State Rundown 11/29: Thanksgiving Leftovers Edition

The State Rundown is back from Thanksgiving break with a heaping helping of leftover state tax news, but beware, some of it may be rotten. Don’t expect to find much fiscally healthy meat to enjoy on the remains of the special sessions in Alaska, Montana, and Oklahoma; most of the good ideas to fill those states’ revenue gaps were left on the table. On the brighter side, news of the destructive effects of Kansas’s “starve the beast” approach to tax cuts seems to be getting around and helping prevent unhealthy choices in other states; hopefully Congress will heed those lessons as well and throw out the federal tax cut bills before they can turn everything else rancid. And there is more than enough delicious reading to go around in our “What We’re Reading” section, with flavors ranging from new research on the millionaire migration myth to city-level efforts to fight inequality.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• On the heels of their special session, Oklahoma remains in the news. Today, the Tulsa World editorial board dives into the state commission’s unwillingness to challenge a tax break for the wealthy. The state capital gains tax exemption cost the state $465 million over five years. Earlier this week the Atlantic examined parallels between tax cut policies and the backlash in Oklahoma and their neighbors in Kansas. And lawmakers considered efforts to reduce the state’s supermajority threshold for tax increases.
• Just before Thanksgiving, Alaska’s special session came to a close with no action on taxes. The state’s $2.7 billion annual budget deficit remains. The week prior, Montana’s special session also ended without the legislature accepting any of the governor’s proposed temporary tax increases. To close the projected $227 million deficit, lawmakers instead chose to enact budget cuts, account transfers, payment suspensions to state employee health and judicial retirement funds, new liquor licenses, new investment fees, and furloughs of state workers.
• Warnings from painful experience continue to come from Kansas about the dangerous tax path federal lawmakers are walking down. Lawmakers would be wise to note that Governing has named two Kansas legislative leaders essential to correcting Kansas failed tax cut experiment as Public Officials of the Year. Congratulations to Jim Denning & Jim Ward for their work in putting Kansas on a path to more secure financial footing! May federal legislators be wise enough to avoid the need to take similar corrective action a few years down the line.
• Seattle’s proposal to tax the personal incomes of high-earners received its first legal determination last week with the lower Washington court ruling the tax violates state statutes that prohibit taxes on net income. The city plans to appeal the decision with hopes of taking the issue to the state supreme court.
• A poll in Arizona shows that voters would support a soda tax if the funds were earmarked for education. The state continues to grapple with ways to fund education going forward. Particularly the $600 million a year hole the voter-approved $0.06 sales tax would leave when it expires in 2021. In Oregon‘s Multnomah County, the soda tax campaign is on hold until November 2018 in hopes of more favorable voter turnout. Meanwhile in Illinois, the soda tax is being wound down and some initial opponents are experiencing repeal remorse.
• A California effort to repeal recent gas tax increases got the green light to start collecting signatures in order to get the measure placed on the November 2018 ballot. The repeal is currently polling with majority support, but not by high margins. Relatedly, a state appeals court ruled the Attorney General did not need to revise the contested ballot language, overturning the lower court’s decision. If the repeal effort were to be successful, hundreds of transportation projects would be left to an uncertain future.
• Iowa and Nebraska are seeing improvement in the quality of their infrastructure two years after both states updated their gas taxes. In Texas, opposition to more state spending to fund highway projects is leading to increased reliance on private sector tolling. And in Washington state, consumers are being made more aware of the gas taxes they are paying through a sticker campaign at fuel pumps that started Oct. 30.
• New Jersey-elect Phil Murphy this week reiterated his confidence that passing a ‘millionaires tax’ to improve the state’s regressive tax code and fund local schools is both wise and likely, despite recent concerns that a federal tax overhaul could change the debate.
• Eric Greitens and his allies on the Missouri Housing Development Commission are pushing to end the state’s participation in a low-income housing tax credit program, calling it a “giveaway” and a “failed program,” but 27 Missouri mayors feel otherwise.
• A Mississippi poll found 72 percent support for raising cigarette and alcohol taxes to help fill the state’s $70 million revenue gap.
• Florida Rick Scott’s final budget proposal is a departure from previous years, including less ambitious tax cuts and significant funding increases, which some are speculating is a political calculation in advance of a run for the U.S. Senate.
• A legislator in Missouri is proposing to de-couple the state’s tax code from the federal code to insulate the state from revenue losses if one of the current bills or something like them passes Congress.

What We’re Reading…

• A new analysis by Cristobal Young shows, yet again, that taxes don’t drive millionaires to move to other states. Only 2.4% of millionaires move in a given year, which is less than lower income groups, and 85% of those moves do nothing to reduce taxes for those millionaires anyway.
• The Institute for Policy Studies writes in Newsweek that three individuals – Jeff Bezos, Warren Buffet, and Bill Gates – now own more wealth than the bottom half of America combined. Meanwhile, Route Fifty reports on a National League of Cities paper warning that wealth inequality is a threat to social stability.
• Pew’s Stateline reports on historic preservation tax credits across the country and their likeliness to persevere despite the cost.
• The NYU Tax Law Review has a new issue dedicated to “Tax Policy and Upward Mobility,” featuring Kim Rueben of the Tax Policy Center and other contributors to a NYU/UCLA symposium on the topic.
• State Net reports on the dire state of underfunded public pension systems, which is persisting despite a booming economy. Route Fifty notes that a provision in the House tax cut bill could worsen this situation by taxing some public pension investments.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.

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