California

ITEP Research Director Carl Davis presented to the National Conference of State Legislatures (NCSL) Task Force on State and Local Taxation on approaches to cannabis taxation and the recent report Taxing Cannabis.

Lawmakers in Illinois and Ohio have advanced major tax proposals but cannot rest just yet, as they must still get past the other legislative chamber. Their counterparts in Michigan, Minnesota, Nebraska, and Oregon, meanwhile, are all at impasses over education funding, as those in Texas left their school funding disagreement unresolved at least until they reconvene...in 2021. And in an era of many states pre-empting smaller jurisdictions by revoking local decision-making powers, leaders in Colorado and Delaware made moves in the opposite direction, entrusting cities and school districts with more local control.

Teachers in North Carolina and South Carolina are walking out and rallying this week for increased education funding, teacher and staff pay, and other improvements to benefit students—if you’re unsure why be sure to check out research on the teacher shortage and pay gap under “What We’re Reading” below. Meanwhile, budget debates have recently wrapped up in Indiana, Iowa, Massachusetts, New Hampshire, and Washington. And major tax debates are kicking into high gear in both Louisiana and Nebraska.

In early April, a diverse but mostly black crowd took to the streets in the Shaw neighborhood of Washington D.C. to protest T-Mobile’s decision to order Metro PCS to cease playing gogo music. This tale is a shining example of why economic investment—especially taxpayer-incentivized investment—in underserved communities is fraught with controversy. Who ultimately benefits after developers pour millions of dollars into these communities? And, as this controversy reveals, are the usually black and brown denizens of these neighborhoods and businesses that may have catered to them no longer welcome once economic development reaches a critical mass?

Tax and budget debates are now mostly complete in Alabama, Arkansas, and Colorado, but just starting or just getting interesting in several other states. Delaware and Massachusetts lawmakers, for example, are looking at progressive income tax increases on wealthy households, and New Hampshire may use a progressive tax on capital gains to simultaneously improve its upside-down tax code and invest in education. Nebraska and Texas, on the other hand, are also looking to improve school funding but plan to do so on the backs of low- and middle-income families through regressive sales tax increases. Fiscal debates are heating up in…

As of 2017, 11.5 million children in the United States were living in poverty. A national, fully-refundable Child Tax Credit (CTC) would effectively address persistently high child poverty rates at the national and state levels. The federal CTC in its current form falls short of achieving this goal due to its earnings requirement and lack of full refundability. Fortunately, states have options to make state-level improvements in the absence of federal policy change. A state-level CTC is a tool that states can employ to remedy inequalities created by the current structure of the federal CTC. State-level CTCs would significantly reduce…

Hawaii made progress in pushing back against the increasing concentration of wealth and power by beefing up its estate tax. Delaware, New Jersey, and Rhode Island all took steps toward taxing opioid producers to raise funds to address the ongoing opioid crisis. Oregon lawmakers continue to try to address their chronic school underfunding with a $2 billion annual investment, in contrast to some of their counterparts in North Carolina who are responding to similar issues with the opposite approach, proposing to slash taxes in the face of their school funding issues – just as research highlighted in our What We’re…

Transportation funding was a hot topic this week, as OHIO lawmakers responsibly voted to update their gas tax and offset some of its impact on lower-income families with an Earned Income Tax Credit (EITC) boost, while NEW YORK enacted the nation’s first “congestion pricing” charge, and LOUISIANA and VIRGINIA leaders looked at gas tax updates as well—a trend ITEP’s Carl Davis explored in depth today here. Broad tax packages are also being hashed out in LOUISIANA, NEBRASKA, OREGON, and TEXAS. And MARYLAND became the sixth state with a $15 minimum wage on the horizon.

Though a long winter and a rough start to spring weather have wreaked havoc in much of the country, lawmakers are off to a good start in the world of state fiscal policy so far. In the last week, a progressive revenue package was passed in the nick of time in NEW MEXICO, a service-sapping tax cut was vetoed in KANSAS, and a regressive and unsustainable tax shift was soundly defeated in NORTH DAKOTA. Meanwhile, gas tax updates are on the table in MAINE, MINNESOTA, and OHIO. And exemptions for feminine hygiene products and diapers were enacted in VIRGINIA and introduced in MISSOURI. 

A 2019 ITEP analysis found that Black and Latinx households are overrepresented in the lowest-income quintiles; while they represent about 22 percent of overall tax returns, they account for 30 percent of the poorest quintile of taxpayers.

More than three billion dollars could be raised under a major progressive tax plan proposed by Illinois Gov. J.B. Pritzker this week, the point being to simultaneously improve the state’s upside-down tax code and address its notorious budget gap issues. One state, Utah, may already be looking at a special session to revisit the sales tax reform debate that ended this week without resolution, in contrast to Alabama and Arkansas, where leaders finally resolved years-long debates over gas taxes and infrastructure funding. And lawmakers in four states – California, Florida, Minnesota, and North Carolina – introduced legislation to expand or…

There is significant room for improvement in state and local tax codes. State tax codes are filled with top-heavy exemptions and deductions and often fail to tax higher incomes at higher rates. States and localities have come to rely too heavily on regressive sales taxes that fail to reflect the modern economy. And overall tax collections are often inadequate in the short-run and unsustainable in the long-run. These types of shortcomings provide compelling reason to pursue state and local tax reforms to make these systems more equitable, adequate, and sustainable.

As another polar vortex heads for large swaths of the country, state tax debates this week were highly polarized in another way. Lawmakers and advocates in MICHIGAN, OHIO, OREGON, UTAH, and elsewhere fought to enact or improve state Earned Income Tax Credits to give a boost to low- and middle-income working families. But the opposite extreme was heavily represented as well, as others pushed for regressive tax cuts for wealthy individuals and corporations, including in KANSAS, NEBRASKA, NORTH DAKOTA, OHIO, UTAH, and WEST VIRGINIA. Even our “What We’re Reading” section has informative reading on how education funding policy continues to…

Happy Valentine’s Day to all lovers of quality research, sound fiscal policy, and progressive tax reforms! This week, some leaders in ARKANSAS displayed their infatuation with the rich by advancing regressive tax cuts, but others in the state are trying to show some love to low- and middle-income families instead. WISCONSIN lawmakers are devoted to tax reductions for the middle class but have not yet decided how to express those feelings. NEBRASKA legislators are playing the field, flirting with several very different property tax and school funding proposals. And VIRGINIA’s legislators and governor just decided to settle for a flawed…

On Monday a group of Senators and Representatives from the Northeast announced their latest proposal to repeal the cap on deductions for state and local taxes (SALT), this time offsetting the costs by restoring the top personal income tax rate to 39.6 percent. This is an improvement over previous proposals to repeal the cap on SALT deductions without offsetting the costs at all. But the new approach does not improve our tax system overall. Instead, it trades one tax cut for the rich (a lower top income tax rate) for another (repeal of the cap on SALT deductions).

It’s always troubling for those concerned with adequate and fair public finance systems when states prioritize tax cuts at the cost of divesting in important public priorities and exacerbating underlying tax inequalities. But it’s even more nerve-racking when it happens on the eve of what many consider to be an inevitable economic downturn.

Few areas of state tax policy have evolved as rapidly as cannabis taxation over the last few years. The first legal, taxable sale of recreational cannabis in modern U.S. history did not occur until 2014. Now, just five years later, a new ITEP report estimates that recreational cannabis is generating more than $1 billion annually in excise tax revenues and $300 million more in general sales tax dollars.

Consumption taxes are a significant source of state and local revenue, and we expect that lawmakers will continue to adjust state consumption tax levies to adapt to budget needs and a changing economy.