March 17, 2021
March 17, 2021
We wrote last week that the inclusion of fiscal relief for states and localities in Congress’s American Rescue Plan should free up state lawmakers’ time and attention to focus on the comprehensive reforms needed to address upside-down and inadequate tax codes, and some states are already doing just that. Connecticut lawmakers, for example, held an all-day hearing on progressive tax reform opportunities, and New York legislators united behind a package of similar policies in their budget bills. New Mexico leaders also got right to work on advancing progressive tax improvements. Not all states are so dialed in yet though, as Mississippi lawmakers squashed and revived an income tax elimination proposal in the span of a few hours, and counterproductive tax cuts remain on the table in several states including Arkansas, Idaho, and Nebraska.
Major State Tax Proposals and Developments
- It’s already been an eventful week in MISSISSIPPI. The House tax plan – that would eliminate the state’s income and shift state taxes (PDF) away from the wealthy and onto low- and middle-income households – was tabled for the session, moved to a summer study committee with no vote in the Senate. However, hours later the bill, with minor tweaks, was revived in a separate House bill. – AIDAN DAVIS
- A NEW MEXICO bill recently advanced out of the Senate Tax, Business and Transportation Committee that would increase the top marginal tax rate and corporate rate for those earning more than $500,000 and increase the state working families credit to 25 percent while also expanding it to workers without children and ITIN filers. – MARCO GUZMAN
- The budgets proposed by both houses of the NEW YORK legislature are mostly in agreement and land somewhere between Gov. Andrew Cuomo’s reticence to tax wealthy households and some advocates’ ambitious plans to raise tens of billions through bold progressive tax changes. To shore up underfunded services and add some progressivity to the tax code, the budget proposals would raise $7 billion through tax increases on the state’s richest households and most profitable corporations. Components include raising income taxes and instituting a surcharge on capital gains income for millionaires and multi-millionaires, imposing a surcharge on billion-dollar corporations and a minimum tax on corporate capital, increasing property taxes for high-value second homes, and increasing the estate tax rate. – DYLAN GRUNDMAN O’NEILL
- CONNECTICUT lawmakers held a day-long hearing on a robust set of progressive tax policies proposed this year, hearing strong support from around the state. The reforms would raise taxes on the state’s richest households – through income tax increases and a surcharge on unearned income for households with incomes exceeding $500,000, a 2 percent mansion tax, a strengthened estate tax, a tax on tech companies selling over $1 billion in digital ads, and increases on corporations raking in more than $100 million in profits. The revenue would address longstanding underfunding issues in schools and elsewhere while also funding short-term aid to unemployed workers and long-term reforms to reduce taxes on middle- and low-income families. – DYLAN GRUNDMAN O’NEILL
- Lawmakers in ALASKA have proposed legislation to double the state’s lowest-in-the-nation gas tax.
- An ARKANSAS Senator has introduced a bill to eliminate the state income tax.
- A group of CALIFORNIA lawmakers is proposing a state-level wealth tax, similar to Elizabeth Warren’s proposed Ultra-Millionaire Tax, that would tax net household wealth exceeding $50 million at 1 percent and amounts exceeding $1 billion at 1.5 percent.
- DELAWARE advocates continue to press for a $15 minimum wage and legislators will discuss a bill to do so in legislative committee Wednesday.
- The IDAHO House will soon take up a bill that reduces the top individual tax rate and corporate tax rate to 6.5 percent and includes a $220 million, one-time tax rebate.
- Both houses of the KENTUCKY legislature have passed legislation that would create a controversial tax-credit scholarship program. The measure, expected to be vetoed by Gov. Andy Beshear, would allow individuals and corporations to forgo paying taxes to donate to a scholarship fund. Allowing for donations up to $1 million each, the fund would be capped at $25 million. Those contributing would receive a tax credit of up to 97 percent. Visit this page for additional information on this topic.
- Republicans in the MINNEOSTA Senate have introduced their own two-year budget plan that does not include tax increases, but instead, exemptions for paycheck protection program loans and unemployment benefits, state government administrative cuts, and funds for broadband.
- After seemingly stalling last week, a proposal to raise MISSOURI’s second-lowest-in-the-nation gas tax has been passed by the state Senate. The proposal oddly allows people to file for a refund equivalent to the increased tax at the end of the year, greatly reducing its ability to help fund infrastructure while also favoring people with professional accountants or a fondness for red tape.
- NEBRASKA lawmakers seem to have backed off of a dangerous effort to shift state taxes onto middle- and low-income families through income tax cuts and sales tax expansion, but are moving forward smaller proposals to cut taxes for retirees and corporations.
- In a recent release PENNSYLVANIA Gov. Tom Wolf reiterated his commitment to phase out the state’s gas tax. He established a commission to recommend options for replacing the tax with alternative revenue sources.
- In his proposed budget, RHODE ISLAND’s Gov. Dan McKee, called for legalizing recreational cannabis and the continuation of the state’s car-tax phaseout. He also supported a version of former-Gov. Gina Raimondo’s proposal to raise the real estate transfer tax on high-end homes.
- MASSACHUSETTS lawmakers join a number of other states looking to tax digital advertising.
- A TENNESSEE Democrat has sponsored a bill that would temporarily eliminate the four percent tax on groceries from May to October of 2021.
- The WASHINGTON House heard testimony – most of it in support – on the Senate’s recently passed bill to implement an excise tax on extraordinary capital gains transactions exceeding $250,000.
What We’re Reading
- The off the charts blog explains what is known so far about the American Rescue Plan (ARP) provision restricting states from using federal aid to undermine their own revenue systems through tax cuts – and why it’s an important and sound policy.
- Route Fifty writes that local jurisdictions are often overshadowed in fiscal discussions and federal relief efforts, making the recently approved ARP particularly welcome news, for example because it will help counties invest in infrastructure.
- Governing expands on how the ARP aid will be received and used by those local entities, and Route Fifty explores how it will help local economies more broadly.
- Buzz continues to grow for Dorothy Brown’s upcoming book “The Whiteness of Wealth: How the Tax System Impoverishes Black Americans—and How We Can Fix It.” Bloomberg Businessweek reviews this important research.
- In a recent blog post, ITEP pushes back against supply-side myths in WEST VIRGINIA and MISSISSIPPI and explains the impact of proposed tax shifts in each state.
- The podcast Policy For the People recently featured OREGON experts explaining the state tax code’s inequitable effects for Oregonians of color.
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.
TagsITEP State Rundown
- Corporate Taxes
- Education Tax Breaks
- Federal Policy
- Inequality and the Economy
- ITEP Work in Action
- News Releases
- Personal Income Taxes
- Policy Briefs
- Property Taxes
- Refundable Tax Credits
- Sales, Gas and Excise Taxes
- Sales, Gas and Excise Taxes
- SALT Deduction
- State Corporate Taxes
- State Policy
- State Reports
- Tax Analyses
- Tax Basics
- Tax Credits for Workers and Families
- Tax Reform Options and Challenges
- Taxing Wealth and Income from Wealth
- Trump Tax Policies
- Who Pays?