Michigan

Reductions in critical state and local investments, including health care and education, would only exacerbate the economic crisis brought on by COVID-19 and worsen racial and income inequality for years to come. Higher taxes on top earners are among the best options for addressing pandemic-related state revenue shortfalls in the coming months.

Voters could significantly change the tax landscape through ballot measures this November regarding oil taxes in Alaska and a high-income surcharge for education funding in Arizona. Legislators are doing their part to bring progressive tax ideas to the fore as well, including a possible wealth tax in California, a millionaires tax in New Jersey, and a pied-a-terre proposal in New York. And Nebraska lawmakers reached a property tax and business tax subsidy compromise before closing out their session, but did not identify progressive revenue sources to fund it and will likely be back at the bargaining table before long.

Even in statehouses, many eyes remained on Congress and President Trump this week as state lawmakers advocated for needed federal fiscal relief and debated whether they can afford to join in on the president’s executive order requiring states to partially fund a new version of enhanced unemployment benefits that have otherwise expired.

Lawmakers in many states have enacted “sales tax holidays” (16 states will hold them in 2020) to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. These holidays may seem to lessen the regressive impacts of the sales tax, but their benefits are minimal while their downsides are significant—and amplified in the context of the COVID-19 pandemic. This policy brief looks at sales tax holidays as a tax reduction device.

Local leaders in the District of Columbia and Seattle, Washington, approved progressive tax changes to raise needed funding this week for priorities such as coronavirus relief, affordable housing, and mental health. Arizona advocates submitted signatures to place a high-income surcharge on the ballot for November. And as a number of states made decisions on how to use federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funds, North Carolina decoupled from costly business tax cuts contained in the act and Nebraska started discussing doing the same.

As ITEP analyst Kamolika Das wrote today, July 1 is typically the beginning of state fiscal years and “a point when one can take a step back and reflect on the wins and disappointments of the past state legislative sessions.” Not so in 2020, she writes, as uncertainty surrounding the virus, state revenues, and potential federal action give state lawmakers no such time to relax and reflect. Although most recent state actions, such as those covered below in California, Mississippi, and West Virginia, have focused on funding cuts and temporary measures to bring budgets into short-term balance, the need for…

State policymakers this week took a variety of approaches to their fiscal situations amid the COVID-19 pandemic. Tennessee lawmakers chose to balance their budget through $1.5 billion in cuts to public services, but not before adding to those cuts by going forward with planned tax cuts. California legislators also passed a budget but relied on a number of temporary measures and delays to do so. Their counterparts in Massachusetts, New Jersey, and Rhode Island opted for interim budgets to tide them over for a few months while they continue to look for lasting solutions. Meanwhile, many states are debating whether…

Despite uncertainty all around the nation, a few states passed budgets this week and many more are negotiating to enact theirs before fiscal years close at the end of June. Colorado notably pared back some of its own tax breaks and limited the potential damage on its budget from new federal breaks. California also passed a budget but few in the state actually think the dealing is done. Iowa quietly enacted its budget too, though advocates in the state are making noise about non-fiscal bills that were added late in the game.

State policymakers are navigating incredibly uncertain waters these days as they attempt to get a firmer grasp on the scale of their revenue crises, identify painful budget cuts they may have to make in response, and look for ways to raise tax revenues coming from the households and corporations still bringing in large incomes and profits amid the pandemic—all while hoping that additional federal aid and greater flexibility in how they can use federal CARES Act funds will help relieve some of these difficult decisions.

Florida politicians deliberately rigged the unemployment system after the Great Recession to avoid raising taxes on businesses. Now, in a pandemic, some out-of-work residents are left waiting more than six weeks for unemployment benefits while more than 280,000 others have been inexplicably denied. What’s happening in Florida underscores deeper challenges with systems that should help those in need, but instead are designed to fail them.

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.

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.

Excise and sales taxes on cannabis raised more than $1.9 billion in 2019. This represents a jump of nearly half a billion dollars, or 33 percent, compared to a year earlier. These are the findings of an ITEP analysis of newly released tax revenue data from the eight states where legal sales of adult-use cannabis took place last year. 

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…

This testimony explains the advantages of the cannabis tax structure proposed in Connecticut’s Senate Bill 16 and offers additional background information as well as ideas for potential changes to the bill.

Kamolika monitors trends in state tax policy and supports state researchers and advocates. She primarily focuses on the South and mid-Atlantic regions. Before joining the team in 2020, Kamolika promoted progressive affordable housing and workforce development policies at the local level in the District of Columbia.

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.

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.

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,…

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…

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.

The stock option rules in effect today create a problem because they allow corporations to report a much larger expense for this compensation to the IRS than they report to investors. The result is that corporations can report larger profits to investors but smaller profits to the IRS, undermining the fundamental fairness of the tax system.

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…

The last few years have brought major improvements in how states enforce their sales tax laws on purchases made over the Internet. Less than a decade ago, e-retailers almost never collected the sales taxes owed by their customers. The result was a multi-billion dollar drain on state coffers and a competitive disadvantage for local businesses. But this holiday season looks a bit different.