Just Taxes Blog by ITEP

State Rundown 10/13: Haven Sent Edition

October 13, 2021

.ITEP Staff

The release of the ‘Pandora Papers’ showed once again that states and their tax systems play an important role in wealth inequality, and in this case, worsening it. States like Nevada, Delaware, and now—as the documents reveal—South Dakota, are popular tax havens for the rich to shield their wealth from state taxes like the estate tax. Elsewhere, the governors of North Dakota and Maryland stated that they want to use their excess budget revenues on temporary income tax credits and permanent cuts. And Missouri finally increased its fuel tax for the first time since Wayne’s World was released, which could be excellent…news for their infrastructure.

Major State Tax Proposals and Developments

  • The ‘Pandora Papers’ revealed how states like SOUTH DAKOTA benefit from a complex financial system built to help the super-wealthy hide money in investments and property in low-tax places around the world. The state, particularly, enables dynasty trusts by eliminating specific rules and benefits from an increase in bank franchise tax revenue, the balance of which has doubled since 2015. — MARCO GUZMAN

State Roundup

  • CALIFORNIA Gov. Gavin Newsom recently signed into law a 12.5 percent tax on vaping products to help fund public health and education efforts, as well as a bill to extend a cellular phone tax and direct more of the funds raised to building high-speed internet infrastructure in underserved parts of the state. Newsom also issued one veto, nixing a bill that would have stopped cities from handing over sales tax revenues to corporations.
  • DELAWARE is undertaking a multi-year property tax reassessment process as part of a lawsuit settlement over education equity.
  • The largest beneficiary of LOUISIANA’s Quality Jobs program, which provides a payroll and sales tax rebate to companies that create high-wage jobs, is the New Orleans Pelicans NBA team. The team receives a $3.65 million cash rebate from the state each year. A recent audit showed the best case return on investment from the Quality Jobs program was $.10 on the dollar.
  • MARYLAND Gov. Larry Hogan laid out a plan to spend the state’s $2.5 billion budget surplus on the rainy-day fund, targeted aid, as well as permanent tax cuts.
  • A survey in MICHIGAN showed that 13% of Child Tax Credit-eligible families were unfamiliar with the CTC or unsure of how to receive it. These families were more likely to be Spanish speaking or have less formal education, indicating that more strategic CTC outreach is needed to ensure it reaches all eligible families.
  • MISSOURI’s gas tax increase has gone into effect. The 2.5 cent increase is the first fuel tax increase since 1992. Unfortunately, the increase will be fully refunded to those who save their receipts and apply, greatly undermining its potential to improve infrastructure funding.
  • NEBRASKA lawmakers and interest groups convened by the Legislative Revenue Committee chairwoman discussed tax reform ideas in a hearing last week, setting up a familiar debate about whether to broaden the regressive sales tax, slash progressive personal and corporate income taxes, and/or funnel more money to property tax cuts. None of the leading plans discussed at the hearing emphasized raising progressive revenues on the richest Nebraskans or offsetting the state’s upside-down tax code with enhanced refundable credits for middle- and low-income families.
  • A study of NEW YORK City’s congestion pricing toll found that it primarily affects a small group of wealthy commuters, not working-class families as opponents have claimed.
  • NORTH DAKOTA Gov. Doug Burgum announced that he intends on using $207 million of the projected $1.1 billion in excess general fund revenues from the 2019-2021 budget to provide a $500 personal income tax credit for returns filed for tax years 2021 and 2022.
  • OREGON’s unusual “kicker” credit will amount to a 17 percent refund of 2020 income taxes in 2021.
  • TENNESSEE is considering new models for funding education. As it stands, Tennessee ranks low on education funding. If changes to the school funding formula leave some schools with less funding, they may need to increase property taxes to make up the difference.

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