From California to Virginia, many states that faced devastating shortfalls in the depths of the pandemic recession now find themselves flush with tax revenues because of a rebounding economy and a soaring stock market, the New York Times reported. Lawmakers who worried about budget cuts are now proposing lucrative increases in school spending, tax cuts and direct payments to their residents. That turnaround is partly the product of strong income tax receipts, particularly in states that heavily tax high earners and the wealthy, whose finances have fared well in the crisis. The unexpectedly rosy picture is raising pressure on President Biden to repurpose hundreds of billions of dollars of federal aid approved this year, in order to help fund a potential bipartisan infrastructure deal. Last week, Sen. Mitt Romney (R-Utah) suggested that Biden and Republican negotiators look to “some of the funding that’s been sent to states already under the last few bills” to help pay for that agreement. “They don’t know how to use it,” Romney said. “They could use that money to finance part of the infrastructure relating to roads and bridges and transit.” Some economists and budget experts support that push, arguing that the money could be better spent elsewhere and that states’ spending plans could add to a risk of rapid inflation breaking out across the country. Other researchers and local budget officials say that the federal aid is rescuing harder-hit cities and states, like New York City and Hawaii, from a cascade of layoffs and spending cuts.
