March 1, 2023
March 1, 2023
This week, several big tax proposals took strides on the march toward becoming law. Whether being formally unveiled or landing on the governor’s desk, this March is sure to be a busy one for tax bills. Governors in New Jersey and Massachusetts released proposals to expand credits aimed at helping children, although, the good news may end there, as Gov. Phil Murphy reaffirmed his commitment to letting the corporate business tax surcharge sunset, while Gov. Maura Healey has proposed to cut the capital gains rate and increase the income threshold for the estate tax. Nearby, a top-heavy tax cut plan that would ultimately eliminate the personal income tax passed out of the West Virginia Senate, and further west, the Montana governor’s plan to cut income tax rates and increase the Earned Income Tax Credit took another step forward, but lawmakers left an important Child Tax Credit proposal behind in committee.
Major State Tax Proposals and Developments
- In an address before the NEW JERSEY statehouse, Gov. Phil Murphy unveiled his budget plan, which includes a Child Tax Credit of $1,000 for children aged 6 and under (effectively doubling the existing credit), and also reiterated that he intends on letting the corporate business tax surcharge to expire — a plan that we here at ITEP advise should remain intact, as it is targeted at only the most profitable corporations and raises revenue that helps support vital public services. The governor’s administration will also seek to reduce taxes on global intangible low-taxed income. — MARCO GUZMAN
- MASSACHUSETTS Gov. Maura Healey formally unveiled details of her tax plan, which includes a $600 child and dependent tax credit, an increase to the estate tax threshold from $1 million to $3 million, and a cut to the short-term capital gains rate from 12 to 5 percent. — MARCO GUZMAN
- The WEST VIRGINIA Senate passed a second tax plan with roughly $750 million in 2024 cuts to personal income and property taxes, an apparent compromise with Gov. Jim Justice. Headlined by an about 22 percent income tax cut, the plan also includes a full rebate of local taxes on cars. Critically, the plan provides an automatic trigger for future personal income tax rate reductions, which will eventually eliminate the tax. The West Virginia House will likely take up the measure next week. — ELI BYERLY-DUKE
- A key component of MONTANA Gov. Greg Gianforte’s budget plan that would have created a $1,200 child tax credit was tabled in the House Appropriations Committee. The other component, which includes an income tax cut and increase to the state Earned Income Tax Credit, has advanced. — MARCO GUZMAN
- ARKANSAS lawmakers are considering House Bill 1465 that would allow Arkansas veterans with 100 percent disability an exemption from the sales tax on purchases made in Arkansas.
- The ARIZONA state legislature advanced a bill prohibiting localities from taxing groceries. Gov. Katie Hobbs has not yet indicated whether she will approve the measure; she has raised concerns about impacts to local budgets.
- Supporters of a Child Tax Credit in CONNECTICUT cited the high cost of child care in the state, the decreasing federal credit, and the credit’s economic multiplier effect in a hearing on the matter this week. Another hearing focused on a potential statewide mansion tax to raise school funding, applying a 0.2% rate to homes valued over $1.5 million.
- The Chief Financial Officer of the DISTRICT OF COLUMBIA announced that projections show tax revenue dropping by over $400 million in upcoming years due to shortfalls in commercial real estate revenue, as federal and other office workers continue with their hybrid and work-from-home schedules.
- IDAHO state lawmakers are considering legislation to restrict property taxes by requiring localities to hold referenda before raising tax rates.
- The INDIANA Senate unanimously passed Senate Bill 3, creating a blue-ribbon commission to study income tax elimination and local property tax reform.
- KANSAS state legislators are weighing a bill that would allow counties to enact personal income taxes.
- Republican lawmakers in MINNESOTA released their “Give it Back” tax plan, which includes rebate checks of up to $2,500, eliminating tax on Social Security income, and a $1,800 Child Tax Credit.
- The MICHIGAN legislature sent the Lowering MI Costs Plan to Gov. Gretchen Whitmer for her signature. The legislation would overhaul the state’s retirement tax and expand the state Earned Income Tax Credit. However, it will not include the $180 rebate checks that were originally included after the legislation failed to gain the necessary Republican support to receive immediate effect, which would have distributed the checks before the end of the legislative session and averted an automatic income tax trigger.
- The full OKLAHOMA Senate will hear Senate Bill 133, which would disqualify cannabis producers from the sales tax exemption that farmers and ranchers get on using materials and equipment in their agriculture practices.
- The OHIO state Supreme Court is set to decide whether municipalities must issue local income tax refunds to nonresident workers who worked from home in 2020.
- The SOUTH DAKOTA Senate Taxation Committee advanced an amended bill that would reduce the state’s sales tax from 4.5 percent to 4.3 percent, a smaller reduction than the bill’s original rate of 4.2 percent, and added a sunset clause that would end the reduction on June 30, 2025. According to lawmakers, the sunset clause is intended to avert future budget cuts if a ballot measure to cut the sales tax on groceries, a proposal that lawmakers recently rejected, is passed in 2024.
- Official estimates for SOUTH DAKOTA for reducing the state’s sales tax from 4.5 percent to 4.2 percent show that state revenue would face a revenue impact of about $13 million less compared to alternative legislation to eliminate groceries from the sales tax. The fiscal note for legislation to eliminate the sales tax for groceries estimated the proposal would reduce state revenue by about $115 million, while reducing the state sales tax rate across the board would reduce revenue by $102 million.
- Lawmakers in UTAH have combined two tax bills that would cut the flat income tax rate to 4.65 percent, expand the Social Security benefits credit, increase the Earned Income Tax Credit, double the credit for newborn children, and remove state sales tax on groceries into one bill. The sales tax component is contingent upon voters approving a constitutional amendment that would eliminate an earmark on income tax revenues that are specifically used to fund education.
- WASHINGTON State lawmakers are considering a proposal to add a $2 tax at the time of purchase on devices that access the internet and cost more than $250.
- Two key WISCONSIN state legislators poured cold water on an effort by Milwaukee to seek state approval to raise its local sales tax to address budget challenges.
What We’re Reading
- Route Fifty explains the hunger cliff facing families losing emergency SNAP benefits this year, and the efforts in more than half of states to help fill the gap, with New Jersey leading the way so far this year.
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