January 24, 2019
January 24, 2019
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. Our “What We’re Reading” section has much more on the current status of King’s dream in the states and the movement for better and more equitable funding for our schools. And don’t forget to also celebrate Earned Income Tax Credit (EITC) Awareness Day tomorrow!
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Developments and Proposals
- MASSACHUSETTS lawmakers have relaunched the state’s popular millionaires tax proposal. The proposed legislation would amend the state constitution, imposing a four-percentage-point surcharge on residents making more than $1 million. If passed, the tax is expected to raise over $2 billion a year that would be spent on the state’s schools, universities and transportation systems. — AIDAN DAVIS
- After ARIZONA lawmakers of his own party balked at the governor’s decision to side-step federal tax conformity in his executive budget, legislators are pushing to couple the state changes as a result of federal law with income tax cuts. It has been estimated that the tax cuts would cost the cash-strapped state $150 million. At the same time, lawmakers are pushing for a sales tax hike, which would fall more heavily on low- and middle-income Arizonans, to fund education. — AIDAN DAVIS
- NEW MEXICO lawmakers have introduced a bill to reduce the state’s reliance on oil and gas revenue and improve the progressivity of the state’s personal income tax while increasing investments in education and infrastructure. — LISA CHRISTENSEN GEE
Governors’ Budget Proposals and State of the State Speeches
- ALASKA Mike Dunleavy introduced three constitutional amendments that would effectively tie the hands of the state government in his speech earlier this week. They would establish a spending limit and spending plan for the state, ensure no changes to the statutory formula that determines the Permanent Fund Dividend (PFD), and allow for no tax changes without a vote from Alaska residents.
- DELAWARE John Carney, after vetoing a widely supported bill to convert the state’s Earned Income Tax Credit (EITC) to a refundable credit that would do more for lower-income working families, was mum on the subject in his address last week. He did focus on adhering to a budget smoothing plan to avoid overspending in good years and build reserves for bad years, even though efforts to enshrine such a system in the state constitution failed last year.
- New GEORGIA Brian Kemp did not deliver on his campaign promise to give teachers a $5,000 annual raise, but did include a $3,000 raise in his budget proposal. He also proposed to borrow money to replace election infrastructure and repair bridges.
- In HAWAII David Ige’s recent speech, he focused on affordable housing, the transient accommodations tax (TAT) and provided a roadmap for universal preschool.
- IOWA Kim Reynolds did not focus on fiscal issues in her speech.
- Charlie Baker of MASSACHUSETTS released his executive budget this week. It included an increase on real estate transfer tax to fund climate adaption programs, expanded Medicare coverage, and a bill to adjust the state’s school funding formula.
- New NEVADA Steve Sisolak is, like many governors this year, proposing to raise teacher and state employee pay, and promising he can fund that and other priorities without raising taxes.
- WISCONSIN Tony Evers delivered his first State of the State address, calling on lawmakers for bipartisanship to fund middle-income tax cuts by scaling back the state’s Manufacturing and Agriculture tax credit, fund roads, and increase investments in public education.
- 2019 may be the year that lawmakers in ARKANSAS pass legislation requiring the collection of sales taxes for online sales.
- CALIFORNIA Gavin Newsom is talking about brokering a comprehensive tax reform deal in wake of a pending large ballot battle over the taxation of commercial properties in 2020.
- Talk of tax cuts in COLORADO are causing a stir as the Gov. Jared Polis’s support for a conservative plan raises concerns as the state grapples with complex laws that keep investments artificially low even while the state economy is booming and prioritizes tax breaks for those least in need of one.
- In DELAWARE, a school funding lawsuit is working its way through the courts. Legislators are also considering a statewide property tax to fund community colleges.
- ILLINOIS’s experience with video gambling serves as a cautionary tale for other cities and states now flocking to it as a solution to help stabilize public revenues.
- Despite substantial public support and a recognized need to improve teacher pay, observers consider INDIANA lawmakers unlikely to pass a proposed cigarette tax increase or cannabis legalization.
- INDIANA and NEBRASKA lawmakers are among those proposing tax breaks for people who take gun safety classes or buy gun safes.
- LOUISIANA is experiencing a new kind of budget battle this year, with the House Speaker holding up revised revenue forecasting that if approved would give the state more revenue to spend in its upcoming budget—meaning, would give Gov. John Bel Edwards the ability to give teachers a pay raise without raising taxes in an election year.
- In other LOUISIANA news, ExxonMobil was denied tax breaks by a vote of the East Baton Rouge Parish School Board—a rare outcome as the corporation has received hundreds of such tax breaks under the decades-old Industrial Tax Exemption Program.
- The House Taxes Committee in MINNESOTA has been weighing the consequences of failing to conform to the federal tax code post-enactment of the TCJA. Among the considerations? Complexities for tax prep, windfall revenue, and the need for more state-level audits.
- Lawmakers in MONTANA introduced a bill, HB 300, that would establish a general sales tax in the state while eliminating most residential and commercial property taxes. Meanwhile Gov. Bullock has proposed increasing taxes on liquor, tobacco, accommodations and rental cars.
- Although NEBRASKA Pete Ricketts is sticking to anti-tax orthodoxy by proposing to cap property taxes while offering no alternatives for funding schools and other local services, state lawmakers are focusing instead on real ideas for reducing property taxes without slowly starving school budgets. Such ideas proposed so far include ending decades-old income tax loopholes, raising income taxes on the state’s highest-income households, and broadening and raising the sales tax.
- NEW YORK’s Senate has approved and passed legislation to make the state’s property tax cap permanent. The cap was approved in 2011 but is set to expire next year. The proposal, which has the support of the governor, now moves to the Assembly.
- Some NORTH DAKOTA legislators are proposing to reverse an oil extraction tax cut the state enacted in 2015 during the height of the fracking boom, and a large group of advocates is pushing for a gas tax update to improve funding for road and bridge repairs and improvements.
- OREGON advocates, armed in part with ITEP data, are pushing to close loopholes that currently allow corporations to avoid taxes by hiding their income in foreign tax havens.
- Lawmakers in SOUTH CAROLINA have proposed boosting teacher pay by raising cigarette taxes.
- TENNESSEE will consider joining other states in a recent movement to exempt feminine hygiene products from sales tax.
- UTAH lawmakers have reached some agreement about expanding the sales tax base to include to-be-specified services, but disagree as to whether to cut the general sales tax rate or income tax rates.
- A report, commissioned by the state of VERMONT, found that carbon pricing combined with other climate policies could allow the state to reduce greenhouse emissions without negatively impacting the state’s economy or low-income residents. In a fellow New England state, CONNECTICUT Ned Lamont committed that his decision-making processes as governor will be viewed through an ”environmental lens.”
- WEST VIRGINIA’s House Finance Committee takes steps to propose elimination the state’s tax on business inventory, equipment and machinery.
What We’re Reading
- This Monday’s celebration of Martin Luther King Jr. Day serves as a reminder both of how far we’ve come in advancing racial justice and how very far we have yet to go. Fast Company notes that the racial wealth gap has grown over the past 35 years, and Common Dreams argues it is killing the middle class. Inequality.org points out that our failure to address this divide is dragging down the entire economy, but that current policies enriching the already rich are driving that gap even wider. And Governing launched a new series digging into how state and local policies reinforce racial segregation.
- The Atlantic, The Hill, and Inequality.org all weighed in on the recent teachers’ strike in Los Angeles and the state of this movement more broadly. These and other teacher actions “are not about making their working conditions a little better, but about keeping public education alive and healthy.”
- Reporting by Governing finds that with state income tax collections down in several states, uncertain economic times could lie ahead.
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