Just Taxes Blog by ITEP

State Rundown 12/7: States Try to Plan While Awaiting Federal Tax Decisions

State Rundown 12/7: States Try to Plan While Awaiting Federal Tax Decisions

December 7, 2017

Meg Wiehe
Meg Wiehe
Deputy Director

Though most eyes were on Congress rather than states this week, several states have been taking stock of their fiscal situations. Wyoming lawmakers considered ways to resolve budget shortfalls, Kansas and New Mexico legislators got some minor good news about their states’ revenues, their counterparts in Minnesota and Vermont grappled with less encouraging revenue news, and those in West Virginia were just happy to hear their revenues had at least met expectations for once.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

  • In advance of their 2018 budget session, Wyoming lawmakers consider both taxes and service cuts. The Legislature’s Joint Revenue Interim Committee, tasked with identifying revenue to offset budget deficits, stopped or punted many tax plans until January. Two bills, increases to tobacco and alcohol taxes, passed muster. A select committee is also focused on solutions to shortfalls in education funding.
  • Revenues are up in Kansas, but not enough to absolve lawmakers of needing to raise an additional $650 million a year to meet the state Supreme Court’s order to adequately fund public education.
  • New Mexico is seeing revenue rebounds after a two-year period of significant cuts to public investments like universities and colleges, courts, and K-12 classrooms. The state is incrementally building up its reserve fund, which remains below the 10 percent mark needed to withstand a mild recession.
  • In a positive turn of events for the Mountain State, West Virginia’s state revenue estimates are on target half-way through their fiscal year. Collections from consumer sales along with personal income and corporate net receipts, both of which were proposed to be eliminated this past session, helped offset previous shortfalls.
  • Minnesota is now projecting a budget deficit over the remaining biennium, due to reduced economic forecasts and revised spending projections. This forecast is “fraught with uncertainty,” Gov. Dayton stated, given pending federal tax action and the status of reimbursements for the Children’s Health Insurance Program. The state has a healthy reserve to draw from.
  • Vermont’s Phil Scott announced that the state will need to raise property taxes next year to support education. To maintain spending levels, it would take a nine cent, or seven percent, increase. In an effort to avoid the tax increase, the governor is exploring options to reduce the number of teachers in the state through mandated student-to-staff ratios.
  • In a familiar story, Iowa localities have been warned they may not receive property tax ‘backfill’ dollars that were promised to them when the state cut their property taxes in 2013.
  • Oregon voters will have the opportunity to vote on Measure 101—whether to repeal a tax on health care providers—this January during a special election. The tax was passed to help fund the state’s Medicaid program. The January election allows lawmakers to respond to the outcome during the legislative session that starts in February.
  • Taxes are going to be the essential issue in Illinois‘ upcoming gubernatorial election, according to Gov. Bruce Rauner, who is opposed to adopting a graduated income tax rate structure where those with high higher incomes pay higher rates and those with lower incomes pay lower rates.
  • The South Carolina Department of Revenue confirmed that residents hoping to benefit from a bizarre tax credit created this year for gas tax and vehicle maintenance expenses will indeed have to save their gas and maintenance receipts to claim the credit.
  • Efforts to allow North Dakota American Indian tribes to levy state sales taxes are progressing, with a bill drafted to be introduced in the upcoming legislative session.

What We’re Reading…

  • The Washington Post reports on a plan being considered by the White House to increase infrastructure spending by offering incentives for states and localities to fund it themselves, which would almost certainly mean a regressive tax shift onto low- and middle-income families even as Congress works to cut federal taxes on the highest-income people and corporations.
  • Eugene Volokh walks Washington Post readers through a work-around that may be available to states in the case that federal tax reform eliminates the deduction for state and local taxes—switching to payroll taxes.
  • The Center on Budget and Policy Priorities provides a report and blog on the largely sorry state of school funding, noting that as of 2015, more than half of states still hadn’t restored school funding to pre-recession levels. What’s worse, several of these states have cut their income taxes in the meantime, undermining their own ability to restore money to their ailing schools.
  • Citylab explains why congressional plans to eliminate the deduction for state and local taxes (“SALT” deduction) is concerning to cities: the move would abruptly cancel a long-established cost-sharing mechanism, making it harder for city (and state) governments to raise the funds they need to provide local services like schools, police, fire protection, and roads maintenance.
  • Route Fifty reports that the currently unfunded Children’s Health Insurance Program (CHIP) is nearly halfway through its emergency funds.

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