the Government Finance Officers Association standing budget committee and is on the GFOA Committee on Retirement Benefits Administration. She is also a Board member of Build America Mutual, a bond insurer, and chairs the Audit Committee.