State Rundown 11/1: Connecticut Balances Budget, Leaves Tax Code Out of Whack
November 1, 2017
.ITEP Staff
November 1, 2017
This week a “historic” but highly problematic budget agreement was finally reached in Connecticut, Michigan lawmakers banned localities from taxing any food or beverages, and Nebraska and North Dakota both got unpleasant news about future revenues. Also see our “what we’re reading” section for news on 11 states that have run up long-term fiscal deficits since 2002 and the impacts of flooding on local tax bases.
— Meg Wiehe, ITEP Deputy Director, @megwiehe
- Connecticut lawmakers have finally passed a budget after months of delays. But many are unhappy with the regressive approach, which balances the budget primarily through budget cuts and a few tax increases that affect low- and middle-income families without asking much of Connecticut’s wealthiest (and in fact cuts the estate tax). To the extent that the budget raises revenue, it does so through a cigarette tax increase, a $10 charge on car registrations, fees on ride-sharing companies, and cuts to a property tax credit and the state earned income tax credit. Proposals to raise income taxes on high-income residents, institute a new tax on second homes, and legalize and tax marijuana were all rejected. Gov. Dannel Malloy signed the budget into law this week, vetoing only a controversial hospital provider tax.
- North Dakota revenues are expected to drop significantly in the coming year. Low crop and energy prices are dragging down incomes, while the declining oil industry is causing many workers to leave the state.
- Uncertainty about federal tax cuts was one factor in Nebraska‘s revenue forecast being reduced last week, opening up a $195 million gap in the current two-year budget cycle.
- Many in Florida are expressing concern about Gov. Rick Scott’s proposal to institute a supermajority requirement that would require up to 75 percent support for tax increases rather than a traditional majority vote.
- California gas tax increases go into effect today—marking the first time in 23 years lawmakers raised this important revenue source for funding transportation infrastructure projects in the state.
- Michigan Rick Snyder signed the bill banning localities from taxing food or beverages, including soda.
- A legal dispute between the city of Loveland and Netflix raises the question as to whether Colorado cities have the authority to tax online content streaming subscriptions.
What We’re Reading…
- Despite balanced budget requirements in nearly all states, states can develop long-term fiscal imbalances by doing things like deferring payments and drawing down reserves. And in fact, Route Fifty reports that from 2002 to 2016, 11 states brought in insufficient revenue to cover their funding needs. Illinois and New Jersey racked up the biggest fiscal imbalances.
- The Center on Budget and Policy Priorities explains how eliminating the federal deduction for state and local income and sales taxes, even if the property tax deduction is kept, could weaken support for progressive state taxes and ultimately shift costs to low- and middle-income families.
- Governing writes up how flooding can devastate local tax bases.
- A report by Fitch Ratings warns that high taxes on legal marijuana sales in California—slated to begin January 1, 2018—may drive consumers to the black market.
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