By DAVID A. LIEB

Associated Press

JEFFERSON CITY, Mo. — Just six months after passing what was billed as the largest tax cut in Missouri history, the Republican-led state House voted Tuesday for an even bigger income tax cut that could return over $1 billion annually to individuals, corporations and retirees.

The Missouri legislation is the latest in a series of aggressive tax reductions that swept across U.S. states last year and have continued into 2023 — even as some warn that it might be wise for states to hold on to record large surpluses amid economic uncertainty.

“Wouldn’t it be a good idea for us to all just pause for a year?” Democratic state Rep. Deb Lavender asked rhetorically before her Republican colleagues endorsed the tax cut on a 109-45 party-line vote.

The Missouri legislation still has a ways to go — it needs a second House approval before it can move to the Senate and then to the governor. But legislatures and governors in several states already have given final approval to tax cuts and rebates in the first few months of this year. In some states, those tax breaks have been pushed by Republicans, but in others by Democrats.

In Michigan, Democratic Gov. Gretchen Whitmer signed a bill passed by the Democratic-led Legislature that provides tax relief to retirees and to lower-income families.

Nationwide, states’ total financial balances reached a record $343 billion at the end of their 2022 fiscal years — up 42% from the previous year, according to a recent report by The Pew Charitable Trusts.

Two-thirds of states approved some sort of tax relief last year, according to an analysis by The Associated Press.

Those surplus-induced tax breaks were enabled by stronger than expected state tax collections and an influx of federal pandemic aid both directly to states and to businesses and individuals that, in turn, injected more spending into the economy. But those federal payments are winding down, inflation remains persistently high and new challenges in the banking sector have raised questions about the overall economy.

“This extraordinary chapter in state finances appears to be coming to an end,” said Justin Theal, an officer with Pew’s State Fiscal Policy Project.

“Tax cuts or new spending initiatives aren’t inherently bad or uncommon during good budgetary times,” Theal said. But “if policymakers aren’t careful, these long-term commitments can place them in a more vulnerable fiscal position when the economy inevitably turns.”