February 14, 2019
February 14, 2019
Happy Valentine’s Day to all lovers of quality research, sound fiscal policy, and progressive tax reforms! This week, some leaders in ARKANSAS displayed their infatuation with the rich by advancing regressive tax cuts, but others in the state are trying to show some love to low- and middle-income families instead. WISCONSIN lawmakers are devoted to tax reductions for the middle class but have not yet decided how to express those feelings. NEBRASKA legislators are playing the field, flirting with several very different property tax and school funding proposals. And VIRGINIA’s legislators and governor just decided to settle for a flawed tax conformity deal rather than hold out for something better. Meanwhile, NEW YORK and Amazon have cancelled their engagement to one another for now.
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- In ARKANSAS, the Senate put their stamp of approval on Gov. Asa Hutchinson’s tax cut for the top after a failed first attempt. The bill is now up for consideration in the House, where leaders are unsure if they have the required supermajority votes to ensure passage, despite the governor’s proposed transportation funding bill offered as a compromise. Meanwhile, House democrats are advocating for an alternative plan for the state by significantly scaling back the proposed tax cut for the top 5% and investing in low- and moderate-income families by instituting a state EITC at 10% of the federal credit. — LISA CHRISTENSEN GEE
- Dueling plans for middle-class tax cuts are at play in WISCONSIN. Republican lawmakers have already passed a plan in the Assembly that would raise the standard deduction for families with under $155,000. Gov. Tony Evers is proposing a plan that would that would offer a 10% credit to families making under $125,000 as well as expand the state’s EITC. Both plans rely heavily on budget reserves to fund the tax cut, though Gov. Ever’s plan relies partially on capping a credit that benefits top-earning taxpayers. — LISA CHRISTENSEN GEE
- NEBRASKA legislators are considering tax proposals and school funding reforms big and small this year, including a constitutional amendment to create a refundable income tax credit for 35 percent of local property taxes paid, a bill to force property tax rates down when valuations increase, another that would devote 25 percent of state income tax revenues to per-pupil foundation aid, and an innovative proposal to give local school districts a progressive revenue option through a local income surtax, among others. — DYLAN GRUNDMAN
- VIRGINIA lawmakers have sent a tax package to Gov. Ralph Northam that he is expected to sign. The deal increases the state standard deduction and retains a progressive limit on high-income households’ ability to reduce their taxes through massive itemized deductions, but includes rebate checks that will leave out many low-income families and are politically timed to reach mailboxes shortly before state elections. Racial equity issues became a sticking point that briefly held up the bill and ultimately led to renewed commitments to prioritizing those issues. Still, the tax breaks fail to make the state EITC refundable, invest in state priorities, or devote revenue to the state’s Rainy Day Fund as had been proposed, and leave behind far too many people of color in the process. — DYLAN GRUNDMAN
- The KANSAS Senate passed legislation intended to eliminate a “windfall” from TCJA, allowing taxpayers to choose the larger of the standard or itemized deductions on their state taxes to prevent a tax increase and providing substantial relief to shareholders in multinational corporations. Gov. Laura Kelly opposes the bill and it’s not clear the Senate has all the support it needs to be veto-proof. The House will take up the bill in the coming weeks in addition to a proposal to reduce the sales tax rate on food from 6.5 to 5.5 percent. — LISA CHRISTENSEN GEE
- Amazon announced today it will back out of a deal reached to build part of its HQ2 facility in Long Island City in Queens, NEW YORK. — AIDAN DAVIS
Governors’ Budget Proposals and State of the State Speeches
- FLORIDA Ron DeSantis’s budget proposal has received mixed reviews and is expected to be altered significantly by the legislature, but contains a few tax-related proposals, including a 3 percent increase in state school aid per pupil coupled with a reduction in the amount of local property taxes required, but also misguided sales tax holidays for back-to-school shopping season and disaster preparedness. Also in Florida, a separate proposal would restrict local jurisdictions’ ability to set tax policy by limiting tax proposals to general election ballots.
- MAINE’s proposed two-year budget promises funding for education and Medicaid expansion, making progress on critical investments. However, by including no tax increases it fails to deliver in addressing the state’s revenue challenges.
- MONTANA Steve Bullock’s final state of the state included a call to increase taxes on hotel stays, rental cars, investment licenses, tobacco and spirits.
- NEW HAMPSHIRE Chris Sununu advocated for increased education spending and no tax increases in his address this week.
- Greg Abbott’s state of the state in TEXAS focused on property tax caps, education funding and teacher pay.
- A recent study from the University of Alabama found that the state needs to invest at $600 million annually to keep up with its infrastructure demands. Lawmakers in ALABAMA are considering two regressive revenue raising options. Increasing the gas tax which hasn’t been increased or indexed to inflation since 1992 or legalizing a state lottery.
- As COLORADO lawmakers are working to simplify sales taxes for small business, teachers are striking over the inadequacy of base pay. With an education funding crisis coming to a head, polls show that Coloradans increasingly support higher taxes on the wealthy. Meanwhile in CALIFORNIA, the L.A. teachers may be back in the classroom, but the school district will only be able to follow through on promises for higher pay with increased state funding and the successful passage of a tax referendum in 2020.
- CONNECTICUT’s Gov. Ned Lamont asked residents to brace for a budget that includes lean spending, overhauls service delivery, restructures pension debt and broadens the sales tax. In response, labor leaders across the state have called for tax hikes for the wealthy and other “alternatives to austerity”.
- Lawmakers in GEORGIA are exploring ways to fund broadband internet access in rural parts of the state, but Gov. Kemp has already shot down a proposal to levy a tax streaming services like Netflix and other downloaded purchases despite the parity it would bring for TV viewers who have “cut the chord.”
- J.B. Pritzker will reveal his proposed budget in ILLINOIS on February 20. Moody’s is warning of worsening credit if the state relies on one-time revenue raisers or adding to the backlog of unpaid bills to balance this year’s budget. While business leaders are advocating for budget cuts and tax increases (including raising the flat personal and corporate tax rates, taxing retirement income, and expanding the sales tax to some services), democratic lawmakers have taken early steps towards adopting a graduated income tax.
- INDIANA lawmakers are considering multiple proposals to ensure the state’s consumption taxes are in line with the modern economy and recent trends, including taxing vaping liquids, sports betting, and Airbnb rentals, and exempting diapers.
- MARYLAND legislators will have the opportunity this year to adopt combined reporting for retail and restaurant chains, and are also considering a corporate tax rate cut.
- Transportation leaders in MICHIGAN are saying the state needs to nearly double its infrastructure budget to bring its roads back into good condition, and a bipartisan group of former lawmakers and policy influencers are advocating a plan to raise the gas tax by 47 cents to help do just that.
- The MISSISSIPPI House overwhelmingly passed a bill aiming to incentivize recent college graduates to stay in or move to the state. The proposal would rebate half of state income tax paid after five years of residency, and all state income tax paid if the individual purchased a home or other real estate or started a business with at least one employee.
Other proposals in the House would address transportation and infrastructure, including a proposal to increase the state gas tax for the first time since 1987 while eliminating an income tax bracket.
- A MISSOURI proposal to shift from income taxes to higher sales taxes—and thus from high-income households to low- and middle-income families—had a hearing this week.
- A bill to eliminate most property tax revenue and create a broad-based sales tax in MONTANA had its first committee hearing. The proposal is regressive and would likely result in a net revenue loss for the state. Lawmakers are also considering whether to allow localities to levy a “luxury tax” on goods in services. And some lawmakers and environmental activists are supporting a proposed $10-per-ton tax on carbon dioxide emissions. in a state with no statewide sales and use tax.
- Though it has been labeled as a “rain tax” and slammed by anti-tax opponents, a bill to improve water quality and reduce pollution in NEW JERSEY by taxing property owners based on impervious surfaces on their land is poised to be signed into law.
- Proposed legislation in NEW YORK could add a levy for second homes over $5 million. At the same time, the state’s millionaires are asking Albany to raise their taxes by creating a new multi-millionaire’s tax.
- NORTH DAKOTA could make its upside-down tax system worse this year if a proposal to use oil tax revenues to fund personal and corporate income tax cuts
- OHIO’s Advisory Committee on Transportation Infrastructure, in exploring options to fund crumbling roads, found common ground in increasing the state’s gas tax.
- Portland, OREGON’s unique tax on corporations with extreme CEO-to-worker pay gaps is expected to bring in up to $3.5 million in its first year.
- TEXAS senators passed a bill out of committee to cap property tax growth at 2.5 percent without voter approval. The proposal, also championed by Gov. Greg Abott is drawing considerable concern from school districts and local governments.
What We’re Reading
- To whom much is given, much is required: Cristobal Young takes on free-riding tech entrepreneurs who move out of state before making their millions in this opinion piece in the San Francisco Chronicle.
- Slate has more on the operations of the “dark store loophole”–or how big box retailers avoid contributing their fair share to local property taxes.
- Governing reflects on what divided governance means for tax policy in the states in 2019.
- A lot of good content out there recently on taxing the top. Check out:
- 400 richest Americans own more than 150 million of the nation’s poorest in the Huffington Post
- ITEP’s Meg Wiehe on the role states can play in mitigating income inequality
- The Center on Budget & Policy Priorities on raising income tax rates for high-income earners as a sensible strategy for funding public investments.
- Forbes contributor on why some of the rich want to pay more taxes, echoed by Facebook co-founder Chris Hughes.
- We also encourage you to check out our own blog series released last week on Trends We’re Watching in 2019!
- Finally, we also released a new report today entitled The Illusion of Race-Neutral Tax Policy, as an early step in our organizational commitment to incorporate a racial equity lens into our work and to turn that lens inward as well.
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