State Rundown 1/25: States Begin Tax Debates while Still Racing to Understand Federal Bill

State legislative sessions are in full swing this week as states grapple with revenue shortfalls and the ramifications of the federal tax cut bill. Lawmakers in Alaska and Louisiana, for example, are debating how to handle their revenue shortfalls, and a tax cut proposal in Idaho has been received tepidly. And be sure to peruse our “What We’re Reading” section for helpful perspectives on how states are affected by the federal tax cut bill.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• In an effort to collect sales taxes from remote sellers, Massachusetts has secured agreement from Amazon to provide state revenue officials with information on third-party sellers.
• Pointing to the state’s deficit as the sole impediment to progress, Alaska’s Bill Walker urged lawmakers to act on the budget deficit this year. While there are many ways in which lawmakers can do so, a new analysis commissioned by the state’s Permanent Fund finds that proposals to spend even part of the Fund on government services could leave Alaskans without their annual dividends in years to come. Such a move would have the largest impact on low-income Alaskans.
• Louisiana Bel Edwards released a stark budget proposal on Monday, outlining deep cuts to safety-net medical programs and the state’s popular higher education scholarship program absent tax changes that would avert the expected $1 billion fiscal cliff.
• In Vermont, Phil Scott steered away from additional taxes or fees but called for the elimination of tax on Social Security benefits for residents making less than $55,000.
• Idaho taxpayers are not too keen on reducing personal income tax rates as proposed by Gov. Otter, according to a recent survey. However, lawmakers were big fans of an unemployment tax cut, which has passed both chambers and heads next to the governor’s desk.
• A resolution calling for the elimination of West Virginia‘s business inventory tax for certain industries over a seven-year period was introduced in the state Senate. The West Virginia Center on Budget and Policy weighs in on SJR9.
• Two new tax measures are getting attention in California. A new ballot initiative to increase funding for safety-net medical programs by raising the personal income tax rate on incomes over $1 million has been approved to start collecting signatures. And lawmakers have introduced legislation that would amend the state constitution to increase the corporate income tax rate paid by companies with over $1 million in net income in order to offset half of the tax cut corporations received through federal tax reform.
• Colorado lawmakers are wrangling over what to do with $200 million of potential revenue from the federal tax cut bill. Among the ideas circulating so far are corporate and personal income tax rate cuts, dedicating more funds to transportation projects, and saving more in the state’s rainy-day fund.
• Oregon voters approved Measure 101 in a special election, preserving the new taxes that help fund the state’s Medicaid program.
• Utah legislative opened this week with taxes and opioids stated as among the top priorities lawmakers want to tackle. Lawmakers wasted no time passing a bill to enact a state Earned Income Tax Credit at 10% of the federal out of committee. The proposed credit would target families impacted by intergenerational poverty.
• New Jersey Phil Murphy is ordering an audit of the state’s business tax subsidies as one of his first acts as governor.

What We’re Reading…

• Stateline summarizes some of the ways the federal tax cut bill may affect states and how they might respond, to which Governing adds the context of other funding pressures also affecting states this year. The Center on Budget and Policy Priorities weighs in as well with a report and two blog posts (here and here) outlining effects of the federal bill and states’ options going forward.
• The Center on Budget and Policy Priorities also provides an excellent review of supply-side tax-cut disaster that unfolded in recent years in
• An Arizona editorial board puts pressure on Gov. Doug Ducey to raise significant additional revenue for education.

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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