Legislatures on a Roll

State governments found themselves awash with surplus funds in 1997, relatively speaking, more than they’ve seen since 1980. As a result, lawmakers spent much of their legislative sessions figuring out what to do with the extra revenue generated by a soaring economy, low unemployment and souped-up fiscal programs.

Tax breaks for individuals and businesses took a big chunk of the excess, as lawmakers enacted a total of US$2.6 billion in personal and corporate income tax cuts in 1997. The pocketbook impact of lower taxes boosts a state’s business climate right off the bat, and in the past three years, legislators have approved a total of $10 billion in state tax cuts.

The rosy state revenue outlook is expected to continue through the end of the century, economists predict, giving business a shot at even better tax breaks and incentives over the next few years. Look for state officials to work on improving their business climates, as 36 governorships and 46 state legislatures are up for election next year.

The latest round of tax cuts puts quite a shine on an already-sunny business climate for most states, says Chris Zimmerman, chief economist with the National Council of State Legislatures. “The United States already had the lowest taxes in the world, and now they’ve cut them more,” he says. “So that doesn’t hurt.”