Connecticut

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.

Comments are intended to offer some perspective on the broader tax policy context in which this proposal is being considered. We find that this proposal would help to lessen long-running inequities in Connecticut’s state and local tax law that have allowed high-income taxpayers to pay lower overall effective tax rates than most low- and middle-income families.

Progressive capital gains tax proposals made news this week in Connecticut and Massachusetts, while Nebraskans came out in force to oppose a regressive tax shift, and North Carolina teachers prepare to rally over their legislature’s proclivity to cut taxes on wealthy households while underfunding schools.

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…

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. 

State policymakers around the nation this week served up a handful of harmful and upside-down tax proposals, but these were refreshingly outnumbered by sound tax and budget policy proposals in several other states. NEW JERSEY Gov. Phil Murphy made tax fairness an explicit priority in his budget address, the NEW MEXICO House passed progressive reforms to improve the state’s schools and tax code, states such as VERMONT are looking to raise funds from legalized cannabis and put it to good use, and many states, including ALABAMA, ARKANSAS, OHIO, and WISCONSIN, are seriously considering much-needed gas tax updates to improve their…

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.

Tom Robbins called February “the meanest moon of winter, all the more cruel because it will masquerade as spring, occasionally for hours at a time, only to rip off its mask with a sadistic laugh and spit icicles into every gullible face, behavior that grows quickly old.” Observers of state fiscal debates might think he was writing about similarly tiresome regressive tax cut proposals, which recently succeeded in Arkansas and advanced in North Dakota despite improved public understanding of the upside-down nature state tax systems, ineffectiveness of supply-side trickle-down tax cuts, and importance of investing in education. But like February…

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…

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.

Gubernatorial addresses and the prospect of teacher strikes continued to take center stage in state fiscal news this week, as governors of Connecticut, Maryland, and Utah gave speeches that all included significant tax proposals. Meanwhile, teachers walked out in Virginia, and many other states debated school funding increases to avoid similar results. State policymakers have many other debates on their hands as well, including what to do with online sales tax revenue, how to cut property taxes without undermining schools, whether and how to legalize and tax cannabis, and whether to update gas taxes for infrastructure investments.

This week, as Americans in every state celebrated Martin Luther King Jr. Day and reflected on his dream of peaceful protest and racial and economic justice, many eyes were on the teachers’ strike pressing for parts of this dream amid the “curvaceous slopes of California.” Governors and lawmakers in many states—including Arizona, Georgia, Indiana, Louisiana, Nevada, New Mexico, South Carolina, and Wisconsin—discussed ways to raise pay for teachers and/or enhance education investments generally.

This year lawmakers in Connecticut, Delaware, Hawaii, Illinois, New Jersey, New York, Rhode Island, and Vermont will all be debating the taxation of recreational cannabis. A new ITEP report reviews the track record of recreational cannabis taxes thus far and offers recommendations for structuring cannabis taxes to achieve stable revenue growth over the long haul.

Enacting Worldwide Combined Reporting or Complete Reporting in all states, this report calculates, would increase state tax revenue by $17.04 billion dollars. Of that total, $2.85 billion would be raised through domestic Combined Reporting improvements, and $14.19 billion would be raised by addressing offshore tax dodging (see Table 1). Enacting Combined Reporting and including known tax havens would result in $7.75 billion in annual tax revenue, $4.9 billion from income booked offshore.

States have broad discretion in how they secure the resources to fund education, health care, infrastructure, and other priorities important to communities and families. Aidan Davis with the Institute on Taxation and Economic Policy will offer a national perspective on state-level approaches to funding public investments and the implications of those approaches on tax fairness and revenue adequacy, and their economic outcomes. She’ll also provide insight on what’s in store for 2019 among the states.