Just Taxes Blog by ITEP

State Rundown 2/20: Property Taxes and School Finance Take Center Stage

State Rundown 2/20: Property Taxes and School Finance Take Center Stage

February 20, 2020

ITEP
.ITEP Staff

Property taxes and education funding are a major focus in state fiscal debates this week. California voters will soon vote on borrowing billions of dollars to fill just part of the funding hole created in large part by 1978’s anti-property-tax Proposition 13. Nebraska lawmakers are debating major school finance changes that some fear will create similar long-term fiscal issues. And Idaho and South Dakota leaders are looking to avoid that fate by reducing property taxes in ways that will target the families who most need the help. Meanwhile, Arkansas, Nevada, and New Hampshire are taking close looks at their transportation needs and funding sources. And a new business tax subsidy in Ohio doesn’t look great in light of research covered in our “What We’re Reading” section shedding light on the lack of economic benefit from such subsidies.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals and Developments

  • IOWA Gov. Kim Reynolds is touring the state to campaign for her plan to break the trust of state voters, who approved a 2010 constitutional amendment expressing their willingness to pay higher sales taxes for the sake of water quality and other environmental improvements. Gov. Reynolds’s proposal funds only a fraction of what voters expected, while adding an income tax cut likely to shift hundreds of millions of taxes off of high-income households and onto lower- and middle-income families. — DYLAN GRUNDMAN
  • WEST VIRGINIA‘s tax overhaul package, described here last week, has passed the Senate Finance Committee and heads to the full Senate. The tax package would cut business property taxes and increase the tobacco and sales tax. The proposal must be approved by a two-thirds majority in both houses since it requires a constitutional amendment. — KAMOLIKA DAS

Governors’ Budget Proposals and State of the State Speeches

  • No more addresses are scheduled in February. Governors of LOUISIANA and OHIO are scheduled to address their states in March.

State Roundup

  • An ALABAMA bill that prohibits cities from enacting new occupational taxes through their city councils passed in a state Senate committee and now heads to the full Senate.  At the same time, the Montgomery City Council passed a 1 percent occupational tax ordinance.  This new tax could be repealed if the bill passes.
  • ARKANSAS Gov. Asa Hutchinson proposed funding a highway plan by levying a new wholesale sales tax on motor fuels, permanently extending the state’s half-percent sales tax for highway projects, and authorizing four casinos.
  • CALIFORNIA voters will vote in early March on a proposition to borrow $15 billion (costing $26 billion including interest) to partially fund $100 billion of maintenance and construction needs in the state’s K-12 schools and universities. The measure is coincidentally titled Proposition 13, which was also the name of the infamous 1978 anti-tax measure that has helped cause the very funding shortfalls this measure aims to address.
  • CONNECTICUT’s Progressive Caucus released an agenda that would renew their push for a more progressive tax system and legalized cannabis. The Caucus endorsed a plan by Connecticut Voices for Children that includes an income tax rate increase on households earning more than $1 million and an income tax surcharge on investment income to fund key investments.
  • An IDAHO bill that would put a one-year freeze on the property tax portion of a non-school taxing district’s budget is scheduled for a vote before the House on February 20.
  • Also, three IDAHO lawmakers announced a plan to introduce legislation that would increase the “circuit breaker” property tax break for seniors from $1,320 to $2,000 and adjust the income thresholds for qualifying taxpayers.
  • The LOUISIANA Supreme Court ruled that companies that maintain online marketplaces do not have to collect state sales taxes on third-party purchases.
  • The MISSISSIPPI Senate passed a bill that would allow the state auditor to access tax returns filed by people enrolled in Medicaid and other public assistance programs to verify their incomes.
  • NEW HAMPSHIRE lawmakers are considering levying higher vehicle registration fees to offset the losses from a decrease in gas tax revenue.
  • A new proposal in MAINE could bring streaming services under the umbrella of the state’s sales tax base. That same bill would alter individual and corporate income taxes by making adjustments for inflation, aligning the state’s income tax with the federal limitation on net operating loss, and creating a single exemption to ensure that nonprofits to do not pay sales and service provider taxes.
  • NEBRASKA lawmakers began debate yesterday on a promising but problematic property tax and school funding proposal that advanced out of committee last week but raises concerns for the state’s schools and long-term fiscal outlook.
  • NEVADA legislators are considering a comprehensive study comparing the state’s long-term transportation infrastructure needs with the prognosis for gas tax and other revenue options as use of electric and fuel-efficient vehicles continues to rise.
  • A $528 million capital spending bill funded primarily through severance tax bonds was approved by the NEW MEXICO House of Representatives, and after a 45-23 House vote, a bill that would increase their state’s version of the earned income tax credit to 20 percent of the federal credit and end the exclusion to taxpayers filing without a social security number, heads to the Senate for consideration.
  • Lastly, NEW MEXICO‘s House Taxation and Revenue Committee tabled a bipartisan bill that would have offered military retirees a personal income tax deduction on their pension benefits.
  • General Motors will benefit from a 75 percent tax abatement (extending over 15 years) from Lordstown, OHIO. The tax break will benefit the company as it builds a new electric battery cell factory next to the site of a much larger assembly plant that they shut down last year.
  • PENNSYLVANIA lawmakers have begun to weigh a range of bills and amendments. They include: a restructuring of the state’s corporate income taxes, legalization of recreational cannabis, and an expansion of the low-income tax forgiveness program.
  • SOUTH DAKOTA lawmakers are considering a bill that would add long-term property owners and residents to the list of taxpayers eligible for a property tax assessment freeze.
  • The TEXAS Comptroller’s Office proposed a change that would shift sales taxes collected from online purchases from the city in which the products were made or shipped to where the products were delivered.
  • WISCONSIN Republicans on the Senate Joint Finance Committee are moving quickly after a 10-4 vote along party lines to approve a $250 million income tax cut plan. The cuts would come in the form of an increase in the state standard deduction and an exemption that would allow manufacturers to exclude machinery and tools from property tax.
  • The WYOMING House Speaker announced that a proposal that would have levied an income tax on publicly traded companies with over 100 shareholders will not be heard during the 2020 legislative session.
  • The WYOMING House of Representatives passed a bill that would impose a 5 percent lodging tax and voted to reject a proposal to exempt state residents from the tax.

What We’re Reading

  • The Nation highlighted the lack of adequate investment in the rural South’s “Black Belt”, a region of roughly 300 counties that have high African-American populations. This lack of investment stands in contrast to parts of Appalachia that have benefited from federal funding.
  • The Hill reports on state and local governments’ heightened skepticism about tax incentives in the wake of the Amazon HQ2 fiasco, and Route Fifty covers how some states are using annual caps on total business tax subsidy program spending to protect their budgets and investments.
  • Efforts to rein in business tax subsidies are further reinforced by new research out of Princeton and Columbia showing—yet again—that state business tax subsidies fail to deliver the economic growth they promise, and actually reduce home values, suggesting that the significant foregone revenue and insignificant economic impacts add up to a net-negative for states and localities.
  • Taxation of menstrual products has been getting increased attention in recent years, and one TENNESSEE lawmaker made national news this we by expressing his concern that including them in a state sales tax holiday would lead to out-of-control tampon purchases. The Hill and The Washington Post picked up the story and Vox added some national perspective.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.