State Rundown 2/8: State Responses to Federal Bill Gaining Steam

Several states this week are looking at ways to revamp their tax codes in response to the federal tax cut bill, with Georgia, Idaho, Maryland, Nebraska, and Vermont all actively considering proposals. Meanwhile, Connecticut, Louisiana, and Pennsylvania are working on resolving their budget shortfalls. And transportation funding is getting needed attention in Mississippi, Utah, and Wisconsin.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• Georgia Nathan Deal has changed his tune about how to react to the possibility of increased state revenue due to the federal tax cut. Having previously urged caution and proposed waiting until next year to be certain of the effects, Gov. Deal is now reportedly interested in cutting income taxes, a move that would likely exacerbate the unfairness and uncertainty resulting from the bill.
• A proposal to cut Idaho personal and corporate income tax rates and to enact a $130 nonrefundable child credit passed the House Committee along party lines. A report by the Idaho Center for Fiscal Policy shows that the bill doesn’t target the families most negatively impacted by federal conformity (one of its stated intents), and that it gives the most generous tax treatment to high-earners who already received net cuts from federal tax reform. The chairman of the Senate tax committee has announced that he will be introducing a more targeted alternative.
• Phil Scott announced a tax plan last week that would alter Vermont’s personal income tax in response to the recent change in federal tax law. Details of the plan remain in the works.
• Maryland legislators are taking action in response to the federal tax cut bill after a careful review of the likely effects. The Senate has unanimously passed a bill to ensure the state’s personal exemption remains in place. The state is also joining a lawsuit with other states to challenge the federal bill in court.
• Nebraska lawmakers are also looking at ways to respond to the federal tax cut, including two bills that respond directly by fully or partially preserving the state’s personal exemption credit, one of which also increases the standard deduction and decouples from the new federal inflation measure. Another bill aims to counter the regressive nature of the federal bill and improve revenues to deal with impending federal funding cuts.
• Dannel Malloy presented a detailed plan this week to reduce Connecticut’s long-term deficit. His tax proposal includes: elimination of the state’s $200 property tax credit; re-establishing highway tolls; increasing taxes on gas (by $0.07 per gallon), real estate sales, hotel occupancy, and cigarettes (to $4.60 per pack); imposing the sales tax on non-prescription drugs; and making changes to the state’s unitary tax on corporations. He also proposed a SALT workaround that would allow localities to set up their own charitable organizations.
• Friday is the new deadline for Louisiana Bel Edwards to determine if he is going to call lawmakers in for a special session starting February 19 to address the state’s budget crisis. Interested in catching up with the historic and more current happenings around the LA fiscal situation? Check out these good reads: Alleged fiscal hawks barely beck at edges of budget mess; LA can’t keep spinning in circles on taxes; and self-inflicted budget wound festers as lawmakers ignore the cure.
• Pennsylvania’s Tom Wolf presented a budget proposal this week that would increase taxes on natural gas extraction to fund education spending and reduce the state’s corporate net income tax to 7.9 percent, down from 9.9 percent, by 2023. To achieve the latter, he would aim to eliminate the “Delaware loophole” that allows corporations to set up holding companies in the state.
• A substantial transportation bill in Utah was voted out of committee. Provisions include plans for a major overhaul of the Utah Transit Authority and tax changes, many of which target out-of-state visitors (such as car rental tax increases and taxing hotel rooms). And in a counter move to the Our School’s Now initiative to approve income and sales tax rate increases via the ballot, one Utah lawmaker is sponsoring legislation that would immediately cut tax rates back to their current levels.
• Wisconsin Walker is changing his tune on the state gas tax, saying he would be open to raising the state gas tax to leverage federal funding and if there were offsetting cuts to other tax rates or budget expenditures. But on business tax incentives, the governor is still singing a one note samba, this time promoting substantial tax breaks for the Kimberly-Clark corporation.
• Mississippi may also update its gas tax this year, with a 12-cent increase proposed, but the current plan also includes an income tax cut that would be trouble for the state’s other priorities.
• After ten months of study, Wyoming’s Joint Revenue Committee opted against introducing proposals for new taxes. While the state relies on mineral revenues for 70 percent of its budget, a balance that many find unsustainable, lawmakers saw an improved forecast as an opportunity to delay any action.
• New York’s Senate Majority has proposed legislation to freeze school property taxes for seniors, with the ultimate goal of eliminating them over the next ten years. School districts have voiced concerns over the potential loss of revenue.
• A proposal to tax residential and commercial properties differently in California could generate between $6 and $10 billion new dollars in revenue a year.
• A proposal to amend the Kansas constitution to lower the state sales tax rate on food and ingredients is before lawmakers in the Senate Assessment and Taxation Committee.
• A proposal to revive the gross receipts tax on unhealthy food items failed in committee in New Mexico last week.
• A carbon tax initiative in Washington state has passed out of Senate committee, though with a lower rate than proposed by Gov. Inslee.
• Alabama residents can now protect themselves from tax fraud by submitting a selfie along with their tax return under a new facial recognition program.

What We’re Reading…

• NPR’s Morning Edition had a piece this week on Oklahoma’s revenue crisis and lawmakers’ newfound determination to raise taxes to make up for years of tax cuts that have left the state in a real fiscal bind.
• Interested in analysis on tax and budget trends under Gov. Snyder in Michigan? Check out this series from the Center from Michigan.
• This thoughtful piece in the Texas Tribune reveals the fundamental tension behind many tax/budget policy debates—the popular desire for concrete, tangible goods but at “virtual” prices (or, on how humans are predictably irrational—wanting all the things but not to pay for them).
• A University of Washington professor dusts off the “old” and still relevant idea of localities sharing tax bases to help spur regional prosperity.
• Soda tax opponents are taking the fight to the courts and the outcome in Philadelphia may have far reaching consequences. Quartz has the story.

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.

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