State Rundown 8/23: Few Lingering Budget Debates Cannot Linger Much Longer

This week, Oklahoma lawmakers learned they’ll need to enter a special session to balance their budget and that they’ll likely face a lawsuit over their low funding of public education. Pennsylvania‘s budget stalemate is also coming to a head as the state literally runs out of funds to pay its bills. And Amazon’s tax practices are in the news again as the company has been sued in South Carolina. Our “What We’re Reading” section this week features an insightful piece on the role of local taxes in racial injustice, developments in taxing self-driving cars, and more.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• Oklahoma lawmakers must act fast in a special session to balance the state’s budget after the courts struck down a cigarette “fee” increase. Meanwhile, the state’s recent history of misguided tax cuts and resulting shoe-string budgets are playing out much like the Kansas tax cut debacle of the last few years, as Oklahoma City schools are now looking to sue the state for providing unconstitutionally low levels of education funding.
• Pennsylvania is in dire need of an emergency revenue package, as legislators’ weeks-old budget stalemate is rapidly nearing the point at which the state will not be able to pay its bills.
• Connecticut lawmakers are still in a budget deadlock. Democratic lawmakers proposed increasing the sales tax by .5 percentage points this week from 6.35 to 6.85 percent, but Gov.  Dannel Malloy is not a fan of that revenue approach.
• Texas House lawmakers have adjourned their special session, leaving the fate of a bill requiring special local votes for property tax increases uncertain.
• New York City mayor Bill de Blasio is pushing for a millionaire’s tax to help improve funding for public transit in the city, but Gov. Andrew Cuomo has declared the plan “dead on arrival.”
• Some Florida lawmakers and Gov. Rick Scott will push to amend the state’s constitution in 2018 to require a legislative supermajority to enact tax increases, an unnecessary and harmful policy that legislators should reject. Gov. Scott is even touring the state to promote the idea.
• At the same time, realtors in Florida are promoting their own unnecessary and harmful policy gimmick: a permanent cap on property valuation increases, which is a proven way of undermining funding for schools and other local services and driving localities to even more regressive funding sources like sales taxes, fees, and fines.
• Online retail giant Amazon is battling South Carolina over whether the company is responsible for collecting state and local sales taxes on sales by third-party sellers using the site’s “marketplace” feature. The decision could lead to a $12.5 million tax bill for Amazon in South Carolina alone, while setting a precedent for similar decisions in other states. ITEP Research Director Carl Davis is interviewed in a New York Times piece about Amazon’s tax record.
• South Carolina residents will be able to see the results of the state’s long overdue gas tax update online through a new state website that will track construction funded by the tax increase.
• Seattle, Washington‘s new income tax now faces three separate lawsuits from wealthy residents and anti-tax interests.
• Also in Washington, the state Supreme Court has ruled that the state’s new gun tax ($25 per firearm and 2 or 5 cents per round of ammunition) does not violate a state constitutional prohibition against cities regulating firearms.
• A proposed business incentive package in Wisconsin for display screen manufacturer Foxconn is so generous it would take 25 years to pay off for the state even under optimistic assumptions, according to an analysis by the state’s Legislative Fiscal Bureau.

What We’re Reading…

• Citylab provides an excellent history of how racial injustices have been exacerbated by local revenue systems based on property taxes and targeted fines and fees.
• The Center on Budget and Policy Priorities recaps the year in state tax and budget policy and highlights this year’s advances in state Earned Income Tax Credits.
• Self-driving cars are a near enough reality that states are looking at how to tax the new technology, according to a new report in The Detroit News.
• Governing reports on a new trend that has reached Europe, Asia, and now the United States: “night mayors,” special local positions with the goal of improving life and resolving conflicts in cities after dark.
• Former Kansas City, Missouri, Mayor Mark Funkhouser reviews a recent book and 25 years of evidence concluding that business tax incentives are an ineffective economic development strategy.

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.

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