Just Taxes Blog by ITEP

State Rundown 11/24: Lawmakers and Families Thankful to Be Nearing End to 2020

State Rundown 11/24: Lawmakers and Families Thankful to Be Nearing End to 2020

November 24, 2020

ITEP
.ITEP Staff

Just as people will search their hearts to give thanks this week for the small and large things that got them through a difficult year, state lawmakers are also doing their best to count their blessings while keeping fingers crossed for badly needed federal relief to give them something to be truly grateful for. Massachusetts and Pennsylvania lawmakers, for example, are thankful to finally be completing their state budgets for the upcoming year. A list included in “What We’re Reading” highlights ballot measures passed this month that ITEP staff are grateful will reduce inequalities around the nation. Unfortunately the governors of Arkansas, Mississippi, and West Virginia said “thanks but no thanks” to their states’ income taxes this week, proposing to eliminate or cut the tax despite the fact that progressive income taxes are one of the only ways of funding shared priorities without relying disproportionately on struggling low-income families. But advocates in these and all other states continue to earn our gratitude by fighting such damaging regressive proposals and pushing for tax justice for all, including in states like Rhode Island where leaders are pushing for taxing the rich and residents are rallying around them.

Major State Tax Proposals and Developments

  • MISSISSIPPI Gov. Tate Reeves proposed phasing out the individual income tax by 2030, even though the tax is the second largest source of state tax collections after sales taxes. WEST VIRGINIA Gov. Jim Justice has also announced that eliminating the personal income tax will be a top priority. Given that the governor’s party now holds a legislative supermajority, there is a much greater risk of income tax elimination than in past years. – KAMOLIKA DAS

State Roundup

  • Following the defeat of ALASKA’s Ballot Measure 1 which would have increased oil production taxes, lawmakers will need to explore options for new revenue. Particularly hard-hit by this recession, the state currently lacks both a personal income tax and statewide sales tax.
  • ARKANSAS Gov. Asa Hutchinson proposed extensive income tax cuts as part of his overall budget proposal. The proposal includes reducing the top individual income tax rates for new residents, cutting the sales tax rate for used vehicles, and eventually reducing the top income tax rate for all Arkansans. However, some legislators seem wary of the proposed tax cuts.
  • CALIFORNIANs’ rejection of Proposition 15 spells trouble for the state’s schools and teachers in the long run, as the measure would have raised $6.5 to $11.5 billion per year for a school system that is already underfunded by $25 billion per year and saw the state defer $11 billion of scheduled payments earlier this year. In the shorter term, a one-time $26 billion “windfall” should help the state fill some of this gap for now, but also speaks to the unsettling truth that rich Californians are living in a completely different world from low- and middle-income families.
  • CONNECTICUT officials are projecting a $4.3 billion revenue shortfall over the upcoming two-year budget cycle.
  • IDAHO lawmakers on an interim property tax committee endorsed three tax-reduction proposals that include capping local government property tax budget increases, restricting local governments from building up budget reserves or rainy-day funds, and launching a website to publish local spending figures.
  • The MASSACHUSETTS Senate and House have both approved their versions of the state’s budget. Next up: conference committee to determine a final compromise budget plan, votes by each chamber, and signoff by Gov. Charlie Baker.
  • MINNESOTA Gov. Tim Walz announced that he plans to call a special session to approve a COVID-relief package that includes sales tax forgiveness for businesses that sell food and beverages and create a tax credit for food donations in the hospitality industry.
  • A new study shows NEBRASKA’s low unemployment rate is largely a mirage created by evaporating job-seekers rather than actual jobs being filled.
  • PENNSYLVANIA’s Gov. Tom Wolf signed the budget plan that will fund the state through June 2021. The plan does not include any new tax revenue, but rather fills the state’s multibillion revenue shortfall with one-time revenue sources.
  • Lawmakers in RHODE ISLAND are considering options to raise income taxes for the state’s highest earners and revisiting proposals to legalize cannabis. Just this week advocates rallied outside of the statehouse to urge lawmakers to increase taxes on the state’s top earners. The process of negotiating a stopgap, midyear budget bill remains underway.
  • VERMONT lawmakers join others across the country in hopes of another round of federal COVID-19 relief funding. Gov. Phil Scott has pointed to the March federal aid package as a major driver of the state’s revenues coming in above expectations.
  • VIRGINIA Gov. Ralph Northam announced his support for legalizing cannabis after the Joint Legislative Audit and Review Commission released a report with revenue projections. The process could take a couple of years, but there’s already discussion about the best use for anticipated revenue; one proposal is to use the future tax revenue on reparations for Black and Indigenous Virginians.
  • WYOMING lawmakers rejected two plans that would have raised taxes on the wealthiest residents—one in the form of a real estate transfer tax and the other, an income tax. Another plan, that would explore how to tax large ranches that are not used for agriculture, will be discussed next month. Lawmakers on an interim committee also advanced a bill that would increase the state fuel tax by nine cents, from 24 cents to 33 cents, and raise an estimated $60 million a year.

What We’re Reading

  • The podcast “Hidden Brain” has a new episode out exploring how making thankfulness a habit can help with self-control, health, and overall well-being.
  • Congress has urgent work to do to help states get through the pandemic, not only on the public health front but also the staggering effects on state economies and tax revenues. The Center on Budget and Policy Priorities provides a clear and sober overview of the situation, the Kansas City Star covers a recent plea from state governors for more help, and the National Low Income Housing Coalition estimates that at least $100 billion is needed just to in emergency rental assistance to forestall a wave of evictions in January.
  • Pew breaks down recent Department of Labor data showing just how bad public school job losses this year have been, with a nearly 9 percent decline from last October to this year, and seven states with double-digit losses.
  • Inequality.org highlights 14 ballot initiatives that made progress in reducing inequality this year.
  • A recent Orlando Sentinel article highlights the Florida Policy Institute’s recent recommendation to require combined reporting as a strategy for clamping down on corporate tax avoidance.
  • The Wisconsin Budget Project examines how the state’s property tax code favors white taxpayers over residents of color in the form of bigger tax breaks for homeowners than for renters.
  • New Jersey Policy Perspective released an excellent five-part series on the state’s schools and education finance system, comprising an overview, a look at where school funding comes from, the legislative landscape, schools’ funding needs, and inequities in New Jersey school districts.

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.