This week a “historic” but highly problematic budget agreement was finally reached in Connecticut, Michigan lawmakers banned localities from taxing any food or beverages, and Nebraska and North Dakota both got unpleasant news about future revenues. Also see our “what we’re reading” section for news on 11 states that have run up long-term fiscal deficits since 2002 and the impacts of flooding on local tax bases.
State Policy
State taxes pay for essential public services, from education to health care. But the ideal design of a tax system is complicated. ITEP’s state policy resources offer insights into central issues, including the impact of state tax systems on individuals, families, and businesses. Its work also analyzes the sustainability of revenue sources over time.
ITEP's State Policy Research Priorities
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blog November 1, 2017 State Rundown 11/1: Connecticut Balances Budget, Leaves Tax Code Out of Whack
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report October 26, 2017 Trickle-Down Dries Up
Lawmakers who support reducing or eliminating state personal income taxes typically claim that doing so will spur economic growth. Often, this claim is accompanied by the assertion that states without income taxes are booming, and that their success could be replicated by any state that abandons its income tax. To help evaluate these arguments, this study compares the economic performance of the nine states without broad-based personal income taxes to their mirror opposites—the nine states levying the highest top marginal personal income tax rates throughout the last decade.
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blog October 25, 2017 State Rundown 10/25: Marijuana Taxes a Bright Spot amid Underperforming State Revenues
This week in state tax news saw Alaska begin yet another special session, Louisiana lawmakers holding meetings to begin preparing for the state’s looming (self-imposed) fiscal cliff, and Alabama policymakers beginning a study of school finance (in)adequacy and (in)equity. Meanwhile, state revenue performance is poor well into 2017 in many states, though Montana, Nevada, and Oregon are all enjoying modest but welcome revenue bumps from legalized marijuana.
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blog October 18, 2017 State Rundown 10/18: Ballot Initiative Efforts Being Finalized
Ballot initiatives relating to taxes made news around the country this week, with Oregon voters to consider reversing new health care taxes, Washingtonians to vote on improving education funding, and Nebraskans to potentially vote on a state tax credit for school property taxes. Meanwhile, multiple states are finalizing their proposals to lure Amazon to build a new headquarters in their state, often through the use of massive tax subsidies. And in our “What We’re Reading” section we have sobering news from Moody’s Investors Service on states’ struggles to fund their infrastructure and save for the next recession.
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blog October 13, 2017 State Rundown 10/13: Soda Taxes, Business Subsidies, and Gas Taxes Considered in Several States
A comprehensive tax study is underway in Arkansas this week as other states hone in on more specific issues. Soda taxes hit setbacks in Illinois and Michigan, business tax subsidies faced scrutiny in Iowa and Missouri, and gas tax update efforts are underway in Mississippi and North Dakota.
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blog October 4, 2017 State Rundown 10/4: Wildfires in Montana and Tax Cuts in Kansas Wreak Budget Havoc
This week, Kansas’s school funding was again ruled unconstitutionally low and unfair, while Montana lawmakers indicated they’d rather let historic wildfires burn a hole through their budget than raise revenues to meet their funding needs. Meanwhile, a struggling agricultural sector continues to cause problems for Iowa and Nebraska, but legalized recreational marijuana is bringing good economic news to both California and Nevada.
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blog September 29, 2017 Indiana’s Tax Cuts Under Mike Pence Are Not a Model for the Nation
In announcing a new tax cut framework this week in Indianapolis that was negotiated with House and Senate leaders, President Trump claimed that “Indiana is a tremendous example of the prosperity that is unleashed when we cut taxes and set free the dreams of our citizens …. In Indiana, you have seen firsthand that cutting taxes on businesses makes your state more competitive and leads to more jobs and higher paychecks for your workers.”
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blog September 28, 2017 State Rundown 9/28: Wisconsin Budget Finalized, Oklahoma Special Session Underway
This week, Wisconsin’s leaders finalized the state budget at last, while those in Oklahoma began a special session to close their state’s revenue shortfall. Soda tax fights made news in Illinois and Pennsylvania. And New Jersey offered Amazon $5 billion in tax subsidies.
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blog September 25, 2017 State Rundown 9/25: No Rest for the Weary as State Tax and Budget Debates Wind Down, Ramp Up
Last week, Wisconsin leaders finally came to agreement on a state budget, while their peers in Connecticut appear to be close behind them. Iowa lawmakers avoided a special session with a short-term fix and will have to return to their structural deficit issues next session, as will those in Louisiana who will face a $1 billion shortfall. Meanwhile, District of Columbia leaders have already resumed meeting and discussing tax and budget issues there.
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blog September 15, 2017 Poverty is Down, But State Tax Codes Could Bring It Even Lower
The U.S. Census Bureau released its annual data on income, poverty and health insurance coverage this week. For the second consecutive year, the national poverty rate declined and the well-being of America’s most economically vulnerable has generally improved. In 2016, the year of the latest available data, 40.6 million (or nearly 1 in 8) Americans were living in poverty.
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report September 14, 2017 State Tax Codes as Poverty Fighting Tools
Astonishingly, tax policies in virtually every state make it harder for those living in poverty to make ends meet. When all the taxes imposed by state and local governments are taken into account, every state imposes higher effective tax rates on poor families than on the richest taxpayers.
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blog September 13, 2017 State Rundown 9/13: The Year of Unprecedented State Budget Impasses Continues
This week, Pennsylvania lawmakers risk defaulting on payments due to their extremely overdue budget and Illinois legislators will borrow billions to start paying their backlog of unpaid bills. Governing delves into why there were more such budget impasses this year than in any year in recent memory. And Oklahoma got closure from its Supreme Court on whether closing special tax exemptions counts as “raising taxes” (it doesn’t).
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brief September 11, 2017 Reducing the Cost of Child Care Through State Tax Codes in 2017
Low- and middle-income working parents spend a significant portion of their income on child care. As the number of parents working outside of the home continues to rise, child care expenses have become an unavoidable and increasingly unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
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brief September 11, 2017 Property Tax Circuit Breakers in 2017
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. One such targeted program to reduce property taxes is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to reducing property taxes.
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brief September 11, 2017 Options for a Less Regressive Sales Tax in 2017
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.
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brief September 11, 2017 Rewarding Work Through State Earned Income Tax Credits in 2017
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families 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 magnified as many states have enacted and later expanded their own credits.
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blog September 7, 2017 State Rundown 9/6: Most Statehouses Quiet, Many Pondering Harvey’s Impacts
It’s been a quiet week for tax policy in most states, though lawmakers are still making noise in Pennsylvania, where a budget agreement is still needed, and in Wisconsin, where legislators are searching for the will to raise revenue for the state’s ailing transportation infrastructure. In our “What We’re Reading” section you’ll find interesting reading on the fiscal fallout of Hurricane Harvey, as well as an in-depth series on how states’ disaster response needs are likely to continue to increase.
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blog August 31, 2017 State Rundown 8/31: Modernizing Taxes is Sometimes a Sprint, Sometimes a Marathon
Tax and budget debates are progressing at different paces in different parts of the country this week. In Connecticut and Wisconsin, lawmakers hope to finally settle their budget and tax differences soon. In South Dakota, a court case that could finally enable states to enforce their sales taxes on online retailers inches slowly closer to the U.S. Supreme Court.
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blog August 30, 2017 Private School Voucher Credits Offer a Windfall to Wealthy Investors in Some States
State lawmakers who want to send public dollars to private schools have devised a shrewd tactic for getting around political and constitutional obstacles that make it difficult to do so.… -
blog August 23, 2017 State Rundown 8/23: Few Lingering Budget Debates Cannot Linger Much Longer
This week, Oklahoma lawmakers learned they’ll need to enter a special session to balance their budget and that they’ll likely face a lawsuit over their low funding of public education. Pennsylvania’s budget stalemate is also coming to a head as the state literally runs out of funds to pay its bills. And Amazon’s tax practices are in the news again as the company has been sued in South Carolina.
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blog August 10, 2017 The Many Reasons for the Seattle Income Tax
A month ago, the Seattle City Council passed an income tax measure, which has garnered a lot of attention as well as volumes of supportive and opposition commentary. Haven’t had… -
blog August 9, 2017 State Rundown 8/9: And Then There Were Three
This week, Rhode Island lawmakers agreed on a budget, leaving only three states – Connecticut, Pennsylvania, and Wisconsin – without complete budgets. Texas, however, remains in special session and West… -
blog August 9, 2017 It’s a Fact: Voucher Tax Credits Offer Profits for Some “Donors”
In nine states, tax rewards gained by donating to fund private K-12 vouchers are so oversized that “donors” can turn a profit. This is the shocking but true finding of a pair of studies released by ITEP over the last year.
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blog August 2, 2017 State Rundown 8/2: Legislative Tax Debates Wind Down as Ballot Initiative Efforts Ramp Up
Budget deliberations continue in earnest this week in Alaska, Connecticut, Pennsylvania, and Rhode Island. In South Dakota and Utah, the focus is on gearing up for ballot initiative efforts to raise needed revenue, though be sure to read about legislators nullifying voter-approved initiatives in Maine and elsewhere in our “what we’re reading” section.
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blog July 27, 2017 State Rundown 7/27: State Legislative Debates Winding Down but Tax Talk Continues
While only a few states still remain mired in overtime budget debates, there is plenty of budget and tax news from around the country this week. Efforts are underway to repeal gas tax increases in California and challenge a local income tax in Seattle, Washington. And New Jersey legislators’ law to modernize its tax code to tax Airbnb rentals has been vetoed for now.
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blog July 24, 2017 Sound Tax Policy Made a Comeback in 2017
2017 marked a sea change in state tax policy and a stark departure from the current federal tax debate as dubious supply-side economic theories began to lose their grip on… -
brief July 21, 2017 Rewarding Work Through State Earned Income Tax Credits
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families 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 magnified as many states have enacted and later expanded their own credits.
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blog July 21, 2017 States May Be Finally Learning Their Lesson on Back-To-School Sales Tax Holidays
State lawmakers face a dilemma when it comes to sales tax holidays, an attractive and popular policy that nonetheless proves to be a poor choice compared to developing thoughtful, targeted tax policies or investing in well-executed public services. Luckily, word seems to be getting out that the costs associated with these holidays far outweigh their purported benefits.
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report July 20, 2017 Trump’s $4.8 Trillion Tax Proposals Would Not Benefit All States or Taxpayers Equally
The broadly outlined tax proposals released by the Trump administration would not benefit all taxpayers equally and they would not benefit all states equally either. Several states would receive a share of the total resulting tax cuts that is less than their share of the U.S. population. Of the dozen states receiving the least by this measure, seven are in the South. The others are New Mexico, Oregon, Maine, Idaho and Hawaii.
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blog July 19, 2017 State Rundown 7/19: Handful of States Still Have Their Hands Full with Tax and Budget Debates
Tax and budget debates drag on in several states this week, as lawmakers continue to work in Alaska, Connecticut, Rhode Island, Pennsylvania, Texas, and Wisconsin. And a showdown is brewing in Kentucky between a regressive tax shift effort and a progressive tax reform plan. Be sure to also check out our “What We’re Reading” section for a historical perspective on federal tax reform, a podcast on lessons learned from Kansas and California, and more!
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brief July 12, 2017 Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
Sales taxes are an important revenue source, composing close to half of all state tax revenues. But sales taxes are also inherently regressive because the lower a family’s income, the more the family must spend on goods and services subject to the tax. Lawmakers in many states have enacted “sales tax holidays” (at least 16 states will hold them in 2017), to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. While these holidays may seem to lessen the regressive impacts of the sales tax, their benefits are minimal. This policy brief looks at sales tax holidays as a tax reduction device.
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blog July 11, 2017 State Rundown 7/11: Some Legislatures Get Long Holiday Weekends, Others Work Overtime
Illinois and New Jersey made national news earlier this month after resolving their contentious budget stalemates. But they weren’t the only states working through (and in some cases after) the holiday weekend to resolve budget issues.
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blog June 28, 2017 State Rundown 6/28: States Scramble to Finish Budgets Before July Deadlines
This week, several states attempt to wrap up their budget debates before new fiscal years (and holiday vacations) begin in July. Lawmakers reached at least short-term agreement on budgets in Alaska, New Hampshire, Rhode Island, and Vermont, but such resolution remains elusive in Connecticut, Delaware, Illinois, Maine, Pennsylvania, Washington, and Wisconsin.
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blog June 28, 2017 Gas Taxes Will Rise in 7 States to Fund Transportation Improvements
Summer gas prices are at their lowest level in twelve years, which makes right now a sensible time to ask drivers to pay a little more toward improving the transportation infrastructure they use every day. Seven states will be doing this on Saturday, July 1 when they raise their gasoline tax rates. At the same time, two states will be implementing small gas tax rate cuts.
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brief June 28, 2017 How Long Has It Been Since Your State Raised Its Gas Tax?
Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.
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brief June 28, 2017 Most Americans Live in States with Variable-Rate Gas Taxes
The flawed design of federal and state gasoline taxes has made it exceedingly difficult to raise adequate funds to maintain the nation’s transportation infrastructure. Thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty-three years. Likewise, nineteen states have waited a decade or more since last raising their own gas tax rates.
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blog June 22, 2017 Explaining our Analysis of Washington State’s Highly Regressive Tax Code
Supporters of creating a local personal income tax in Seattle are rightly concerned about the lopsided nature of their state’s tax code. In a 50-state study titled Who Pays?, produced using our microsimulation tax model, we found that Washington State’s tax system is the most regressive in the nation.
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blog June 21, 2017 West Virginia Lawmakers Settle on Imperfect Budget, Delay Tax Debate for Next Session
West Virginia’s roller coaster ride of a session is nearing its tumultuous end. In a press conference this morning, Gov. Jim Justice announced that he will let the legislature’s most recent budget bill become law without his signature.
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blog June 21, 2017 State Rundown 6/21: Crunch Time for Many States with New Fiscal Year on Horizon
This week several states rush to finalize their budget and tax debates before the start of most state fiscal years on July 1. West Virginia lawmakers considered tax increases as… -
ITEP Work in Action June 21, 2017 Failed Tax-Cut Experiment (in North Carolina) Will Continue Under Final Budget Agreement, Pushes Fiscal Reckoning Down the Line
The final budget agreement from leaders of the House and Senate puts North Carolina on precarious fiscal footing, The tax changes that leaders agreed to—which were less a compromise and more of a decision to combine the tax cuts in both chambers’ proposals—make the cost of these tax cuts bigger than what either chamber proposed. Including the new tax cuts,approximately 80 percent of the net tax cut since 2013 will have gone to the top 20 percent. More than half of the net tax cut will go to the top 1 percent.
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blog June 14, 2017 State Rundown 6/14: Some States Wrapping Up Tax Debates, Others Looking Ahead to Next Round
This week lawmakers in California and Nevada resolved significant tax debates, while budget and tax wrangling continued in West Virginia, and structural revenue shortfalls were revealed in Iowa and Pennsylvania. Airbnb increased the number of states in which it collects state-level taxes to 21. We also share interesting reads on state fiscal uncertainty, the tax experiences of Alaska and Wyoming, the future of taxing robots, and more!
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blog June 13, 2017 How to Recover from A Failed Tax Experiment: Part 1
Gov. Sam Brownback’s tax experiment in Kansas was a failure.
His radical tax cuts for the rich eventually had to be partly paid for through tax hikes on low- and middle-income families and also failed to deliver on promises of economic growth. Meanwhile, the tax cuts decimated the state’s budget, diminished its credit rating, and compromised its ability to meet the state’s constitutional standard of adequacy for public education.
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blog June 8, 2017 Kansas May Have Saved Us All
Sitting in the National Museum of American History in Washington, DC, hidden in the jumble of Americana like Thomas Jefferson’s desk, Michelle Obama’s inaugural gown and the ruby slippers worn in the Wizard of Oz, is a napkin with a drawing on it. Probably one of the least known exhibits in the museum, this napkin, quietly hiding behind glass lest some child wandering from a school group wipe his nose on it, has on several occasions destroyed the finances of the federal government and several state governments, most recently in Kansas.
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blog May 31, 2017 State Rundown 5/31: Budget Woes Spurring Special Legislative Sessions
This week, special legislative sessions featuring tax and budget debates are underway or in the works in Kentucky, Minnesota, New Mexico, and West Virginia, as lawmakers are also running up against regular session deadlines in Illinois, Kansas, and Oklahoma. Meanwhile, a legislative study in Wyoming and an independent analysis in New Jersey are both calling for tax increases to overcome budget shortfalls.
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ITEP Work in Action May 26, 2017 The Cost Of Trickle-Down Economics For North Carolina
Since 2013, state lawmakers have passed significant income tax cuts that largely benefit the state’s highest income earners and profitable corporations. These costly tax cuts have made the state’s tax… -
blog May 24, 2017 State Rundown 5/24: Several States Scramble to Finalize Budgets
This week, Kansas lawmakers continued work on fixing the fiscal mess created by tax cuts in recent years, as legislators in Louisiana, Minnesota, Oklahoma, and West Virginia attempted to wrap up difficult budget negotiations before their sessions come to an end, and Delaware lawmakers advanced a corporate tax increase as one piece of a plan to close that state’s budget shortfall. Our “what we’re reading” section this week is also packed with articles about state and local effects of the Trump budget, new 50-state research on property taxes, and more.
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blog May 23, 2017 Trump Budget Plan Would Eliminate Child Tax Credits for Working Families Due to Parents’ Immigration Status
As ITEP has detailed, undocumented immigrants are taxpayers, contributing close to $12 billion a year in state and local taxes while also paying federal payroll, income, and excise taxes. In spite of these facts, Mick Mulvaney, President Trump’s budget director, has spread erroneous information to validate the administration’s cruel proposal to strip a proven anti-poverty benefit from undocumented immigrants and their children.
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blog May 18, 2017 State Rundown 5/18: Tax Debate Heat Wave Hitting States
This week saw tax debates heat up in many states. Late-session discovered revenue shortfalls, for example, are creating friction in Delaware, New Jersey, and Oklahoma, while special sessions featuring tax debates continue in Louisiana, New Mexico, and West Virginia. Meanwhile the effort to revive Alaska’s personal income tax has cooled off.
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blog May 17, 2017 Investors and Corporations Would Profit from a Federal Private School Voucher Tax Credit
A new report by the Institute on Taxation and Economic Policy (ITEP) and AASA, the School Superintendents Association, details how tax subsidies that funnel money toward private schools are being… -
report May 17, 2017 Public Loss Private Gain: How School Voucher Tax Shelters Undermine Public Education
One of the most important functions of government is to maintain a high-quality public education system. In many states, however, this objective is being undermined by tax policies that redirect public dollars for K-12 education toward private schools.