State Rundown 10/18: States Learn “Who Pays”!

Policymakers and residents in all 50 states and the District of Columbia got new ITEP data this week on how their tax structures and decisions affect their high-, middle-, and low-income residents. As our “Who Pays?” report outlines, most state and local tax codes exacerbate economic inequalities and all states have room to improve. The data can serve as an important informative backdrop to all state and local tax policy debates, such as whether to change the valuation of commercial property in California, how to improve funding for early childhood education in Indiana, and how to evaluate tax-related ballot measures around the nation.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals and Developments:

• Curious who pays state and local taxes in your state? Check out our sixth edition of Who Pays: A Distributional Analysis of the Tax Systems in All 50 States. Handy state-by-state data available here.
• An initiative to tax commercial properties at market value instead of purchase value qualified for the 2020 ballot in CALIFORNIA this week. The initiative would roll back provisions of Proposition 13 that have been in place in the state since 1978 and would recover an estimated $10 billion in revenue currently lost due to this generous tax break.

State Roundup:

• Advocates of early childhood education in INDIANA plan to push expanding access to pre-K in the Hoosier state, funding it through tax credit scholarships, social impact bonds, food and beverage tax receipts, or local option taxes.
• IOWA’s latest budget forecasts confirm that the tax cuts passed this year will bite deeply (and regressively) into state revenues starting in about a year. Uncertain economic prospects and inevitable federal funding cuts combine with this state revenue slow-down to create a troubling fiscal outlook for the state.
• Ford Motor Company looks like it will be receiving a $103 million tax break package from Detroit, MICHIGAN shortly, leaving some community members unsatisfied with the terms of community benefits Ford has agreed to.
• It’s may be back to the drawing table for UTAH lawmakers who expressed intentions to hold families harmless from federal tax changes impacting state tax liability. Actions to cut the personal and corporate income tax rates and enacting a $30 million nonrefundable child tax credit fall far short of holding many taxpayers harmless.
• NORTH DAKOTA residents continue to lament slashing taxes on oil producers during the fracking boom and debate how to handle state and tribal sales taxes.
• A business tax cut trigger has been activated in NEVADA.

On (and Off) the Ballot:

• In KANSAS, the governor’s race is turning into a referendum on the state’s notorious tax cuts.
• Voters in San Francisco, CALIFORNIA get to decide if the city should levy a new tax on wealthy businesses in order to fund homeless and mental health initiatives.
• Leesburg, FLORIDA’s, Daily Commercial points out correctly that all three of the tax-related questions appearing on Florida ballots next month will make it harder to fund crucial state and local services like schools, roads, and public safety.
• MISSOURI voters will decide on a gas tax update, a minimum wage increase, and the potential legalization and taxation of cannabis at the polls in November.
• Big money continues to pour into WASHINGTON state in support of a ballot initiative that would prohibit cities from taxing food or soda. Big contributors include The Coca-Cola Company, PepsiCo, and Dr. Pepper Snapple Group.
• Voters in WASHINGTON state may be the first to enact a carbon tax in the United States this November.
• In WISCONSIN, democratic gubernatorial nominee Tony Evers has proposed a 10% income tax cuts for families making under $150,000, to be funded by scaling back the Manufacturing and Agricultural tax credit, which primarily benefits the wealthy. Incumbent Gov. Scott Walker has proposed various tax credits for college students, seniors, and parents.

What We’re Reading…

• Improvements to the Earned Income Tax Credit have been trending at the state-level and have become a major topic of discussion at the federal-level. Just today, Sen. Kamala Harris released a proposed new refundable federal credit—the LIFT the Middle Class Act—that aims to reshape the recent federal tax bill, shifting the benefit of the tax cuts away from the wealthy and corporations to low- and middle-income workers and their families.
• Governing points out that economic recovery and rising incomes over the last several years have not resulted in revenue recovery for cities, in part because their tax bases are predominantly composed of property taxes and assorted fees, which don’t generally correlate with income. Cities with local income taxes, such as New York City, have seen revenues rebound better.
• Governing also reports on how the new trade agreement with Canada and Mexico is likely to affect states. Alabama, Indiana, Kentucky, and Michigan are expected to benefit the most (relative to scrapping NAFTA altogether) due to their high levels of trade with those two countries and large manufacturing sectors.
• A Stateline study on race and home values finds that homeownership is much more likely to pay off for white households than for African-Americans. Since 2000, homes in black neighborhoods have been about 10 times more likely to decline in value than those in other areas.
• Nobel-winning Yale economist William D. Nordhaus reflects on lessons learned about implementing carbon taxes in a New York Times
• The sale and taxation of legal recreational cannabis begins this week in Canada. NPR reports that early tax revenues generated will be “used to research addiction treatment, for mental health resources and treatment, and for public education about the drug.”

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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