State Rundown 10/12: Tax Policy Debates Don’t Just Happen in the Statehouse

It may be the off-season for state legislatures, but tax policy changes could soon emerge from the ballot box or the courts. Advocates in Arkansas want voters to decide the future of taxing diapers and feminine hygiene products, and supporters of public education in Nebraska are working to make sure voters have a say on the state’s school choice tax credit. Meanwhile, cannabis firms in Missouri are suing the state over cities and counties stacking sales tax on marijuana. And Nevada is suing travel companies for alleged discrepancies in sales tax collections versus remittance that may have resulted in lower sales tax revenue.

Major State Tax Proposals and Developments

• MASSACHUSETTS Gov. Maura Healey signed the legislature’s compromise tax bill into law. The legislation includes targeted low-income credit boosts: an increase and improvement to the state’s Child and Dependent Tax Credit; an increase to the Earned Income Tax Credit; an increase to the senior circuit breaker tax credit; and an increase to the cap on the rental deduction. It also included other improvements like closing the married filing separately loophole and tweaks to a system that sends revenue back to residents if collections exceed a set amount. However, those changes came alongside tax cuts that largely benefit the state’s wealthiest, and profitable corporations: a uniform estate tax credit of $99,600 (effectively eliminating tax on estates worth under $2 million); a cut to the short-term capital gains rate from 12 percent to 8.5 percent; and a shift in corporate taxation to single sales factor apportionment. – MARCO GUZMAN

State Roundup

• Advocacy groups in ARKANSAS have proposed a ballot initiative that would exempt feminine hygiene products and diapers from the state sales tax.
• Ahead of the 2024 legislative session which will begin in early February, CONNECTICUT lawmakers are considering an expansion to a property tax cut for military veterans that would result in a $2,000 cut.
• GEORGIA Brian Kemp extended the state’s gas tax suspension until mid-November.
• First quarter revenue collections in MISSISSIPPI are lower than last year. This dip in collections is coinciding with Mississippi’s first year of their income tax cut phase-in.
• Owners of MISSOURI cannabis firms are suing the state in a dispute over how some local governments may levy an excise tax on cannabis. Although the state initially interpreted its constitution to permit only a single city or county to levy the tax, it now permits both.
• NEBRASKA supporters of public education have gathered the signatures necessary to give voters the opportunity in November to reverse the legislature’s decision to funnel public dollars to private schools through scholarship tax credits.
• A NEVADA lawsuit against major online travel companies, alleging they have been collecting taxes based on retail prices but remitting them based on wholesale prices, will be taken up by the state Supreme Court. The companies – such as Expedia, Hotels.com, Orbitz, Priceline, and Travelocity – could ultimately owe more than $1 billion in unpaid taxes and damages.
• The PENNSYLVANIA House passed tax legislation that would accelerate the state’s corporate tax rate reduction, create a state-earned income tax credit equal to 25 percent of the federal credit, increase the childcare tax credit, among other changes. While the bill adopted amendments that were proposed by both Republicans and Democrats, it passed along a party-line vote by Democrats. Despite the party-line vote, the Republican Senate Majority Leader did not completely rule out the measure.
• A WYOMING state-funded assessment of a value-based property tax system–akin to the one in California–found that it would slash revenue for public services and would likely be unconstitutional.

What We’re Reading

• A new report by Good Jobs First breaks down how Louisiana John Bel Edwards’ reforms to the state’s Industrial Tax Exemption Program has resulted in boosted revenues for public school districts that predominantly serve Black communities and students.
• The Nevada Current forcefully argues for the state to find ways to rectify its upside-down tax code, for example by following Washington State’s lead in creating an EITC-like rebate to boost the incomes of middle- and low-income families.
• Route Fifty reports on four tax credits that can help states mitigate the child care crisis: child tax credits, earned income tax credits, child and dependent care credits, and employer-provided child care credits.

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