State Rundown 2/14: Our Love Language is Taxes

As many of you may know, we love taxes, along with the many great things they provide for our communities. And by the looks of it, so do states across the country. However, it’s important to identify differences in communication methods when fostering a healthy relationship. So, here’s an assessment of what we’re seeing this week: New Mexico continues their acts in service to progressive taxation after the Senate approved a tax bill that would reduce taxes for low-income households while raising revenues through limits to the state’s capital gains deduction and modification of the corporate income tax rate structure. Meanwhile, Georgia plans to give another gift – in this case one that will primarily benefit the wealthy – as it considers cutting the state’s flat income tax rate. And Florida continues to provide words affirming that they would like to retain the top spot as the most regressive state and local tax system in the nation on ITEP’s Tax Inequality Index. Lawmakers are exploring replacing property taxes with consumption taxes which are the most regressive major tax category and the most significant drivers of economic and racial inequality in state and local tax codes.

Major State Tax Proposals and Developments

• GEORGIA’s House unanimously passed legislation to cut the state income tax from 5.49 to 5.39 percent for 2024, increase the dependent exemption, and increase the statewide homestead tax exemption. The bills now move to the Senate for consideration. – NEVA BUTKUS
• The KENTUCKY Senate has advanced a constitutional amendment that would freeze property valuations for those 65 and older. The measure applies to seniors of all incomes for homes of all values, not targeted to those most in need. The measure now heads to the House and would require a ballot initiative to become law. – ELI BYERLY-DUKE
• An omnibus tax bill approved by NEW MEXICO’s House of Representatives, has now passed through the Senate. The bill would, among other things, restructure personal income tax brackets, place additional limitations on the capital gains deduction, and replace the two-tiered corporate income tax rate with one. – MARCO GUZMAN

Governors’ Annual Addresses and State of State Speeches

• Gov. Kay Ivey of ALABAMA announced support for a voucher-type bill in her State of the State address. The legislation would provide families under 300 percent of the poverty line up to $7,000 in tax credits to be used towards private school tuition. After two years, the income cap would be lifted altogether.
• MARYLAND Gov. Wes Moore outlined his priorities in his State of the State address, which included a focus on safety, affordability, economic competitiveness, and encouraging public service. He also focused on using a data-driven plan to guide his plans, such as using data to increase access to tools that reduce poverty, like the Child Tax Credit, the Earned Income Tax Credit, and increasing accountability for the new K-12 funding law that is being phased in.

State Roundup

• ALABAMA’s state grocery tax will remain at 3 percent for 2024. Lawmakers passed legislation in 2023 that reduced the grocery tax from 4 to 3 percent and attached a trigger to reduce it further to 2 percent if certain growth metrics are met within the state’s Education Trust Fund.
• A bill to study replacing property taxes with consumption taxes is being considered in FLORIDA. A similar proposal was considered in Nebraska (to replace property and income taxes) and has received deep criticism due to the very high consumption tax rate – over 20 percent – that would be required to make the proposal revenue-neutral, as well as the worrying effects on businesses of such an extreme shift.
• In response to proposals that aim to expand the MISSOURI’s tax benefits and vouchers for religious and private schools, home school organizations have said they want to avoid the accountability that could accompany the funds.
• Lawmakers in the MISSOURI House advanced a measure to eliminate the state’s corporate income and franchise taxes over several years. The measure, which would cost the state about $900 million once fully enacted, included no offsetting revenue and would eventually require cuts to state services.
• A state-sponsored study of NEW YORK’s film tax credit confirmed what most tax policy experts have been saying for years: the subsidies largely hand money to productions that would have happened anyway, and do not provide states with a good return on their investment, in this case 31 cents on the dollar, at best.
• The VIRGINIA House and Senate will have to come to an agreement on two different bills they passed that would establish regulations and tax rates for adult-use marijuana. While a final measure would be sent to Gov. Glenn Youngkin if the bill is reconciled, Youngkin has expressed no interest in moving forward with marijuana legislation.
• Signature gatherers in WASHINGTON state managed to stir up enough anti-tax sentiment to put a question before voters that would repeal the state’s groundbreaking Capital Gains Excise Tax on passive income of wealthy households. But thanks to transparency laws in the state, voters will have more facts to base their decision on, as the question will include the fact that repealing the tax would reduce funding for education by nearly $6 billion over the next six years.
• Also in WASHINGTON state, however, an effort to allow counties more flexibility to set their own budgets in the face of rising costs was scrapped.
• The WISCONSIN Assembly advanced the Republican-sponsored tax cut package. It now heads to the Senate. The package includes legislation that would expand the state’s second tax bracket of 4.4 percent to higher incomes, tax cuts on retirement income, a child and dependent care credit expansion, and an increase to the state’s married couple credit. The total tax cut would cost the state $2 billion annually.

What We’re Reading

• Michael Hiltzik of the LA Times breaks down a coming ballot initiative limiting California’s state and local governments. The measure, pushed by the same corporate and wealthy interests behind the disastrous Proposition 13, would require all state tax increases to go to a public vote, redefine most fees and fines as taxes, and apply retroactively.
• A recent webinar and write-up regarding sales taxes in Nebraska is helpful for folks in any state seeking to understand issues such as the regressive nature of such taxes and the hazards of taxing business inputs.

 

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