Temporarily modifying the structure of the EITC to reflect the realities of our current economy could provide a vital lifeline to low-income workers who have seen their incomes disappear during this crisis. What follows are a few such ideas which could be implemented at either the federal or state levels, or both.
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 April 1, 2020 Adding Flexibility to Make the EITC Work During the Pandemic
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blog March 26, 2020 State Rundown 3/26: Pandemic’s Health and Fiscal Fallout Continues to Grow
This week’s Rundown brings you the most useful reading and resources about how states are affected by and responding to the COVID-19 pandemic. These include: landing pages for the most up-to-date lists of state policy responses; ITEP’s own materials on state policy options and the federal response bills; insights on how a race-forward approach can improve these efforts at all levels; updates on state fiscal troubles and legislative postponements; and the developing picture of which states and communities could be affected more than others.
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blog March 19, 2020 State Rundown 3/19: Spring Is Here but States Brace for Long Winter
As the COVID-19 pandemic continues to disrupt more and more aspects of life and cause greater and greater harms to public health and the economy, information is changing by the hour. State policymakers, if they are even able to convene, are wholly focused on how to respond to the crisis. The pandemic is certain to pose a series of fiscal challenges for states and their economies, and this week’s Rundown focuses on the most helpful resources and the latest state-by-state updates available.
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blog March 18, 2020 It’s Time for Some State Fiscal Policy Triage
The COVID-19 novel coronavirus’s effects on public health and economies at all scales are creating a daunting situation for state budgets as well. Lawmakers can choose and prioritize their responses through a straightforward approach similar to that taken by health professionals: marshal and reinforce available resources, triage response options to prioritize the most vital services and most vulnerable people, and enact or strengthen the policies that will help address longer-term issues as well as immediate emergencies.
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blog March 11, 2020 State Rundown 3/11: Georgia Bucks Trend of Cautious Policymaking Amid Crises
With all eyes on the potential effects of the oil price war and COVID-19 coronavirus on lives, communities, and economies, Georgia House lawmakers this week crammed through a regressive and costly tax cut for the rich with essentially no debate, information, or transparency. Most states are proceeding much more responsibly, assessing the ramifications for their service provision needs and revenues to fund those needs.
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blog March 6, 2020 Talking Taxes in Alaska
Alaska’s tax system underwent major changes in the 1970s when oil was found at Prudhoe Bay. Lawmakers repealed the state’s personal income tax (making Alaska the only state ever to do so) and began balancing the state’s budget primarily with oil tax and royalty revenue instead. But as oil prices and production levels have declined, a yawning gap has opened between state revenues and the cost of providing vital public services.
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blog March 4, 2020 State Rundown 3/4: Sun Shining on Progressive Tax Efforts This Week
Wisconsin’s expansion of a capital gains tax break for high-income households represents a dark spot on this week’s state fiscal news, and the growing threat of COVID-19 is casting an ominous shadow over all of it, but otherwise the picture is pleasantly sunny, featuring small steps forward for sound, progressive tax policy. An initiative to create a graduated income tax in Illinois, for example, got a vote of confidence from a major ratings agency, while a similar effort went public in Michigan and two progressive income tax improvements were debated in Rhode Island. Gas tax updates made encouraging progress in Alaska and Kentucky. And Hawaii leaders continued to work toward important Earned Income Tax Credit (EITC) and minimum wage improvements.
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blog February 27, 2020 State Rundown 2/27: Leaps Forward Needed for Tax Justice
This weekend’s Leap Day should be a welcome extra day for state lawmakers, advocates, and observers who care about tax and budget policy, as there is an overflow of proposals and information to digest. Most importantly, as emphasized in our “What We’re Reading” section, there are never enough days in a month to do justice to the importance of Black History Month and Black Futures Month. In state-specific debates, Oregon and Washington leaders are hoping to take a leap forward in raising funds for homelessness and housing affordability measures. Lawmakers in West Virginia and Wisconsin could use a day to return to the drawing board on recently rejected tax cut proposals. New Jersey and Rhode Island leaders have proposed forward-thinking progressive income tax measures. And lawmakers continue to work overtime on needed gas tax updates in Arizona, Massachusetts, and Utah.
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brief February 26, 2020 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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blog February 20, 2020 State Rundown 2/20: Property Taxes and School Finance Take Center Stage
Property taxes and education funding are a major focus in state fiscal debates this week. California voters will soon vote on borrowing billions of dollars to fill just part of the funding hole created in large part by 1978’s anti-property-tax Proposition 13. Nebraska lawmakers are debating major school finance changes that some fear will create similar long-term fiscal issues. And Idaho and South Dakota leaders are looking to avoid that fate by reducing property taxes in ways that will target the families who most need the help. Meanwhile, Arkansas, Nevada, and New Hampshire are taking close looks at their transportation needs and funding sources. And a new business tax subsidy in Ohio doesn’t look great in light of research covered in our “What We’re Reading” section shedding light on the lack of economic benefit from such subsidies.
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report February 18, 2020 Expanding State EITCs: Age Enhancements and a Credit Increase for Workers without Children in the Home
For 45 years, the federal Earned Income Tax Credit (EITC) has benefited low- and moderate-income workers. Yet, throughout its history, the EITC has provided little or no benefit to workers without children in the home—a group that includes noncustodial parents whose children live the majority of the year with another parent.
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blog February 13, 2020 State Rundown 2/13: What’s Trendy in State Tax Debates This Year
We wrote earlier this week about Trends We’re Watching in 2020, and this week’s Rundown includes news on several of those trends. Maine lawmakers are considering a refundable credit for caregivers. Efforts to tax high-income households made news in Maryland, Oregon, and Washington. Grocery taxes are receiving scrutiny in Alabama, Idaho, and Tennessee. Tax cuts or shifts are being discussed in Arizona, Nebraska, and West Virginia. And Arizona, Maryland, and Nevada continue to seek funding solutions for K-12 education as Alaska and Virginia do the same for transportation infrastructure.
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blog February 12, 2020 Trends We’re Watching in 2020
State lawmakers have plenty to keep them busy on the tax policy front in 2020. Encouraging trends we’re watching this year include opportunities to enact and enhance refundable tax credits and increase the tax contributions of high-income households, each of which would improve tax equity and help to reduce income inequality.
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blog February 5, 2020 States Can Make Their Tax Systems Less Regressive by Reforming or Repealing Itemized Deductions
Itemized deductions are problematic tax subsidies that need to close. The mortgage interest deduction, for instance, is often lauded as a way to help middle-class families afford homes and charitable deductions are touted as incentivizing gifts to charitable organizations. But the dirty little secret is that itemized deductions primarily benefit higher-income households while largely failing to achieve their purported goals.
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report February 5, 2020 State Itemized Deductions: Surveying the Landscape, Exploring Reforms
State itemized deductions are generally patterned after federal law, though nearly every state makes significant changes to the menu of deductions available or the extent to which those deductions are allowed. This report summarizes the key details of each state’s itemized deduction policies and discusses various options for reforming those deductions with a focus on lessening their regressive impact and reducing their cost to state budgets.
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blog January 30, 2020 State Rundown 1/30: Flip-Flops and Steady Marches in State Tax Debates
State tax and budget debates can turn on a dime sometimes, as in Utah this past week, where lawmakers unanimously repealed a tax package they had just approved in a special session last month. Delaware lawmakers are hoping to avoid the similarly abrupt end to their last effort to improve their Earned Income Tax Credit (EITC) by crafting a bill that Gov. John Carney will have no reason to unexpectedly veto as he did two years ago. But at other times, these debates just can’t change fast enough, as in New Hampshire and Virginia, where leaders are searching for revenue to address long-standing transportation needs, and in Hawaii, Nebraska, and North Carolina, where education funding issues remain painfully unresolved.
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blog January 29, 2020 ITEP Urges IRS to End SALT Workaround Scheme for Businesses
A new IRS proposal could once again allow wealthy business owners to use state charitable tax credits–including tax credits for donating to support private and religious K-12 schools–to dodge the federal government’s $10,000 cap on state and local tax (SALT) deductions.
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January 29, 2020 ITEP Comments and Recommendations on REG-107431-19
Comments regarding the possibility that owners of passthrough businesses may be able to circumvent the $10,000 SALT deduction cap of section 164(b)(6) by recharacterizing the nondeductible portion of their state and local income tax payments as deductible expenses associated with carrying on a trade or business.
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blog January 22, 2020 State Rundown 1/22: “Only Light Can Do That”
This week as Americans celebrate Martin Luther King Jr.’s messages of resisting oppression and fighting for progress, state policymakers can look to some bright spots where tax and budget debates are bending toward justice. Among those highlights, Hawaii leaders are considering improvements to minimum wage policy, early childhood education, and affordable housing; Kansas Gov. Laura Kelly is seeking to reduce sales taxes applied to food and restore the state’s grocery tax credit; and advocates in Connecticut and Maryland are pushing for meaningful progressive tax reforms.
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blog January 15, 2020 State Rundown 1/15: State Tax Proposals Are All Over the Map
State tax and budget debates have arrived in a big way, with proposals from every part of the country and everywhere on the spectrum from good to bad tax policy.… -
blog January 8, 2020 State Rundown 1/8: States Need Clear Tax and Budget Policy Vision in 2020
Happy New Year readers! The Rundown is back to our usual weekly schedule as state legislative sessions and governors’ budgets and State of the State Addresses begin in earnest. Here’s to clear-eyed 20-20 vision guiding state tax and budget decisions in 2020! So far this year, the harm of Colorado’s TABOR policy and Alaska’s lack of an income tax are coming into focus in big ways. Utah advocates are hoping the benefit of hindsight will help convince voters to overturn a recently enacted tax overhaul. Lawmakers in states including Iowa, Maryland, and Virginia can clearly see a need for revenues, but are looking at mostly regressive options so far. And eagle-eyed lawmakers are looking to the tax policy horizon for innovative ways to tax foreign corporations doing business in Michigan and ways to fund infrastructure needs in the era of electric vehicles in Utah.
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blog December 18, 2019 State Rundown 12/18: Utah’s Tax Fight Wraps Up As Other States’ Ramp Up
With the new year and many state legislative sessions just around the corner, most state tax and budget debates are just getting started. Arkansas will be among the states working to improve their roads and other infrastructure. Massachusetts will have to deal with revenue losses due to a misguided tax-cut trigger put in place in prior years. Maryland and South Dakota will be two of many states facing teacher pay shortages and other education funding needs. And debates over the legalization and taxation of cannabis will likely continue in California, Kentucky, New Jersey, and beyond. Utah lawmakers, on the other hand, are just now putting their 2019 tax debates to bed, having touched on many of the major tax themes of the year, both good and bad: enacting and expanding Earned Income Tax Credits (EITCs) and other refundable tax credits, expanding the sales tax base and cutting the personal and corporate income tax rates, and more. We at ITEP will be back to our regular weekly Rundown schedule in the new year!
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report December 12, 2019 States Should Decouple from Costly Federal Opportunity Zones and Reject Look-Alike Programs
Post enactment of TCJA, lawmakers in most states needed to decide how to respond to the creation of this new program. Given the shortcomings of the federal Opportunity Zones program and its added potential costs to states, the most prudent course of action is three-pronged: States should move quickly to decouple; states should reject look-alike programs; and lawmakers should make investments directly into economically distressed areas.
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report December 9, 2019 Cannabis Legalization: Tax Cut or Tax Hike?
Understanding the full tax consequences of cannabis legalization requires evaluating not only the excise taxes proposed in most legalization bills, but also the effects on the federal income tax liability of cannabis businesses.
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blog November 27, 2019 State Rundown 11/27: Don’t Forget to Thank Taxes!
In the last few weeks, Florida Gov. Ron DeSantis has served up his budget proposal, which advocates are eager to dig into and hoping to contribute to with a delectable Earned Income Tax Credit proposal of their own. Utah lawmakers have been cooking up tax ideas as well, but haven’t yet decided when to come to the table to debate them. And Maryland leaders finalized their menu of needed education reforms, now moving on to assigning responsibilities for funding them. With respect to dividing up the pie, our “What We’re Reading” section below includes reporting on evidence that corporate tax subsidies contribute to inequality at both the federal and state levels. We at ITEP are very thankful for your readership, support, and encouragement!