Just Taxes Blog by ITEP

State Rundown 11/29: Thankful for Good Tax Policy

November 29, 2023

Though Turkey Day has passed, lawmakers in states across the U.S. have yet to get their fill of delicious tax policy goodness. Here is what’s been going on since the holiday break: In Colorado, the General Assembly and governor went back for seconds and approved a temporary property tax cut and an increase to the state EITC during their recent special session. Illinois lawmakers made it known that the state’s voucher tax credit wasn’t invited to dinner after choosing not to extend the program. And Washington state is mighty thankful for the state’s new capital gains excise tax, which has provided nearly $900 million for important public programs and services like schools and infrastructure.

Major State Tax Proposals and Developments

  • COLORADO Gov. Jared Polis approved several special session bills that will temporarily increase the state’s Earned Income Tax Credit (EITC) and cut residential property taxes, in addition to a bill that changes TABOR refunds from tiered payments to a flat amount for all taxpayers.
  • Lawmakers in ILLINOIS chose not to extend the state’s voucher tax credit program, which paid families to send money to organizations that bundle vouchers to attend private and religious K-12 schools. ITEP previously panned the policy, in part because it provided an easy avenue for wealthy families to avoid capital gains tax.
  • WASHINGTON State’s new capital gains excise tax is almost to the end of its first year and has already brought in almost $900 million for schools, infrastructure, healthcare, and other priorities, while affecting only a few thousand of the state’s richest residents who currently pay lower overall tax rates than any other group.


State Roundup

  • A proposed increase to the real estate transfer tax on homes sold for over $1 million in Chicago, ILLINOIS passed its first hurdle. A referendum was passed by the Chicago City Council. It now sends the ordinance to the city’s voters who will determine the fate of the tax in March.
  • Democrats in KANSAS unveiled a $500 million property tax cut plan which includes reviving and refining the Local Ad Valorem Tax Reduction Fund, raising the exemption on the statewide mill levy from $42,000 to $100,000, and placing a constitutional amendment before voters that would shift taxes from homeowners to other types of property.
  • Kansas City MISSOURI voters decisively re-authorized a 3/8 cent sales tax used to finance bus service. Despite some discomfort with the tax’s regressive nature, voters overwhelming chose to continue to pay the tax, which finances approximately a third of the city bus system. Meanwhile, Johnson County—which includes most of Kansas City—rejected a measure to establish a use tax on online purchases to finance infrastructure, despite strong support from within the city.
  • Anti-tax interests in NEBRASKA are paying an out-of-state company to gather signatures for their initiative to replace state and local taxes with a single consumption tax. The plan would amount to a tremendous tax cut for the rich and/or major funding shortfalls for key priorities like education and infrastructure, if implemented.
  • The TEXAS House of Representatives voted to remove school vouchers from a large education bill during a special session. Democrats and rural Republicans voted together on the amendment despite vouchers being a policy priority for Gov. Greg Abbott.
  • Meanwhile in TEXAS, A recent amendment to the state’s constitution allows localities to exempt childcare centers from local property taxes. The Austin City Council was the first to act and has already approved an exemption for childcare facilities that are enrolled in the state’s Rising Star Program and have at least 20 percent of their enrollment from children subsidized by state funding.
  • WISCONSIN’s Gov. Tony Evers vetoed the latest attempt at income tax cuts by the Republican-controlled legislature. The tax cut would have cost the state $2 billion by cutting the middle tax bracket from 5.3 to 4.4 percent on individual income between $27,630 and $304,170 and joint income between $18,420 and $405,550.


What We’re Reading

  • The Public Policy Institute of California (PPIC) carefully describes the reach of the California EITC. In the piece, the author particularly focuses on take-up rates in California’s diverse geographies and among Latinos. The credit, worth about $1 billion to Californians each year, is a critical support for families with modest means and is a key component of the state’s progressive tax structure.
  • The small town of Fenton, Louisiana brought in $1.3 million through fines and forfeitures in fiscal year 2022 – mostly through traffic tickets – despite its population of 226 residents. ProPublica and WVUE in New Orleans look into how these fines are administered through a “mayor’s court” system that only exists in Louisiana and Ohio.
  • The New York Times reports on the renewed emphasis on “Georgist” economics and the associated idea of “Land Value Taxes,” which apply higher rates to land and lower rates to structures built on the land. The idea is drawing attention now in Detroit in particular, where some would like to see more construction and less incentive to hold vacant land for speculative purposes.

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