California

Even with Halloween coming up this weekend, months of dealing with the horrors of the Covid-19 pandemic have made it hard to scare anyone in the closing months of 2020, which state lawmakers and residents are showing by voting in droves and supporting policies they had been more trepidatious about in recent years.

The Trump campaign has failed to convince the public that large numbers of Americans would face tax hikes under Democratic presidential nominee Joe Biden’s tax plan. The claim has been widely discredited. For example, ITEP found that the federal taxes that people pay directly would rise for just 1.9 percent of taxpayers in the U.S., and that number does not vary much by state. So, Fox News and other conservative voices are trying out a new argument: Biden’s tax plan would be too burdensome for that 1.9 percent.

There’s a lot at stake in this election cycle: the nation and our economy are reeling from the effects brought on by the coronavirus pandemic and states remain in limbo as they weigh deep budget cuts and rush to address projected revenue shortfalls.

State lawmakers around the nation are already looking well past the upcoming election to the legislative debates they’ll be cooking up in 2021. In Iowa and Nebraska, anti-tax groups are thawing out regressive tax shift ideas they had put on ice earlier in the pandemic. In Delaware, a lawsuit and recent settlement have put educational and property tax inequities on the menu for the upcoming session. Meanwhile New Jersey and New York are both looking to add stock to their revenue mixes with progressive taxes on stock trades.

Californians are voting now on Proposition 15, which would require commercial and industrial property worth $3 million or more to be taxed based on an up-to-date assessment of full market value. Proposition 15 is sound tax policy that would raise much needed revenue and help to advance racial and economic justice.

The biggest news for state and local fiscal debates this week was that federal fiscal relief to help with their pandemic-induced revenue crises is effectively off the table for at least another month. But if there is a silver lining to this federal inaction, it may be that it coincides with New Jersey’s success filling part of its own revenue shortfall through a millionaires tax, as well as with prominent wealth managers admitting that their rich clients don’t flee to other states in response to such taxes (see “What We’re Reading”). Combined, these three developments could encourage state leaders elsewhere…

An ITEP report finds that taxes that people pay directly would stay the same or go down in 2022 for 98.1 percent of Americans under President-elect Joe Biden’s tax plan.

A state-by-state analysis of President-elect Joe Biden’s proposal to raise taxes for filers with income of more than $400,000 finds that in 2022, just 1.9 percent of all taxpayers would face a direct tax increase. This would vary only slightly by state. For example, in West Virginia, 0.6 percent of taxpayers would see an increase, and in Connecticut, 3.7 percent of taxpayers’ taxes would increase.

New Jersey leaders grabbed the biggest headlines of the week by finally agreeing to implement a much-needed and long-discussed millionaires tax to shore up the budget and improve tax fairness. And Illinois residents can begin voting tomorrow to enact a graduated income tax there. Relatedly, ITEP Research Director Carl Davis updated our research debunking the myth that progressive taxes interfere with economic growth. Cannabis legalization and taxation was a hot topic as well, as lawmakers in Vermont reached an agreement to move forward on the matter and others in Connecticut, Kansas, and New Hampshire worked toward the same.

ITEP updated a 2017 study that examined the economic performance of the nine states with the highest top marginal tax rates compared to the nine states with no state income tax. Economies in states with the highest top marginal rates grew faster. States facing budget shortfalls should first look at raising taxes on those most able to pay (incomes at the top have grown during this economic crisis) before considering harmful budget cuts.

The Earned Income Tax Credit (EITC) is a policy designed to bolster the incomes of low-wage workers and offset some of the taxes they pay, providing the opportunity for families struggling to afford the high cost of living to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been amplified as many states have enacted and expanded their own credits.

Although the 2017 Tax Cuts and Jobs Act has created a slew of problems, it is now clear that a mass migration of top earners out of higher-tax blue states is not one of them.

Reductions in critical state and local investments, including health care and education, would only exacerbate the economic crisis brought on by COVID-19 and worsen racial and income inequality for years to come. Higher taxes on top earners are among the best options for addressing pandemic-related state revenue shortfalls in the coming months.

Voters could significantly change the tax landscape through ballot measures this November regarding oil taxes in Alaska and a high-income surcharge for education funding in Arizona. Legislators are doing their part to bring progressive tax ideas to the fore as well, including a possible wealth tax in California, a millionaires tax in New Jersey, and a pied-a-terre proposal in New York. And Nebraska lawmakers reached a property tax and business tax subsidy compromise before closing out their session, but did not identify progressive revenue sources to fund it and will likely be back at the bargaining table before long.

This week, voters in Missouri approved Medicaid expansion, Nevada lawmakers moved to amend their Constitution to raise taxes on the state’s mining industry, and leaders in California and New York continued to push for needed revenues through tax increases on their richest households.

As many of the country’s major professional sports leagues attempt to return to action amid concerns that the pandemic will find a way to ruin even the best-laid plans, state legislatures find themselves in a similar boat. Lawmakers would normally be enjoying their summer breaks at this time of year, but instead are returning to work in special sessions surrounded by plexiglass and uncertainty. Read on for information on ongoing sessions in states including California, Massachusetts, and Nebraska, as well as upcoming sessions in Missouri and Oregon.

Americans are demanding policy that meets the needs of this urgent moment. There are now competing proposals from the U.S. House and Senate: One is a reasonable response to the staggering crisis we’re in. One is not.

Temperatures and tensions are high right now across the country as Congress debates its next pandemic response and states continue to sweat through difficult decisions. Nevada lawmakers, for example, just wrapped up a special session during which they came within one vote of a proposed tax increase but ultimately chose to balance their shortfall through only funding cuts. But advocates in many states, including California, New Jersey, New York, and Rhode Island are trying to light a fire under lawmakers to encourage them to enact progressive tax increases on their wealthiest households.

Local leaders in the District of Columbia and Seattle, Washington, approved progressive tax changes to raise needed funding this week for priorities such as coronavirus relief, affordable housing, and mental health. Arizona advocates submitted signatures to place a high-income surcharge on the ballot for November. And as a number of states made decisions on how to use federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funds, North Carolina decoupled from costly business tax cuts contained in the act and Nebraska started discussing doing the same.

As ITEP analyst Kamolika Das wrote today, July 1 is typically the beginning of state fiscal years and “a point when one can take a step back and reflect on the wins and disappointments of the past state legislative sessions.” Not so in 2020, she writes, as uncertainty surrounding the virus, state revenues, and potential federal action give state lawmakers no such time to relax and reflect. Although most recent state actions, such as those covered below in California, Mississippi, and West Virginia, have focused on funding cuts and temporary measures to bring budgets into short-term balance, the need for…

July 1—the start of the new fiscal year in most states—typically marks a point when one can take a step back and reflect on the wins and disappointments of the past state legislative sessions. 2020 is markedly different. Nationwide business closures and stay-at-home orders in response to COVID-19 have led to unprecedented spikes in unemployment, decreased demand for consumer spending, and increased demand for vital public services. As a result, states face incredibly uncertain financial futures with little clarity regarding how their tax collections will fare over the next year.

State policymakers this week took a variety of approaches to their fiscal situations amid the COVID-19 pandemic. Tennessee lawmakers chose to balance their budget through $1.5 billion in cuts to public services, but not before adding to those cuts by going forward with planned tax cuts. California legislators also passed a budget but relied on a number of temporary measures and delays to do so. Their counterparts in Massachusetts, New Jersey, and Rhode Island opted for interim budgets to tide them over for a few months while they continue to look for lasting solutions. Meanwhile, many states are debating whether…