State Rundown 3/23: Spring Brings More Tax Happenings

Spring is around the corner and like those pesky allergies that come along with it, equally pesky tax proposals continue to pop up in states across the U.S. The governor’s signing of a temporary gas tax holiday in Georgia is causing our eyes to well up and get a little itchy, especially after we explained last week how these plans oftentimes fail to produce meaningful relief. The sound of us trying to clear our scratchy throat could also be mistaken for us trying to bring attention to House and Senate bills in Oklahoma that include cuts that will primarily benefit those at the top. And Iowa is giving us a full-on migraine, after Senate Republicans proposed a constitutional amendment that requires a supermajority to raise taxes in the future but only a simple majority for tax cuts. Fortunately, Michigan is relieving some of the pain, as the governor recently made the sensible decision to veto a major tax cut that would have lowered the income tax rate and suspended the gas tax.

Major State Tax Proposals and Developments

• A MAINE bill that would limit big box retailers’ ability to mount “dark store theory” legal challenges has now been approved in the Senate in addition to the House. The bill would require that towns and cities base property assessments on the highest and best use. – AIDAN DAVIS
• MICHIGAN Gov. Gretchen Whitmer has vetoed a $2.5 billion tax cut bill that would have lowered the state flat income tax rate from 4.25 to 3.9 percent, reasoning that a substantial tax cut would result in either future tax hikes or painful cuts that would hurt families down the line. Gov. Whitmer also intends to veto a suspension of Michigan’s 27 cent gas tax, but that she is open to temporarily reducing or suspending the 6 percent state sales tax on gasoline. – NEVA BUTKUS
• Lawmakers in both chambers of the OKLAHOMA legislature passed a mixed bag of untargeted, mostly top-heavy tax cuts. The Senate passed a bill that would put the corporate franchise tax on hold starting in tax year 2023 and years going forward. It is estimated to decrease revenue by $57.2 million in fiscal year 2024. Meanwhile, the House passed a handful of bills that would cut taxes by around $500 million. One bill would suspend the state sales tax on groceries for two years. Another would reduce all tax brackets by 0.25 percent. They also passed a House Joint Resolution that proposed a constitutional amendment that would freeze valuations for property taxes on households with homeowners who are 65 and older. – BRAKEYSHIA SAMMS

State Roundup

• CONNECTICUT’s tax debates are heating up. Gov. Ned Lamont is still prioritizing property tax and car tax breaks, while others continue to push for creating or bolstering targeted refundable credits. Unfortunately, an ill-advised gas tax holiday has swept the legislature and is likely to pass, which will reduce available revenues for those priorities.
• GEORGIA Gov. Brian Kemp signed a temporary gas tax holiday bill that will suspend the gas tax until the end of May. And the costly and regressive tax cut bill proposed by the House is still before the Senate.
• In HAWAII there is a proposed bill to exempt diapers, food, and medicine from their general excise tax.
• After cutting nearly $2 billion in taxes this legislative session, IOWA Senate Republicans are proposing a constitutional amendment that would require a supermajority to raise future taxes while preserving a simple majority for future cuts.
• The MISSISSIPPI House released a new income tax cut proposal that would gradually eliminate the personal income tax by $100 million a year over eighteen years. Senate leaders and Lt. Gov. Delbert Hosemann oppose the House plan which would use a temporary surplus for permanent cuts.
• House members in MISSOURI considered multiple consumption tax changes, including a six-month state gas tax holiday and legislation that would permanently exempt diapers and feminine hygiene products from state sales tax.
• Defenders of sound tax policy in NEBRASKA managed to stall the regressive income tax cut backed by Gov. Pete Ricketts for now, but proponents of the tax cut for high-income households have already amended it into another bill that the full legislature will consider soon.
• As an alternative to gas tax suspensions discussed in other states, NEW HAMPSHIRE lawmakers are considering a $40 million proposal to cut vehicle registration fees for any vehicle or trailer registered between July 2021 and June 2022.
• NEW MEXICO Gov. Michelle Lujan Grisham and legislative leaders announced a special session, beginning April 5. They will consider a “junior” spending bill that will include relief for residents facing an increase in the cost of goods. Specifics of the plan have not yet been released.
• A coalition of NEW YORK advocates recently gathered to continue pushing for improvements to the state’s Empire State Child Tax Credit, such as including children under 4 years old and increasing the value of the credit.
• An OREGON audit of the state’s $1.1 billion mortgage interest deduction found that it has inequitable effects, primarily benefiting wealthy and white homeowners, and is not evaluated sufficiently to track whether it’s meeting its policy goals.
• OREGON lawmakers passed a one-time $600 payment to EITC recipients, a refreshing alternative to the ineffective gas tax holidays and untargeted rebates being considered in many other states.
• A proposed bill in PENNSYLVANIA could make it more difficult to enact tax increases by allowing voters to override changes on the ballot; if voters reject a tax, the General Assembly could override the referendum with a two-thirds vote.
• WEST VIRGINIA Gov. Jim Justice signed a budget bill, vetoing a provision that would have set aside $265 million for future income tax cuts. But the state legislative session may not be over since some state Democrats asked for a special session to suspend the state gas tax.

What We’re Reading

• Governing (rightfully) throws water on the idea that states making deep, permanent tax cuts will see a benefit to their state, noting that the cuts can worsen inflation and jeopardize the prospects of sustainable budgets in the future.
• New York Times columnist Peter Coy explains in an opinion piece that there are better ways to help those impacted by increases at the pump than suspending the gas tax, like providing direct relief to residents.
• The Center for the Study of Social Policy conducted interviews with 15 families of color in Michigan with incomes under $55,000 to better understand the impact that the federal expansions to the Child Tax Credit had on their lives.

 

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