Temporary Taxes

When the Great Recession created unexpected budget deficits, many states used temporary tax increases to maintain revenues for vital government services. Because they are generally less disruptive than immediate spending cuts, temporary tax increases can be a useful tool for overcoming short-term deficits. There is a perception that temporary taxes become permanent taxes but the evidence on this point is mixed. States do allow temporary taxes to expire after the taxes have met their short-term revenue needs but some of the taxes are made permanent or extended. In this brief, we look at 14 states and the District of Columbia (DC) that together enacted 25 temporary tax increase measures between 2008 and 2011.