February 2, 2022
February 2, 2022
Idaho will become the first state to pass a significant tax cut package after the Senate approved and sent its bill to the governor, who gleefully took to Twitter to celebrate the vote. The bill includes highly regressive personal and corporate income tax cuts and a tax rebate equal to 12 percent of 2020 income taxes or $75 per person. One-time payments have become a common theme around the country, as the Gem State is one of roughly eleven states with plans to provide tax relief in a similar fashion. For instance, the Mississippi Senate seems to be following suit by including one-time rebates in their destructive income tax proposal, which is, albeit, less destructive than the House plan. New Mexico, on the other hand, is one state showing it read Aidan Davis’s blog on alternative spending options for managing inflation and budget surpluses, and has earmarked money in their budget for targeted payments to low-income residents. States need to tailor their tax solutions to the times: expanded earned income tax credits and child tax credits or targeted, one-time rebates will go much further in helping families and children navigate these uncertain times rather than permanent and regressive income tax cuts, which will only make it harder for states to deal with shocks in the future.
Major State Tax Proposals and Developments
- After the MISSISSIPPI House of Representatives passed an egregious income tax elimination bill, the Senate unveiled their own income tax proposal. While the Senate bill does not fully eliminate income taxes and is less harmful to low-income families than the House plan, it would still create massive revenue loss for a state that needs to address long-standing public needs. The bill would eliminate taxes on the first $10,000 of taxable income, reduce the state’s grocery tax, eliminate state fees on car tags, and provide one-time rebates that would range from $100 to $1,000. – KAMOLIKA DAS
- A bill that will go down as IDAHO‘s largest tax cut to date passed the Senate by a 27-7 vote – with no Democratic support – and will move to Gov. Brad Little’s desk, who has already signaled that he intends to sign the bill into law. The bill reduces the income tax brackets from five to four, cuts the top income tax rate and corporate income tax rate to 6 percent, and authorizes a one-time rebate for taxpayers. – MARCO GUZMAN
- The $8.5 billion budget bill being considered in NEW MEXICO‘s legislature has cleared its first hurdle after gaining approval from a House panel. The budget has yet to gain the full support of Gov. Lujan Grisham and includes an earmark of $10 million for $750 payments to certain eligible, low-income households.
- Momentum to eliminate the sales tax on groceries has slowed in UTAH, but it’s leading to a push to provide relief in the form of an expanded tax credit for residents on Social Security and an expanded earned income tax credit.
- CONNECTICUT Gov. Ned Lamont is proposing $336 million in tax cuts. While his proposals do not include a state Child Tax Credit that made progress last year, the cuts are more progressive and targeted than most of those we’re seeing in other states. About half ($160 million) of the total would be used to reduce local motor vehicle property taxes, while about $120 million would go to increasing the state property tax credit and restoring its reach to include residents of all ages rather than only seniors. Lamont also proposes to accelerate a pension and annuities income exemption that is already phasing in and expand an existing student loan tax credit. – DYLAN GRUNDMAN O’NEILL
Governors’ Annual Addresses and State of State Speeches
- MARYLAND Gov. Larry Hogan is expected to deliver his final State of the State address this evening. He will likely mention his recent push a gradual elimination of income taxes for retirees and making the enhanced earned income tax credit permanent.
- Competing House and Senate bills in ALABAMA would eliminate the state’s 4 percent grocery tax. While the Senate bill would raise revenue to offset the loss, the House bill would not. On a separate note, the state legislature used American Rescue Plan Act (ARPA) dollars to replenish the state’s unemployment insurance trust. As a result, most employers will see a 29 percent tax cut in their 2022 unemployment insurance taxes.
- CALIFORNIA lawmakers allowed a deadline to pass without voting on the proposed single-payer health care system and accompanying tax package, ending the effort for this year.
- COLORADO Gov. Jared Polis signed into law a bill that extends the exception for small businesses to source their sales tax income to October 1, 2022.
- A new FLORIDA bill is moving through the House that would cut property taxes specifically for law enforcement officials. In other news, Gov. Ron DeSantis’s plan to cut the state gas tax for five months was not included in the House budget plan.
- In addition to the $250 to $500 tax refunds GEORGIA Gov. Brian Kemp proposed a few weeks ago, he recently came out in favor of eliminating income taxes for retired veterans.
- ILLINOIS Gov. JB Pritzker has proposed a $1 billion tax relief package that would suspend the state’s 1 percent sales tax on groceries, freeze the fuel tax and provide a $300 property tax rebate for homeowners.
- The INDIANA State Senate is pushing for a $400 million media tax incentive program for film, television and music productions.
- More details are emerging for MASSACHUSETTS Gov. Charlie Baker’s budget proposal, which includes a plan to raise the income threshold for paying income tax from $8,000 to $12,000 for single filers, $16,400 to $24,800 for joint filers, and $14,400 to $18,650 for heads of household. The governor is also seeking to double the dependent credit, increase the threshold for paying estate tax on properties valued over $1 million to $2 million, and increase the breaks for seniors and renters.
- General Motors in MICHIGAN is the first to take advantage of a $1 billion incentive package. The company is receiving $824.1 million in state tax incentives.
- NEBRASKA lawmakers are considering several tax changes right now. Gov. Pete Ricketts called for slashing the top personal and corporate income tax rates, but bills introduced to do so were met with strong opposition because they would primarily benefit high-income households and residents of other states while costing hundreds of millions in revenue. The Revenue Committee also discussed a bill to implement two new tax brackets for wealthy residents while eliminating one of the lower brackets, a more progressive approach that would also reduce revenue significantly.
- Property tax and school funding changes are also on the table in NEBRASKA. One proposal that has advanced out of committee would constrain school revenue growth to an extent that would particularly harm students in the state’s largest school districts. And a pair of bills that would increase state funding for schools and reorganize its distribution has generated debate over whether it achieves a better balance for large and small schools and how it would be paid for over the long term. Finally, lawmakers have advanced a proposal to lock in a minimum total amount for a recently enacted income tax credit that offsets a portion of school property taxes.
- An important joint interim committee on revenue in NEVADA has begun meeting with an eye toward modernizing the state’s far-out-of-date tax code.
- A recent bill in NEW HAMPSHIRE aims to means–test the state’s new state scholarship program that allows qualifying families to use tax money to pay for private, parochial, or home school costs.
- Lawmakers on both sides of the aisle in OKLAHOMA are making proposals to eliminate some or all of the sales tax on groceries in anticipation of the start of next week’s legislative session.
- OREGON lawmakers returned to session this week with 35 days to debate priorities including affordable housing and workforce development.
- Two PENNSYLVANIA Senate proposals would jointly provide $1 billion to small businesses that employ 500 or fewer workers.
- WASHINGTON legislators and Gov. Jay Inslee have approved a plan to delay and reconsider aspects of the state’s long-term care program and accompanying payroll tax.
- WISCONSIN Gov. Tony Evers is proposing to use the $1.7 billion of the state’s surplus for $150 checks to residents, K-12 funding and childcare.
What We’re Reading
- An op-ed in the Des Moines Register by Peter Fisher of Common Good Iowa explains why Gov. Kim Reynolds’s 4 percent flat individual income tax proposal is neither flat nor fair.
- Governing looks at efforts to rethink property taxation, a long-time staple of local finance that also has many well-known issues and inequities.
- Governing is also tracking governors’ State of the State Addresses and which major topics they cover. One trend they’ve identified is a strong focus on technology and investing in related infrastructure such as broadband.
- Route Fifty reports on Urban Land Institute research into how policies can be better crafted to improve housing stability for both owners and renters of homes.
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