November 13, 2020
November 13, 2020
Although progressive tax policy doesn’t always succeed in in statehouses or voting booths, Arizona voters showed once again that when offered a clear choice, most people resoundingly support requiring fairer tax contributions from rich individuals and highly profitable corporations over allowing their schools and other shared priorities to wither and decay. Still, a similar effort in Illinois and another progressive measure in California were defeated, and anti-tax zealots in West Virginia and many other states will continue to push for tax cuts for the rich and defunding public investments, leaving much work to be done to advance tax justice. As highlighted in “What We’re Reading” below, one major part of that work will involve advocating for much needed common-sense federal fiscal relief to help states get through the current crisis.
Major State Tax Proposals and Developments
- ARIZONA voters passed Proposition 208, which imposes a 3.5 percent surcharge on single filers making more than $250,000 and joint filers making more than $500,000. The revenue generated from the tax will directly fund education. – MARCO GUZMAN
- Voters in ARIZONA, MONTANA, SOUTH DAKOTA, and NEW JERSEY approved ballot measures to legalize and tax the use of recreational cannabis. – MARCO GUZMAN
- A FLORIDA constitutional amendment overwhelmingly passed on Election Day that will gradually increase the minimum wage to $15 an hour by 2026 from its current rate of $8.56. As the Florida Policy Institute notes, the last increase was fifteen years ago. Fortunately, Amendment 4 failed, which would have made it more difficult to pass constitutional amendments. – KAMOLIKA DAS
- WEST VIRGINIA Gov. Jim Justice announced that eliminating the state income tax will be his top priority, even though the personal income tax accounts for nearly half of how state government pays for basic services. Further, now that Republican leaders have a supermajority in the state legislature, House Speaker Roger Hanshaw proposed taking more control over tax policy which can currently only be changed through an amendment approved by voters. – KAMOLIKA DAS
- Defeat of the Fair Tax amendment in ILLINOIS is a huge missed opportunity to improve tax equity in the state with the 8th most regressive tax system in the nation. If passed, the amendment would have made effective a graduated rate structure that increased taxes on those making over $250,000 (top three percent of earners in the state) while cutting it for all other income tax filers and raising crucial revenues needed to fund schools, public infrastructure, and health services. The state currently faces a $7 billion deficit and leaves the state facing nothing but tough choices even while the coronavirus pandemic in the state reaches all-time highs. – LISA CHRISTENSEN GEE
- Votes are still being continued in ALASKA. Ballot Measure 1, which would have increased taxes paid by large oil companies, is behind by more than 55,000 votes.
- ARKANSAS voters approved Issue 1 on the ballot to make permanent a 0.5% sales tax that funds infrastructure work including bridges, state highways, county roads and city streets. The existing 0.5% sales tax was set to expire in 2023. But in more alarming news, Gov. Asa Hutchinson recently proposed $50 million in tax cuts this coming fiscal year including reducing sales taxes on certain vehicles and cutting income taxes for new residents.
- CALIFORNIA voters did not approve Proposition 15 to raise school funding through updated assessments of commercial property, but a few local-level tax changes passed in San Francisco, including an increased tax on real estate sales of greater than $10 million and a tax on companies with extreme pay gaps between their executives and their average employees..
- COLORADO will increase taxes on tobacco and cigarette products and impose a new tax on nicotine products used with e-cigarettes after voters approved a proposition by a 68 percent to 32 percent margin.
- A new system for reassessing property values in DELAWARE, required by a court ruling this year, may not be ironed out until 2022.
- FLORIDA Amendments 5 and 6 passed, both of which will impact tax collections; Amendment 5 increases the amount of time homeowners have to transfer a property tax benefit from an old home to a new residence and Amendment 6 allows a veteran’s surviving spouse to receive an existing homestead property tax discount until the beneficiary remarries or disposes of the property.
- The KANSAS Department of Revenue is likely to increase enforcement of economic nexus laws over the next few months for out-of-state retailers that aren’t registered to collect and remit Kansas sales tax.
- LOUISIANA also had seven constitutional amendments on the ballot. Out of the five amendments that passed, four will directly impact the budget and/or tax collections. Amendment 2 allows property assessors to account for the presence or production of oil or natural gas when determining the fair market value of an oil and gas well, potentially raising property taxes paid by some oil producers. Amendment 3 allows the legislature to tap into rainy day funds to help pay for federally declared disasters. Unfortunately, Amendment 6 raises the maximum income threshold to qualify for a property tax freeze even though the state is already incredibly generous in awarding property tax breaks. Lastly, Amendment 7 limits the state’s ability to spend unclaimed property proceeds.
- Come January, MARYLAND lawmakers may override Gov. Larry Hogan’s veto of a tax on online advertising passed earlier this year to fund education. In anticipation of the next legislative session, a coalition of businesses is launching a campaign against the tax.
- In MASSACHUSETTS, a proposed tax that would raise taxes primarily on the state’s wealthiest residents did not make it past the state House of Representatives. The budget amendment would have raised the tax on unearned income – such as dividends, long-term capital gains, and interest – from 5 percent to 9 percent. The state continues to face a multi-billion revenue shortfall.
- MINNESOTA‘s head of the Office of Management and Budget, Jim Schowalter, said that the state could be facing a $2.4 billion deficit by next July, when the current budget period ends. Schowalter also noted that congressional action will be vital in addressing the lost state and local tax revenue.
- MISSISSIPPI voters approved an activist-led proposal to allow patients with debilitating medical issues to legally obtain marijuana after getting a doctor’s recommendation. The Department of Health is responsible for developing regulations for the program and issuing cannabis patient cards by next August.
- Advocates in MISSOURI are urging Gov. Mike Parson to use remaining federal Covid-19 relief funds to aid families now through stimulus checks rather than adding more to the state’s unemployment fund.
- Smaller counties in MONTANA are continuing to feel the strain caused by a diminishing coal economy. Several mining companies owe millions in gross proceeds taxes or severance taxes and as a result, one county has had to increase property taxes.
- NEVADA economic and revenue forecasts are still looking grim, particularly with interstate flights and large conventions unlikely to recover soon, and leaders in the state are calling for additional federal fiscal relief to help get the state through this period. The full forecast will come out in early December.
- NEW JERSEY legalized recreational cannabis, the first state to do so without a specific tax on the product beyond the state sales tax, though lawmakers may consider adding an excise tax.
- As NEW MEXICO lawmakers work to manage the fiscal effects brought on by the coronavirus pandemic, House Appropriations and Finance Chairwoman Patricia Lundstrom announced that she is going to assess the $1 billion in credits and tax breaks the state offers ahead of the 2021 session.
- Beginning next month, the ability for OHIO cities to collect income taxes from remote workers, who are no longer commuting into the city, will expire. Without further action, cities will face substantial revenue declines and potential layoffs throughout the state.
- Austin, TEXAS residents approved Proposition A which raises property taxes to fund new light rail lines, an all-electric bus fleet, expanded bus services and other transportation infrastructure worth $7.1 billion.
- UTAH voters approved Amendment G, which authorizes income tax revenue to be used to support children and disabled individuals, as opposed to only going to K-12 and higher education.
- Wealthy anti-tax activist Tim Eyman will pursue two ballot initiatives in 2021 in an effort to permanently prohibit income and carbon taxes in WASHINGTON state.
What We’re Reading
- The National Association of State Budget Officers has a sobering blog out on the tremendous fiscal challenges facing states now and in the near future.
- Building on that picture, Jacobin Magazine covers the “brutal austerity” coming for state and local budgets if major federal fiscal relief does not come through.
- Governing reports that the prospects for that federal relief are in question, however.
- And the TaxProf Blog summarizes work from academics Darien Shanske and David Gamage illustrating an unfortunate upshot of this predicament: if Congress fails to come through with the needed aid, states may be forced to borrow funds to deficit-finance public services as a problematic last resort to avoid decimating their services and economies due to federal inaction.
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