State Rundown 7/27: It’s (Sales Tax) Holiday Season, But Who’s Really Celebrating?

It’s the holiday season – well, the sales tax holiday season, that is. But after taking a closer look, you may notice that there is little to celebrate, as this year twenty states will forgo a combined $1 billion in revenue due to sales tax holidays, which could have gone to help fund vital services. As outlined in ITEP’s updated report from Marco Guzman, these flashy but ultimately ineffective sales tax holidays do little to provide meaningful relief, especially to those most in need. Also worth checking out are Kamolika Das’s wrap-up of the 2022 legislative session and Neva Butkus’s thoughts on the trends gaining momentum out of statehouses across the country.

Major State Tax Proposals and Developments

• MONTANA Democrats unveiled their plan to invest $1 billion of the state’s budget surplus on housing, property tax relief, childcare, and mental health services. – MARCO GUZMAN

State Roundup

• A group called Consumer Watchdog is attempting to call attention to gas price gouging in CALIFORNIA, supporting a bill that requires more detailed reporting of crude oil costs and profit margins from oil companies, and also calling for more oversight and an excess profits tax.
• CALIFORNIA will begin charging a tax on lithium extraction in 2023, with the revenue going to local counties and Salton Sea (where the lithium is mined) improvement projects.
• Following a record surplus in fiscal year 2022, IDAHO Gov. Brad Little announced that, if reelected, he anticipates additional tax cuts and investments in education and infrastructure.
• The INDIANA legislature has entered a special session to discuss a sales tax cap on gasoline, a sales tax suspension on residential utility bills and a $225 tax refund.
• MICHIGAN Gov. Gretchen Whitmer signed the state budget, but a tax cut package is still in flux as Democratic and Republican leadership have yet to come to a consensus.
• MISSISSIPPI Gov. Delbert Hosemann is pushing for a direct rebate during the 2023 legislative session even though the legislature recently passed an income tax cut that will cost the state over $525 million a year when fully implemented.
• NEVADA hopes to recoup some lost revenue through a lawsuit claiming major online travel booking sites owe the state hundreds of millions of dollars in unpaid hotel room taxes.
• NEW YORK is now the latest state to exempt diapers from its sales tax, a trend also covered below under “What We’re Reading.”
• SOUTH DAKOTA Gov. Kristi Noem penned a blog post expressing that she is “cautiously optimistic” about the state’s financial standing. Importantly, however, the governor warned against reductions to the state’s tax structure and mentioned the need to be prepared for any potential economic hardship the state may face in the future.
• TEXAS Governor Greg Abbott pledged his support for a sizable property tax cut during next year’s legislative session.
• WASHINGTON State has issued guidance on how the state sales tax applies to Non-Fungible Tokens (NFTs), which could be a useful model for other states to follow.
• On Tuesday during a special session, the WEST VIRGINIA House of Delegates Finance Committee passed a bill requested by Gov. Jim Justice that would cut income taxes by about 10 percent. The bill is likely to pass the House but the Senate still seems to prefer personal property tax cuts.

What We’re Reading

• An essay in the New York Times by Robin Kaiser-Schatzlein describes Alabama’s inadequate tax revenues and its excessive reliance on abusive fines and fees.
• Paul Constant of Business Insider discusses how increasing taxes on the rich is growing in popularity among voters on both sides of the aisle, potentially due to rising income inequality and the exorbitant displays of wealth seen by celebrity billionaires such as Jeff Bezos and Elon Musk.
• CNN Business reports on the recent trend of exempting diapers from state and local sales taxes, noting that the number of states taxing diapers was down to 31 as of this June, with exemptions also approved to take effect this year or next in Colorado, Florida, Iowa, Maryland, New York, and Louisiana, and a number of other states considering exemptions as well.
• An enterprising reporter at WHEC in Rochester, New York, is carefully monitoring data on gas prices and confirming our concerns about gas tax holidays – particularly that there’s no way to ensure the savings reach consumers instead of being siphoned away by gas companies.

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 Aidan Davis at [email protected]. Click here to sign up to receive the Rundown via email.

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