State Rundown 3/15: Tax Madness

It’s March and state lawmakers are showing why the Madness isn’t only reserved for the basketball court. This week, Montana’s governor approved eight bills, including a (tax) bracket-buster that will cut the top marginal tax rate from 6.5 percent to 5.9 percent. Despite the cut, it was coupled with an increase to the state Earned Income Tax Credit (from 3 percent to 10 percent), which will provide an assist to low-income families currently struggling with the high cost of goods. The real Cinderella story, however, would have been the $1,200 Child Tax Credit (coupled with no top-heavy tax cuts), though the clock struck midnight when lawmakers tabled the proposal. The tax package unfortunately provides far greater benefits to the wealthiest residents and is an overall airball that misses the mark for everyday Montanans.

Major State Tax Proposals and Developments

• MONTANA Gov. Greg Gianforte signed a package of tax bills into law. The changes include a reduction of the top marginal tax rate, an increase to the state Earned Income Tax Credit, individual and property tax rebates, and a shift in the way capital gains is taxed, to name a few. — MARCO GUZMAN
• GEORGIA Gov. Brian Kemp signed into law a bill that provide residents with a state income tax refund of up to $500 for those who filed in both 2021 and 2022. — MARCO GUZMAN

State Roundup

• The Chair of the ALABAMA Senate’s education budget committee is working on a plan to phase-out the state’s sales tax on food. The plan would not cut the city and county sales tax on food, but it would prevent them from raising it.
• CONNECTICUT’s new mileage tax on tactor-trailers brought in $4.3 million in January and is projected to raise $90 million per year for transportation funding in the state. But with that fund currently running a surplus, proposals are mounting to carve out exemptions or reduce or suspend the tax.
• CONNECTICUT lawmakers have introduced legislation that would allow municipalities to tax endowment funds of private colleges located in their jurisdictions, permitting New Haven to tax Yale University’s $41 billion endowment, for example.
• In HAWAII, Gov. Josh Green’s tax plan has been revised and passed in the House and now is in the Senate. The bill no longer includes changes to the income tax brackets but called for a doubling of the standard deduction.
• IOWA Sen. Dan Dawson has continued to push his plan to eliminate the state’s individual income tax without any offsets. This would require massive cuts to education and other state spending. Instead, Iowa GOP may yet put together a serious property tax bill.
• The KANSAS House Committee on Taxation has scheduled a hearing next Tuesday on HB 2457, which would replace the state’s graduated income tax with a flat individual income of 4.95 percent, reduce the corporate income tax for income under $50,000 from 4 percent to 3 percent, exempt groceries from the state’s sales tax while repealing the state’s Food Tax Credit, increase the property tax exemption from $40,000 to $65,000, and incrementally increase the amount of Social Security income that is exempt from taxable income for high-income earners until it is fully exempt for all tax filers regardless of income in 2026.
• The KANSAS House approved a $17 million sales tax exemption on equipment purchases by telecommunications companies. It also blocked an increase to the exemption on state property tax collected for K-12 public school funding.
• MICHIGAN Democratic lawmakers introduced legislation that would provide a tax credit to reimburse public employees in government unions the full cost of their dues. The legislation follows the passage of separate bills from both the House and Senate to repeal “right-to-work” laws, which allow those in unionized jobs to opt out of paying union dues and fees.
• A proposal in NEVADA to keep the state’s property tax growth cap from falling below 3 percent, aiming to improve stability in funding for local services, particularly in years when valuations continue to grow but inflation is very low.
• NEW HAMPSHIRE lawmakers are considering a 15 percent tax on cannabis cultivation as the state continues to consider legalizing marijuana. The legislation received a hearing on Monday before the House Ways and Means Committee.
• NEW YORK lawmakers have introduced proposals to raise taxes on the state’s richest households, increasing the rate on income over $5 million and below $25 million from 10.3 percent to 10.8 percent and the rate on income over $25 million from 10.9 percent to 11.4 percent.
• Gov. Roy Cooper in NORTH CAROLINA, released his budget and it included a proposal to limit the scheduled tax cuts only to families making less than $200,000 and cancel scheduled corporate income tax cuts.
• On Tuesday, a bill in the OKLAHOMA House passed that would create a tax credit for caregivers to older family members. The credit up to $2,000 per year or $3,000 if the family member is a veteran or has dementia-related diseases.
• In TEXAS, Lt. Gov. Dan Patrick and other Republican leaders announced increases in the homestead exemption that would cost the state $16.5 billion. This is half of the state’s record surplus. But it differs from the bill filed in the Texas House, which focuses on capping appraisals to handle property taxes.
• The WISCONSIN budget process is continuing to work through competing tax proposals. The GOP’s initial proposal was for an expensive, and inequitable transition to a flat personal income tax. That is now reportedly dead, but the two sides are far apart on either a tax deal or a budget.
• WASHINGTON State’s new Working Families Tax Credit is off to a great start, with more than 100,000 applications submitted already. Lawmakers are considering ideas to further improve the credit, such as allowing married individuals filing separately from their spouses to claim it.

What We’re Reading

• A new report out of New York University’s Tax Law Center calls attention to racial disparities in IRS audits and proposes steps to address them.

 

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.

---

---