State Rundown 4/12: Tax Day 2023 – A Good Reminder of the Impact of Our Collective Investments

With Tax Day quickly approaching it’s worth taking some time to reflect not just on tax forms (though those are important!), but also on the current state of state tax policy. Fortunately, ITEP has you covered: In a new blog post, we identify the states that have chosen to prioritize expensive and regressive tax cuts over investments in those who need them most and recommend we shift from a “tax cuts first mentality” to a conversation to create a more equitable and inclusive society. And as a reminder of how vital our tax systems are, check out our new blog that includes 8 important things that you have got to know about state taxes.

Major State Tax Proposals and Developments

• MASSACHUSETTS lawmakers in the House released a $654 million tax cut plan that largely mirrors the governor’s proposal. Several additions also include reducing the income threshold that the estate tax would start at from $3 million to $2 million, increasing the Earned Income Tax Credit to 40 percent, moving the corporate income tax to single-sales factor apportionment, and eliminating the revenue surplus cap.  – MARCO GUZMAN
• NEW MEXICO Gov. Michelle Lujan Grisham signed an omnibus tax bill into law, which includes $500 rebates, an increase to the Child Tax Credit, and an expansion of the film tax credit. The governor, however, vetoed an alcohol tax increase and the proposed cut to the gross receipts tax. – MARCO GUZMAN
• MARYLAND Gov. Wes Moore signed legislation that permanently extends and expands the state’s Earned Income Tax Credit (EITC) and broadens eligibility for the Child Tax Credit (CTC). The legislation permanently removes the $530 cap for the EITC for adults without qualifying children. In addition, the broadened CTC would allow individuals earning less than $15,000 per year to claim a credit of $500 per child under the age of six. Previously, the CTC was limited to children under the age of 17 with a disability with household AGI under $6,000 per year. – MILES TRINIDAD
• The KANSAS legislature finalized their tax cut package after competing House and Senate bills were hashed out in conference committee. The final bill – Senate Bill 169 – would replace the state’s progressive income tax brackets with a 5.15 percent flat rate and exempt the first $6,150 for individuals and $12,300 for married filers. In addition, the bill speeds up the elimination of sales tax on food to 2024, increases the tax break for residential property, increases the exemption on social security income, and reduces the corporate income tax rate from 4 to 3 percent.  – NEVA BUTKUS

State Roundup

• ALABAMA advocates and rallying to convince lawmakers to eliminating the state’s four percent sales tax on food this legislative session and using the federal income tax deduction to offset the cost.
• Revenue-generating proposals remain popular this session in ALASKA as Rep. Alyse Galvin recently introduced a bill that would impose a 2 percent tax on income over $2000,000. Additionally, fliers earning less than that would pay $20, which could be automatically deducted from that year’s Permanent Fund dividend.
• Gov. Sarah Huckabee Sanders in ARKANSAS signed into law a personal and corporate income tax cut that will reduce annual revenues by $124 million.
• In HAWAII, the Senate Ways and Means committee passed HB1049, which doubles the food tax credit, increases the federal match rate of the EITC from 20 percent to 40 percent, and increases the amount families receive from the child and dependent care tax credit — from $2,400 to $10,000 for one child.
• MARYLAND Gov. Moore indicated that he would sign legislation that would implement a 9 percent sales tax on recreational cannabis after July 1. The legislation comes after the state’s voters approved legalization last year.
• The MISSOURI Senate advanced dual sales tax exemptions. One measure would exempt firearms and ammunition, the other diapers and feminine hygiene products. The former passed with only partial support from the GOP supermajority. One Republican in opposition, Sen. Mike Cierpoint (R- Lee’s Summit) expressed frustration with the change: “I mean a guy goes to the store, he buys a gallon of milk and a box of cereal for his kids. And next to him is a guy buying a box of ammunition. Why is the guy buying food for his kids paying taxes and the guy buying bullets is not?” Meanwhile, the latter measure advanced on a bipartisan vote of 28-6.
• NEBRASKA Republicans are considering changes to their proposed tax cuts in light of the Nebraska Legislative Fiscal Office’s estimate that the measure would cost about $3.9 billion over the six-year window of analysis. The measure—with well over half of its benefits given to corporations or the wealthy—would undermine the state’s ability to fund its current level of services even in a pared back form.
• NORTH DAKOTA lawmakers approved legislation that would exempt diapers from the state’s sales tax. The bill, which would go into effect on July 1 if signed by Gov. Doug Burgum, is estimated to cost the state $800,000 per year.
• NORTH DAKOTA Gov. Doug Burgum signed legislation that would exempt property used to construct or expand coal processing facilities from the state’s sales and use taxes. He also signed off on exempting the first 1 million tons of coal used per year as feedstock by those facilities from the state severance tax.
• OKLAHOMA legislators in the Senate Finance committee have passed a series of bills aimed at cutting taxes. House Bill 1375 lowers state income tax from 4.75% to 4.5% and raises standard deductions. There were two bills related to the franchise tax, but in particular, HB2695 would eliminate the franchise tax and is expected to decrease state revenues by over $55 million for 2024. HB1645 eliminates the state’s corporate income tax “throwback rule.”
• The WASHINGTON legislature sent legislation to Gov. Jay Inslee’s desk that would expand county-based income limits for property tax exemptions for seniors and individuals with disabilities.

What We’re Reading

• Pew Charitable Trusts reports that after years of strong tax collections, states are beginning to see shrinking revenue projections due in part to a lagging stock market, job layoffs, energy prices, and a reduction in consumer spending.

 

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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