For the second year in a row, states are likely to cut taxes by more than they raise them. Although taxpayers won't get as big a break as they did last year, when states slashed taxes by a total of $1.2 billion, they'll enjoy the first back-to-back tax cuts since the late 1970s.
Thanks to an expanding economy, most states are in good fiscal shape, and several have big surpluses. Nevertheless, they're keeping tax relief modest and shoring up their rainy-day funds to brace for an eventual economic slowdown and the likelihood of fewer federal dollars.States with the luckiest taxpayers are:
- UTAH. Cuts in property taxes will kick in during the second half of the year. Marking its third consecutive year of tax reductions, Utah also trimmed its income-tax rates across the board, bringing the top rate down from 7.2 percent to 7 percent.
- GEORGIA. Legislators passed the largest tax cut in the state's history - a $500-million reduction in the sales tax on groceries, which will be cut from 4 percent to 2 percent and gradually phased out.
Fortunately for state coffers, the cut won't take effect until Oct. 1, after the Summer Olympics. (A spokesman for Gov. Zell Miller says the delay was necessary to give grocery stores time to adjust their computer systems).
Georgia also repealed its intangibles tax on assets such as stocks, bonds and mutual funds.
- INDIANA. The Hoosier State doubled its homestead credit (a property-tax credit for homeowners) for 1996 and added a smaller property-tax break in 1997. It also cut excise taxes on automobiles and earmarked $200 million to reduce the shortfall in the state pension plan for public-school teachers.
Elsewhere, Iowa will probably settle on about $120 million worth of property-tax relief. But Arizona's governor vetoed a $200 million tax cut for households and businesses. And tax relief is out of the question in a number of states that are in the red: Connecticut, Hawaii, Maryland, Rhode Island and Vermont.