As state legislative sessions come to a close, decisions on tax policy are being made. Several southern states have cut taxes, while the northeast is making some more measured reforms.

Florida lawmakers finished a long debate, concluding that businesses should come out on top and no longer pay almost $1 billion in sales tax on their commercial leases. Missouri has agreed to subsidize sports teams with tax dollars, and Texas once again cut property taxes.

Meanwhile, Rhode Island has passed legislation to tax second homes and transportation, while Vermont expanded the state’s Earned Income and Child Tax Credits while reforming its school finance system. Elsewhere, negotiations continue to develop in Maine, Wisconsin, and other states that may lead to tax changes in the coming weeks.

Major State Tax Proposals and Developments

• FLORIDA lawmakers have reached a budget and tax compromise after months of discussion over property and sales tax cuts. The key winners in the deal are Florida businesses who will no longer pay the state’s sales tax on commercial leases, costing the state $904.8 million in revenue a year. Lawmakers also passed a menu of sales tax holidays, including tax holidays for back-to-school, disaster preparedness, and exemptions for summer protective items like sunscreen and life jackets. The sales tax holidays will cost the state an additional $331 million. – NEVA BUTKUS
• MISSOURI Gov. Mike Kehoe signed into law a $1.5 billion stadium financing bill. The measure will set aside tax revenue generated by major Kansas City sports teams to finance improvements to their stadiums. Additionally, the measure capped the growth in property tax bills in 75 of the state’s 87 counties at 5 percent. Because this provision is not uniform across the state, it faces potential legal challenges. – ELI BYERLY-DUKE
• Gov. Greg Abbott of TEXAS signed the legislature’s property tax cut package into law. This includes an increase to the homestead exemption from $100,000 to $140,000 as well as an increase to the senior property tax exemption which now totals $200,000. Businesses will now also receive a $125,000 business personal property exemption. The package totals $10 billion, but some lawmakers do not see this as a permanent fix, stating that the changes could lead to increased assessments that will counter the tax cuts received under the expanded homestead exemption. – NEVA BUTKUS
• VERMONT lawmakers gave final approval to legislation that would increase the age eligibility of the state’s Child Tax Credit from 5 to 6, increase the maximum Earned Income Tax Credit for workers without children from $247 to $649, and exempt most military pensions from state income taxes. – MILES TRINIDAD

State Roundup

• The DELAWARE House passed legislation increasing various fees to generate over $100 million in revenue for environmental regulation and transportation infrastructure. They include new fees for electric vehicle owners, increased DMV fees such as driver’s license fees and renewal fees, and increased tolls.
• A $11.3 billion addition to the MAINE budget failed in the House after five Democrats joined Republicans to vote down the proposal by a 77-71 vote. The budget addition would have increased the cigarette tax from $2 per pack to $3.50. Other tax considerations remain up for debate.
• NEBRASKA Gov. Jim Pillen will continue pushing for property tax cuts funded by sales tax expansions despite the approach having failed three consecutive times.
• The OHIO Senate passed legislation that would shift the state’s graduated-rate personal income tax to a flat tax of 2.75 percent in 2026. The proposed cut is estimated to cost the state more than $1 billion a year and would overwhelmingly benefit the wealthy. The bill would also slightly expand the homestead exemption for seniors and people with disabilities by increasing the income It would also increase the standard reduction of how much properties are taxed and the enhanced homestead exemption for veterans with disabilities.
• The RHODE ISLAND House passed legislation creating a new tax on second homes worth more than $1 million, increasing the gas tax by 2 cents, and increasing registration fees for electric vehicles and taxes on home sales. The bill now moves to the Senate for consideration.
• After negotiations between the governor and legislative leaders broke down in WISCONSIN, the legislature has advanced its proposal without an agreement. Tony Evers agreed in principle to support a cut to the state’s personal income tax if the legislature significantly boosted education funding, but the legislature is only advancing the tax cut. Specifically, the measure would expand the state’s second of four tax brackets. For single filers, the bracket is currently from $14,320 to $28,640 and would end at $50,480 if enacted. Additionally, the legislature would exempt up to $24,000 of retirement income for those 67 and older.
• VERMONT has reorganized its school finance regime – again. If schools are consolidated to reduce the cost of running school districts in small towns, the law would shift to a regional property assessment process to smooth out property tax differences between towns. The law would also allow the state to create a higher tax rate for second homes.

What We’re Reading

• Per the New York Times, the U.S. Senate majority released their long-awaited policy bill which includes billions of dollars more in cuts to Medicaid than the House-passed legislation. The cuts come primarily in the form of limiting Medicaid provider taxes, which states use to collect more federal matching funds for the program. Cutting these taxes will likely lead to funding shortfalls of hundreds of billions of dollars in states over the next 10 years. States will either have to raise other taxes or cut services.
• The New York Times describes the struggle of small towns to redevelop mall properties, which are often the largest single taxpayer in town.
• A new report by the Economic Policy Institute breaks down policies that have kept the South locked out of shared prosperity due to regressive tax structures, failure to tax corporations, and corporate giveaways that produce little-to-no return on investment for communities.

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