December 15, 2022
December 15, 2022
State leaders have begun to release budget projections for 2023 and a familiar theme has emerged once again: big revenue surpluses, which have many state lawmakers pushing for another round of tax cuts despite the monumental challenges that we as a country face that call for sustainable revenues. For example, in Mississippi and North Dakota, lawmakers are considering using temporary surpluses to enact deep and permanent cuts in the form of phasing out their state’s income tax. Other states like Utah, meanwhile, have set aside a large chunk of revenue to use potentially for more modest (albeit, still significant) regressive income tax cuts and rebates. In New Mexico, the governor plans to send another one-time income tax rebate out to residents, and some Connecticut lawmakers want to take a more targeted approach and enact a permanent Child Tax Credit. Other state leaders like Colorado Gov. Jared Polis are proceeding into the new year with caution, focusing their priorities on strengthening reserve funds, while lawmakers in Missouri may be forced to temper their tax cutting priorities because of less-than-rosy revenue forecasts due in part to recently enacted tax cuts.
- CONNECTICUT Gov. Ned Lamont is considering tax cuts for families with incomes up to $150,000 as part of his goal to “focus everything we do on economic growth.” Lamont is in luck, because the top priority for many state legislators is enacting a permanent version of the Child Tax Rebate that was highly successful this year at delivering targeted income boosts to middle- and low-income families through the tax code, a policy known to promote thriving communities and strong economies. Lamont is also looking at ending a corporate tax surcharge on large businesses.
- During the FLORIDA legislature’s special session focused on reining in the rising costs of home insurance in the state, lawmakers are also expected to pass separate bills that would provide property tax relief for individuals whose homes or businesses were made uninhabitable by Hurricane Ian and provide a 50 percent toll credit to commuters who use 35 highway tolls in a month for 2023, which was proposed as a way to use the state’s budget surplus to address inflation.
- MISSOURI lawmakers have introduced numerous tax related bills in advance of the state’s 2023 session. However, state revenue growth is already forecasted to slow dramatically due to preexisting tax cuts.
- Republican leaders in MISSISSIPPI are having disagreements over how to use the state’s surplus during next year’s legislative session. Some leaders want a tax rebate, like Lt. Gov. Delbert Hosemann and Senate leaders, while others want a phaseout of the personal income tax, like Gov. Tate Reeves and House Speaker Philip Gunn.
- NEW MEXICO Gov. Michelle Lujan Grisham is expected to call for an additional round of tax rebates in the upcoming legislative session following projections of up to $3.6 billion in surplus revenues. The cost of the rebate package could exceed $1 billion, but the specific size and scope has yet to be determined.
- Some NEW YORK lawmakers unveiled a proposal last week to consolidate the state’s existing Child Tax Credit and Earned Income Tax Credit into a single Working Families Tax Credit. The goals of the proposal include streamlining the two credits into one credit, filling a gap in the existing child credit that restricts it to children over four years old, increase or maintain the overall benefit to current credit recipients, and following other best practices for using such credits to reduce poverty and foster thriving communities and state economies.
- NORTH DAKOTA Gov. Doug Burgum’s proposed 2023-2025 budget included cuts to state income taxes, including eliminating the tax for three out of five taxpayers, after the state’s general fund revenue exceeded legislative forecasts due to higher oil prices. Burgum also called on the legislature for an eventual complete elimination of the income tax.
- The House Speaker in OKLAHOMA said tax cuts will be the focus of next year’s legislative session during a speech at the State Chamber’s annual public affairs forum. He didn’t include any details during his speech but did highlight the personal income tax. On the Senate side, the Republican caucus chair is currently leading a tax reform working group to study specific policy ideas.
- UTAH‘s Executive Appropriations Committee will set aside $400 million for tax cuts in the upcoming 2023 legislative session. The funds are separate from Gov. Spencer Cox’s budget proposal, which includes one-time property tax cuts and rebates totaling roughly $1 billion.
- WISCONSIN’s Assembly Speaker Robin Vos says he wants to cut taxes significantly more than the $3.4 billion cut last year with a focus on reducing the higher brackets of the state’s progressive income tax. With a projected surplus of $6.6 billion, Speaker Vos will have to negotiate with Governor Tony Evers on how to spend the money as Republican state members cannot override Evers’ veto.
What We’re Reading
- Route Fifty explores ways a potential federal funding deal would impact state and local finances and other priorities.
- Pew’s State Fiscal Health initiative explains the importance of data-driven Rainy Day Funds and other best practices for weathering highs and lows in the economy.
- A study on the effects of soda taxes by James Flynn—a researcher at Colorado University—was recently published in the journal Health Economics. His findings suggest that, in addition to not being as regressive as once feared, they also decreased consumption, which provided concentrated improvements among non-white and female respondents.
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