February 27, 2019
February 27, 2019
As another polar vortex heads for large swaths of the country, state tax debates this week were highly polarized in another way. Lawmakers and advocates in MICHIGAN, OHIO, OREGON, UTAH, and elsewhere fought to enact or improve state Earned Income Tax Credits to give a boost to low- and middle-income working families. But the opposite extreme was heavily represented as well, as others pushed for regressive tax cuts for wealthy individuals and corporations, including in KANSAS, NEBRASKA, NORTH DAKOTA, OHIO, UTAH, and WEST VIRGINIA. Even our “What We’re Reading” section has informative reading on how education funding policy continues to contribute to the polarization of opportunities for white families compared to families of color.
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- A NORTH CAROLINA judge ruled that two amendments to the state constitution regarding voter ID and the income tax, approved by voters in November, were unconstitutional. The latter lowered the state’s cap on its state income tax rate from 10 to 7 percent. The judge argued on the grounds that the North Carolina General Assembly is so gerrymandered that its members are not representative of the people of the state. —AIDAN DAVIS
- Last week OHIO Mike DeWine proposed a long-overdue 18-cent increase to the state’s gas tax, a move that would generate $1.2 billion for road and bridge construction. Lawmakers in the state have been quick to provide suggestions on how to offset the tax increase: Democrats favoring an expansion to the state’s EITC—to target the benefit to low- and middle-income families—and Republicans favoring broad cuts to the state’s personal income tax. — AIDAN DAVIS
- Details for a tax overhaul plan in UTAH are coming out, which includes plans to widen the sales tax base to cover all services except real estate, health care, and tuition and to over time lower the general sales tax rate to 3.1% from 4.7%. Other anticipated tax changes include plans to lower the state’s personal income tax rate, enact a state EITC, expand a retirement tax credit, and hold more families harmless from post-TCJA tax changes. — LISA CHRISTENSEN GEE
Governors’ Budget Proposals and State of the State Speeches
- LOUISIANA’s Gov. John Bel Edwards released a “wish list” budget last week, indicating his intent to boost funding for education and health care and provide teachers a pay raise. The budget process is currently being held up by a political impasse with the state’s top Republican leader refusing to sign off on a higher revenue forecast.
- The ALABAMA Republican Party has forcefully opposed a gas tax increase championed by Gov. Kay Ivey (R).
- Netflix is suing ARIZONA over the state’s decision to place its transaction privilege tax on the company. Lawmakers there are looking for ways to tax online industries.
- Supporters of a DELAWARE proposal to create a statewide property tax to fund infrastructure investments at Delaware Technical College have decided to pull their bill and pursue other funding.
- GEORGIA lawmakers introduced a bill, HB 8, that would exempt menstrual products from the state sales tax. A separate proposal in the state would require all tax expenditures to include an economic analysis before a vote is held.
- A bill to raise the minimum wage to $15 by 2023 advances in HAWAII. The bill also provides a tax credit for employers of 20 percent of the total hourly wages paid to employees, up to $50,000, that can be carried over to future tax years.
- The INDIANA House has passed its budget proposal, which is drawing criticism for underfunding education needs.
- INDIANA is also among the states considering legislation to close the “dark store” property tax loophole exploited by big box retailers.
- A bill that was fast-tracked through the KANSAS Senate is now making its way through the House. The base of the bill addresses conformity issues post-TCJA, promising to hold harmless individuals who now will claim the standard deduction on their federal taxes, but it provides the biggest anticipated benefits to corporations. The amended bill also brings down the sales tax rate on food and allows for the taxation of online sales.
- A lawmaker in MICHIGAN is proposing an expansion of the state’s EITC from 6% to 30% of the federal credit.
- A bill to require a supermajority to increase taxes in MONTANA was tabled in committee while another that would exempt old, low-value mobile homes from property tax was introduced.
- NEBRASKA legislators continue to weigh multiple tax-related proposals, including raising tobacco taxes to cut property taxes, slowly draining revenue from schools and other priorities by ratcheting down property and income taxes with an arbitrary tax-cut “trigger,” and instituting a property tax circuit breaker. The revenue committee will likely advance a multi-part package of such ideas for consideration by the full legislature.
- NEW HAMPSHIRE’s House Committee backed a bill to legalize recreational cannabis. The bill now moves to the state’s full House of Representatives for consideration.
- Lawmakers in NEW MEXICO have been busy passing a budget, refining proposals to overhaul the tax code to reduce the state’s reliance on oil and gas, and advancing various proposals to legalize and tax recreational cannabis.
- An attempt to use volatile oil tax revenues to replace income taxes in NORTH DAKOTA is on the Bismark Tribune’s list of bills to watch after the crossover recess, but is considered unlikely to pass the Senate.
- Details are beginning to emerge in how OREGON lawmakers will attempt to meet Gov. Kate Brown’s call for $2 billion in new business taxes to fund K-12 school investments. They appear to be leaning toward a gross receipts tax, which voters roundly declined in 2016.
- A separate effort in OREGON would improve the state’s upside-down tax code by boosting the EITC from 8 percent of the federal credit to 20 percent.
- SOUTH DAKOTA legislators are debating two alternative sales tax cut bills to carry out a three-year-old law that stated the state would cut such taxes once online sales became taxable, as they now have.
- In TEXAS, Senate committee hearings on the proposal to cap property tax increases ended with the bill passing. House hearings on the companion bill take place this week. Meanwhile state Democrats have introduced an alternative bill aiming to provide property tax relief and increase education funding.
- A fast-moving tax cut bill is making its way through the WEST VIRGINIA House of Delegates. The bill, which would cut personal income tax rates across the board would be a boon for the state’s highest income earners, costing the state hundreds of millions in tax revenue.
- WISCONSIN Tony Evers vetoed a tax bill that would increase the state standard deduction. Evers is expected to release his own plan for a middle-class tax cut this week. The legislature lacks the votes to override the veto.
- The last major revenue raising measure on the table in WYOMING, a 5 percent lodging tax increase expected to raise $21 million in new tax revenue, failed to make its way out of the Senate.
What We’re Reading
- The Washington Post summarizes a new report from Edbuild that sheds light on how historical and current racial discrimination continue to dramatically undermine opportunities for people of color. The key finding: nonwhite school districts end up with $23 billion less in funding than predominantly white schools, though they serve the same number of students.
- Inequality.org has put out a helpful new piece summarizing ways states can use tax policy to reduce inequality and poverty.
- Governing, CBS News, and Yahoo! News all reported recently on causes and consequences of the widespread uprisings of teachers fighting for better policy in education and beyond.
- Governing also covers ways states and cities are trying to find funding for mental health services.
- Concerned about how governments will fund themselves in an increasing age of automation? The key may just be to tax robots, one Economist writer explains.
- A CALIFORNIA economist says cities should stop playing corporation’s games and end offering companies tax incentives.
- The DISTRICT OF COLUMBIA Fiscal Policy Institute called attention this week to a proposal that would cut property taxes on DC’s most valuable homes, thereby worsening economic inequality and amplifying existing racial inequities.
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