State Rundown 2/28: States Keep Busy While Washington Stalls

State legislative sessions are in full swing with New Jersey and Oklahoma both particularly active this week. New Jersey’s Gov. Phil Murphy proposed new (or renewed) progressive revenue and Oklahoma lawmakers have opted to eliminate the state’s sales tax on groceries. Lawmakers in many other states are debating cuts to much needed revenue. Ongoing debates continue around property tax cuts in Georgia, Nebraska, and Wyoming and personal income tax cuts in Iowa, Utah, and West Virginia. And it’s not just state lawmakers that will have to make decisions soon, there are also public ballot initiatives cooking across the country, while one stalls in Chicago.

Major State Tax Proposals and Developments

• NEW JERSEY Gov. Philip Murphy announced a proposal to implement a corporate business tax of 11.5 percent on companies with more than $10 million in profits. The plan comes just months after a similar business surcharge expired at the end of 2023, and the revenue will help fund the state’s transit system. – MARCO GUZMAN
• OKLAHOMA Governor Kevin Sitt has signed a measure eliminating the state’s sales tax on groceries. The measure, a cut for all Oklahomans but particularly beneficial to low-and moderate-income families, will result in an estimated $411 million in state revenue loss. – ELI BYERLY-DUKE

State Roundup

• The GEORGIA House passed a bill that would allow local school districts to drop their minimum property tax rate from 14 to 10 mills and still qualify for state equalization funds to pay for K-12 schools.
• The mansion tax proposal in Chicago, ILLINOIS that was on the ballot this March was ruled unconstitutional by a Cook County judge. Organizers plan to appeal to the First District Appellate court in hopes of getting it back on the ballot this fall.
• Two tax cut bills are making their way through the legislature in IOWA. The state’s personal income tax rates are currently consolidating and phasing down to 3.9 percent. One proposal would bring this rate down further to 3.5 percent by 2025, and the second bill would bring the rate to 3.65 percent by 2027 and continue to phase out the income tax with one-time money from the Taxpayer Relief Fund.
• To address a projected structural budget deficit of $3 billion by fiscal year 2028, a top lawmaker in the MARYLAND House of Delegates has sponsored two bills that would increase taxes on cigarettes and alcohol and raise almost $90 million.
• Members of NEBRASKA’s Revenue Committee began meeting again to come up with a new plan to cut property taxes by $1 billion but, faced with strong opposition to previous and similar proposals, are reluctant to propose specific tax increases to fund those cuts.
• The NEW HAMPSHIRE House passed a bill to legalize marijuana use and impose a 10 percent tax on monthly sales. The proposal now heads to the Senate.
• The TENNESSEE Central Labor Council has been collecting signatures in a push to eliminate the state’s sales tax on groceries.
• UTAH lawmakers are primed to cut the state’s flat income tax once more—this time from 4.65 percent to 4.55 percent. Analysis from ITEP, however, show that the wealthiest residents will benefit the most from the tax reduction and more than 60 percent of the cut will go to those in the top 20 percent of income earners.
• WASHINGTON State lawmakers held a joint hearing on Initiative 2111, which would ban state and local income taxes. The legislators can choose to advance the initiative to the November ballot, add an alternative to be considered alongside it on the November ballot, or enact it outright. ITEP’s Dylan Grundman testified in the hearing.
• The WEST VIRGINIA House passed a bill to exempt all Social Security income from the state’s personal income tax at a cost of about $38 million in annual revenue loss. Under current law, seniors with incomes below $100,000 (married) and $50,000 (single) already benefit from this tax break.
• WYOMING lawmakers in the House voted down a bill that would have eliminated property taxes for roughly 97 percent of residents and replaced the lost revenue by increasing the sales tax by 2 percentage points from 4 to 6 percent.

What We’re Reading

• Detroit Future City lays out the trouble in passing Black wealth down to the next generation in Detroit. The city had thousands of properties—usually the most valuable asset of families with modest means of any race—in mostly Black neighborhoods that are “heir’s properties” without clear title because of the death of the owner. In part due to tax concerns, families are at risk of losing those properties.
• The Massachusetts Budget & Policy Center published a report highlighting the impact that expanding the state’s Earned Income Tax Credit to immigrants and filers using Individual Taxpayer Identification Number (ITIN) could have on promoting equity in the state’s tax code.
• The IRS‘s new pilot project with free filing software for federal tax returns is now available in 12 states. The Direct File service, which is available for 2023 tax-year returns, is now being offered to qualified filers in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming.

 

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