Twenty-six states that cut or terminated income taxes since 2021 may not have the revenue to continue the programs.
This fall, Americans got to see what it’s like to go without a safety net for the hungry. With the U.S. government shut down for multiple weeks and President Donald Trump refusing to fund SNAP, the federal food stamp program, a panic set in among the more than 40 million people who rely on it. Families skipped meals, and babies went unfed. Food banks ran out of food, and some people turned to dumpster diving.
It was just a glimpse of what’s to come. Starting next October, Trump’s so-called One Big Beautiful Bill Act will shift billions in SNAP costs from the federal government onto states. Some states won’t be able to afford this, and they could be forced to deeply cut or even shutter their SNAP programs altogether, according to the Congressional Budget Office.
“To be crystal clear, what this bill did was create the potential for SNAP programs to no longer exist … in states that cannot afford to?” Rep. Shomari Figures, an Alabama Democrat, asked a panel of state and county social services officials during a congressional hearing in September. Is it correct that under the new cost-sharing arrangement, Figures continued, these states might not have it in their budgets to feed anyone at all, including children and homeless veterans?
“Yes,” officials from Ohio to Wyoming answered, one by one by one.
Most vulnerable to this outcome are 26 states that have enacted sweeping corporate and personal income tax cuts over the past five years, depriving them of billions of dollars in revenue that they could have used at just this sort of moment. These state-level tax cuts, disproportionately benefiting the rich, have moved through legislatures with backing from powerful conservative organizations including the American Legislative Exchange Council, or ALEC, and the Koch brothers-founded Americans for Prosperity, as well as the Tax Foundation, a think tank. These groups seized on an opportunity created by the pandemic — states were flush with cash from 2021 to 2023 largely because federal stimulus funding was flooding in — to make significant progress toward the long-term goal of eliminating state income taxes entirely.
States that slashed their own taxes have only made themselves more reliant on federal funding, and thus stand to be disproportionately harmed by the cuts to SNAP and also to Medicaid contained in the Trump legislation, budget experts and state legislators said.
“It’s clear to policymakers across the country that there will be added costs coming down to states due to the Republican megabill,” said Wesley Tharpe, senior adviser for state tax policy at the nonpartisan Center on Budget and Policy Priorities. “But what’s less well understood by the public is that state and local budgets were already facing extreme strain due to the scope and scale of the tax cut wave that has been sweeping the nation.”
“There have been prior waves,” Tharpe added, “but the number of states that have cut taxes in the last five years, and the sheer size of the cuts, is nearly unprecedentedly large.”
Indeed, according to Pew, the scale of the recent downturn in states’ tax revenue resembles what is usually seen during a recession — even though the U.S. is not in a recession.
Dave Rader, a state senator in Oklahoma who chairs that chamber’s Republican caucus as well as its revenue and taxation committee, told ProPublica that as the costs of SNAP and Medicaid are shifted onto states by the new federal law, those programs could have to be “eliminated” if he and his fellow lawmakers can’t find a way to pay for them. And his colleagues’ recent decision to set Oklahoma on what has been called a “path to zero” income taxes will “put us in an even less fortunate situation because of the decline in revenue,” Rader said, adding that he still hopes the tax cuts work out.
According to a ProPublica analysis of state tax trends since 2021, 26 states have lowered their income taxes, with 23 of them cutting their top marginal rate, which most benefits their wealthiest residents. Eight of these states did so while adopting a “flat” income tax — meaning that a billionaire and his janitor will pay the same rate. Many states, meanwhile, have slashed other kinds of taxes, including property taxes. North Carolina is eliminating its corporate income tax. Missouri is even exempting passive income (money made on stocks, real estate, cryptocurrency and the like) from taxation, which will give millionaires there a $43,000 tax break on average compared with just $80 for everybody else.
These deep cuts to states’ main revenue streams didn’t hurt too much when stimulus dollars were still flowing in from the first Trump and Biden administrations — which, along with high inflation and the temporary spike in sales tax revenue it created, juiced state budgets and budget forecasts.
