These states may soon slash their residents' income taxes

The pandemic was expected to decimate state tax revenue as millions lost their jobs, but two years after the start of the crisis, many states are instead flush with cash. That's prompting more than a dozen states to propose a new strategy: cutting income taxes for residents. 

Some of the states have recently passed a reduction in their income tax rates, such as in Idaho, where its governor in February signed into law a cut that will save residents anywhere from hundreds to thousands each year, depending on their earnings. Other state lawmakers are currently hammering out the details, which means the tax cuts aren't yet certain.

Across the country, state and local government tax revenue jumped 42% in the second quarter of 2021 compared with the same period a year earlier, according to a December analysis from the Urban Institute. Taxes have been bolstered by the economic recovery from the pandemic, with corporate taxes rebounding. Workers have regained jobs, helping to boost income taxes. And consumers are spending more, helping to bolster sales tax revenue.