Fiscal Discipline Helps States Ditch Income Taxes

Affordability keeps getting worse in many states for a simple reason: government spending has grown far faster than taxpayers’ ability to support it. Vance Ginn recently pointed to a clear benchmark for fiscal discipline, and the numbers make the case. From 2016 to 2025, aggregate state spending excluding federal transfers rose 65.8%, while the sustainable benchmark of population growth plus inflation rose just 32.4%.

That gap helps explain why so many states keep talking about affordability while making it harder to achieve. When spending rises much faster than population growth plus inflation, taxpayers end up financing a government that is expanding faster than their household budgets can reasonably keep up with. States do not have a revenue problem. They have a spending problem.

A Simple Benchmark for Fiscal Discipline

The right ceiling is straightforward: state spending should grow no faster than population growth plus inflation. That standard does not require shutting down core public services. It simply requires lawmakers to keep government growth in line with what taxpayers can sustain over time.

Once spending blows past that limit, the consequences show up everywhere else. Families have less room in their budgets. Employers face higher tax pressure. Lawmakers start treating every revenue increase as an excuse to spend more instead of an opportunity to provide relief. Over time, that approach weakens growth and makes states less competitive. This is part of the affordability story that too many politicians try to avoid.

Overspending Is Not Abstract

This is not a theoretical problem. Ginn highlighted data showing that if states had stayed within the sustainable benchmark, they would have spent $419 billion less in 2025 alone and $1.8 trillion less over the full decade.

Those numbers show how far many states have drifted from budget discipline. They also show why tax relief so often feels out of reach. States can only return money to taxpayers on a lasting basis when spending growth is restrained on the front end. If lawmakers keep building larger baselines year after year, the pressure for future tax hikes or budget gimmicks only grows.

Why Structural Surpluses Work

The fix is not complicated. Reduce spending and limit its growth. Create structural surpluses. Return the excess through tax relief.

That approach works because a structural surplus is not a windfall for politicians to redistribute. It is a sign that government collected more than it needed under a disciplined budget. The right response is to let taxpayers keep more of their own money. Ginn makes that point directly, arguing that permanent tax relief depends on keeping actual spending growth meaningfully below the sustainable ceiling.

States that consistently apply this common sense spending discipline put themselves in a much stronger position to lower income tax burdens over time. In some cases, that means joining the no state income tax club. In others, it means moving toward a low single-rate income tax that is flatter, simpler, and less punitive to work and investment. Americans for Tax Reform’s current income tax map shows both the states with no income tax and the growing number of states cutting rates or moving toward flatter structures.

Spending restraint today creates room for lower taxes tomorrow. It also gives families and job creators more confidence that a state’s fiscal outlook will not swing wildly every budget season.

Some States Are Showing the Way

West Virginia recently provided one example of what this can look like in practice. Governor Patrick Morrisey signed about $230 million in tax cuts, including a 5% across the board personal income tax cut, while also moving the state tax code closer to permanent federal pro-growth provisions.

By contrast, New York lawmakers recently passed a second one-week budget extender while negotiations dragged on around a proposed budget of at least $263 billion. That kind of dysfunction is what happens when spending growth outruns real guardrails and every budget cycle turns into a fight over how much more government should take and spend.

CFE Takeaway

States do not need higher taxes to become more affordable. They need spending discipline.

When spending rises twice as fast as the sustainable benchmark, the result is not stronger public finances. It is a heavier burden on families, workers, and employers. The better path is clear: keep spending growth at or below population growth plus inflation, build structural surpluses, and return the excess through tax relief. Fiscal discipline now puts states in a stronger position to improve affordability, support growth, and deliver lasting prosperity.