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denver – this month, colorado taxpayers began receiving refunds from the state government. joint filers received $1,500 and individual filers received $750. attached was a letter from the democratic government. jared polis, who noted that the checks, required by the state constitution, were mailed out earlier than expected due to a law passed this session to help people cope with rising prices.
“At a time when inflation is causing increases in the cost of everyday items, we are committed to getting this money to you as quickly as possible,” polis wrote.
Taxpayers in more than a dozen states are receiving rebates this year, as both Republican and Democratic leaders seek to reduce budget surpluses and help residents cope with inflation. Although some of the rebates are required by decades-old laws that limit the growth of state spending, such as in Colorado, governors still tout those rebates as inflation relief.
But while the checks will help individual taxpayers, economists say if too many states send too much money, the refunds could make inflation worse.
“It’s not great economic policy,” said Kyle Anderson, professor of business economics at Indiana University’s Kelley School of Business. “No economist would say, ‘What we really need to do is stimulus checks right now,’ especially when unemployment is extremely low.”
Functionally, the refunds aren’t that different from the stimulus payments the federal government sent out in 2020 and 2021, and some states made last year. Back then, lawmakers worried that Covid-19 and public health measures to contain the virus would trigger a severe recession. therefore, they sent money to the families to help them pay the bills and continue shopping.
Inflation is now skyrocketing as demand for some goods and services outstrips supply. consumer prices were 8.5% higher in July than a year ago, and lawmakers again say families need help making ends meet.
“We know people are stressed about inflation,” said the indiana state senator. travis holdman, republican and chairman of the majority caucus. “even though gas prices are going down.”
Prices have recently increased around the world for a variety of reasons, including supply chain disruptions due to covid-19 and the Russian invasion of Ukraine. From that perspective, the states of money in the us. Spending on refunds is not likely to have much of an effect on inflation, economists say. experts also say that mailing checks doesn’t make much sense.
“Basically, pumping more dollars into an economy where supply is already struggling to keep up with demand just drives up inflation,” said Jared Walczak, vice president for state projects at the Center for State Fiscal Policy at Tax. foundation, a washington foundation. , dc, group of experts.
politically, however, lawmakers are under pressure to help people affected by rising prices, particularly in an election year. and many states are dealing with record surpluses. in some states, there is so much extra money coming in that legislators are required by law to pay it back.
That’s the case in Colorado and Hawaii, where constitutional amendments dating from 1992 and 1978, respectively, limit the growth of state spending. in indiana, a 2011 law generated refunds of $125 this year, and a 1986 law may generate tax refunds in massachusetts.
Some legislators also say that returning excess tax money is the right thing to do.
indiana, for example, has $6.1 billion in general fund reserves, triple the usual amount. In addition to the required $125 refunds, state leaders this month approved additional $200 checks for taxpayers and retirees who rely on Social Security.
“We’re giving people their money back,” said the state representative. Tim Brown, a Republican who chairs the House Ways and Means Committee. “We have a reserve balance that is above what we think we need to run state government.”
This marks the second year in a row that some people have received bonus checks from their state government.
For example, some California taxpayers received a stimulus check of $600 or $1,200 last year, depending on income and family size. some families later received an additional $500. this year, a broader group of taxpayers is receiving tax refunds of between $200 and $1,050, depending on family size and income.
Last year, all idaho resident taxpayers received refunds worth $50 per person, or 9% of income taxes due in 2019, whichever was greater. this year, they’ll get even bigger checks: $75 per person or 12% of taxes due in 2020, whichever is greater.
In some states, taxpayers will receive multiple checks this year alone.
new mexico lawmakers in february approved $250 refunds for individual filers earning less than $75,000 and $500 refunds for joint filers earning less than $150,000. In April, they approved two more rounds of refunds of $250 and $500, this time for all individual and joint filers, regardless of income. They also added rebates for residents who don’t file income tax returns, such as people who rely on Social Security or earn too little to owe taxes.
People who qualified for all three rounds received three payments, in June, July and August.
new mexico state representative. Christine Chandler, a Democrat who chairs the House Revenue and Tax Committee, said the rebates passed in February, before gas prices began to skyrocket, were driven primarily by the state budget surplus (estimated at $ 1.6 billion when the legislature met).
“I think it was an acknowledgment that our revenue stream was extremely healthy and that we had enough funds to put some money back to the taxpayers,” said chandler.
The refunds approved in April were due to inflation concerns, he said. “The conversation changed, because we were much more focused on the need to provide support or relief to our citizens.”
Lawmakers say they’re not overly concerned that tax refunds will contribute to inflation. The $9.5 billion California lawmakers are spending on rebates this year will help families put food on the table, the Democratic state representative said. phil ting, chairman of the assembly budget committee.
“While $9 billion is a lot of money for those individual families,” he said, “it really isn’t enough money to impact California’s $3.4 trillion economy.”
GOP members of Congress voted for a massive COVID-19 relief package under former President Donald Trump, but blame the latest round of relief, the US Bailout Act, for fueling inflation .
“[in indiana] the funds that were used to return the checks were overpayments and excess reserves that we have,” holdman said. “The federal government used borrowed money. therefore, we do not believe it will have an impact on inflation close to the level of the federal payments.”
State lawmakers who want to rein in inflation might want to spend extra money on debt payments or pension obligations, economists say, anything that doesn’t involve pumping more cash into the economy.
some states are doing it. Indiana lawmakers spent $545 million on teachers’ pensions last fiscal year, under the same law that triggered the $125 refunds. passed legislation during the special session in August that could put an additional $1 billion into teachers’ pensions next year, depending on the size of the state surplus.
As state lawmakers seek to spend massive surpluses, they may find it difficult to avoid policies that could contribute to inflation.
Launching, say, a new highway construction program would boost construction employment and demand for materials, said Anderson of Indiana University. “That could also be inflationary.”