State Rundown 7/27: State Legislative Debates Winding Down but Tax Talk Continues

While only a few states still remain mired in overtime budget debates, there is plenty of budget and tax news from around the country this week. Efforts are underway to repeal gas tax increases in California and challenge a local income tax in Seattle, Washington. And New Jersey legislators’ law to modernize its tax code to tax Airbnb rentals has been vetoed for now.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• Not there yet—Wisconsin lawmakers are still at an impasse over the state budget. This past week, Senate Republicans put forward their own plan which addresses school funding, doesn’t expand the EITC as proposed by Gov. Walker, and eliminates the state’s Alternative Minimum Tax (creating yet another windfall for the wealthy).
• The Pennsylvania Senate is expected to vote on a plan today to fund the state budget. The plan includes higher consumption taxes on users of natural gas, electricity, and phones; a new severance tax on natural gas drillers; newly remitted sales taxes on all internet purchases; and a fireworks levy – together resulting in over $550 million in new tax revenue. Separate bills would transfer funds from a surplus account, borrow from the state’s annual allotment of tobacco funds, and expand gambling in the state.
• Alaska lawmakers are back to the Capitol today for a single-day session where they will be unveiling their draft version of a capital budget compromise.
• In Louisiana, Gov. Bel Edwards is not planning to call a special session to address the state’s impending fiscal cliff until and unless he is confident the House will seriously address and pass a tax reform plan. He’s not holding his breath.
• While a campaign to repeal recent gas tax increases in California has met initial requirements to appear on the 2018 ballot, officials are planning for the acceleration of road projects to be funded by the new revenues before they hit state coffers.
• As expected, the first lawsuit challenging Seattle’s recently passed income tax ordinance was filed in Washington. The measure also faces a growing oppositional movement, led by a venture capitalist and a former Washington Attorney General.
• In Oregon, as ballot initiative proposals are piling up in response to the legislature’s failure to pass corporate tax reform this session, the grocers association is working to make sure at least one of those ballot initiatives creates a constitutional prohibition against taxing food production and sales (except at restaurants).
• Ohio lawmakers, under pressure from outside groups – primarily Ohio Policy Matters – launched their review of $9 billion in state tax breaks.
• New Jersey Chris Christie has vetoed legislators’ attempt to modernize the state’s tax code by applying hotel taxes to Airbnb rentals.
• Colorado has brought in half a billion dollars in revenue from marijuana since legalization in 2014. On the east coast, lawmakers in Maine are contemplating a 10% excise and 10% sales tax on recreational marijuana as they develop new regulations for the industry that were approved by voters last November.
• Moody’s Investor Services has avoided changing Illinois’s bond rating to junk—for now. With $15 billion in unpaid bills and over $100 billion in unfunded pension liabilities, even with the recent tax increases enacted by lawmakers, the state has a long way to go until reaching the clear. Alaska, on the other hand, without a fiscal plan in place, continues to face downgrades – first by Moody’s and then by S&P.
• Indiana closed the fiscal year with $2 billion in rainy day funds and a $42 million general fund surplus. In contrast, tax revenues in Montana fell short of the budget cut triggers lawmakers passed this last legislative session, meaning there will be $70 million in cuts over the next two years for most state agencies and for mental and other health services. These services currently support people with disabilities and/or low incomes. Due to increases in the oil and gas industries and business receipts, New Mexico is experiencing its fourth straight month of increased revenue from the previous year.
• Education funding is a contentious issue in several states right now. In Kansas, the State Board of Education is at odds with lawmakers over the level of funding required to satisfy the state constitution’s standard of adequacy. And in Texas, the debate over local property tax relief (which the Senate just passed) is inviting protests that underlying problem is the state’s declining contributions to school funding.
• After Missouri legislators nullified St. Louis’s $10-per-hour local minimum wage, a campaign was started to urge local employers to adhere to the wage increase voluntarily.
• Michigan Snyder signed into law tax breaks intended to lure more companies to Michigan, but vetoed the acceleration of sales tax cuts for people trading in used vehicles when purchasing a new one, citing upcoming budgetary pressures and the need for fiscal prudence.

What We’re Reading…

• Taxes on sugary beverages are “popping up all over the country,” the Chicago Sun-Times While the implementation of the Cook County tax has been delayed due to pending legal action, new soda taxes have gone into effect in Boulder, CO and Oakland, CA as of July 1 and are scheduled to go into effect on January 1, 2018 in Seattle, WA and San Francisco, CA.
• Pew’s Stateline reports on the number of states raising the gas tax over the past 4 years—it’s over half (26). Even in conservative states like Tennessee and South Carolina, lawmakers are letting their concerns about crumbling infrastructure overcome their concerns about potential political unpopularity.
• A new working paper out of the National Bureau of Economic Research concludes that the income tax deduction for mortgage interest payments does not increase homeownership, but merely increases the size and price of homes bought by people who would have bought homes anyway.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.

 

 

---

---