March 30, 2023
March 30, 2023
Over the past week Washington state saw a major victory for tax fairness after the state Supreme Court held the state’s capital gains tax—passed in 2021—constitutional. The tax is expected to bring in $500 million in revenue from those with capital gains profits over $250,000 (not to include real estate or retirement accounts). And the news is especially good, considering Washington has the most regressive tax system, due to the 1933 prohibition on progressive income taxes. Lawmakers plan to use the revenue on early childhood education programs, which will provide long-lasting benefits to the state for years to come.
Major State Tax Proposals and Developments
- CONNECTICUT Gov. Ned Lamont’s recent budget plan would include $500 million for a proposal that would eliminate income taxes for households making less than $50,000 a year and give a 20 percent tax break to those earning under $100,000. – MARCO
- The MISSOURI house passed House Bill 816, which would authorize about $1 billion in total cuts. Focused on the rich, the bill would immediately cut the state’s corporate income tax rate from 4 percent to 2 percent, take the state’s top personal income tax rate from 4.95 percent to 4.5 percent, and exempt all social security income from taxation. The house’s budget and tax plan do not leave room for new infrastructure or childcare spending proposed by Governor Parson. The Missouri Senate now has the option to take up the bill. – ELI
- ALASKA lawmakers are preparing to debate two tax proposals to raise revenue after the state’s revenue forecast showed long-term budget deficits, even after accounting for a reduced Permanent Fund Dividend payment. The proposals include a regressive 2 percent state sales and another that would cut the oil production tax credit.
- ARIZONA Gov. Katie Hobbs vetoed a bill that would have prohibited localities from taxing groceries, noting that, “it does nothing for the more than 800,000 Arizonans who use SNAP and WIC benefits for their groceries, as these constituents are already exempt from the tax.”
- CALIFORNIA Governor Gavin Newsom’s signed a bill regulating the oil industry. Although Newsom initially proposed a windfall profits tax on oil manufacturers, the final version instead mandates informative disclosures. Although it does authorize the California Energy Commission to establish a maximum gross margin and a fine for exceeding it through an administrative process.
- The GEORGIA legislature passed a bill that enacts an excise tax of 2.84 cents per kilowatt hour used to charge electric vehicles.
- The IDAHO House of Representatives voted to override Gov. Brad Little’s veto of legislation that would have cut property taxes. Education advocates argue that the bill will negatively impact education funding, while the governor called the bill a “hodgepodge of policy items intermingled with property tax relief.”
- A bill out of IOWA that would put a constitutional amendment before voters and require a supermajority for any increases to personal or corporate tax rates has been proposed.
- The KANSAS House approved a tax package that would combine a flat income tax rate with the immediate elimination of food sales tax by a 94 to 30 vote.
- Lawmakers are beginning to raise concerns over MASSACHUSETTS Gov. Maura Healey’s tax plan, which includes an increase to the estate tax threshold from $1 million to $3 million and cut to the short-term capital gains tax rate, noting that the plan cancels out a significant amount of the revenue generated from the voter-approved Fair Share Amendment.
- MICHIGAN Attorney General Dana Nessel has stated that Michigan’s income tax trigger that was put on the books in 2015 and set to trigger this year will be temporary. The state’s income tax rate is expected to drop to 4.05 percent from its current 4.25 percent for one year.
- In NEVADA, Senate Bill 394, would increase property taxes by 10 cents for every $100 dollars in assessed property value. It is not based on the market value of homes, rather it is tied to the assessed value of the home. This will be used for more educational funding. Lawmakers also are trying to pass Assembly Bill 448 that would change an exemption to the tax when property owners shift real estate to an affiliate or subsidiary. If passed, the tax still applies if the property is transferred to a business entity that was “formed for the purpose of avoiding those taxes.”
- The NEW HAMPSHIRE legislature is debating Gov. Chris Sununu’s proposal to eliminate the state’s communication services tax: an excise tax on older communications technologies. The measure brings in $30 million—1.5 percent of general fund revenue.
- In NORTH DAKOTA, Gov. Doug Burgum signed a bill that exempts military pay from state income tax for active duty, National Guard and Reserve members. The bill will draw down state revenue by an estimated $4 million from 2023 to 2025.
- The TEXAS House passed HB300, which removes the sales tax on diapers, baby wipes and bottles; menstrual supplies including tampons, sanitary pads and menstrual cups; maternity clothing; and products for pumping breast milk. The state would lose an estimated $194 million in sales tax revenue over two years.
- VIRGINIA Gov. Glenn Youngkin signed a bipartisan bill creating a $300 nonrefundable tax credit for people who buy gun safes or other lockable gun containers. It begins in the 2024 tax season. The total amount of tax credits allowable under the new law is capped at $5 million per year.
What We’re Reading
- The Today in Ohio podcast from Cleveland.com discussed whether 20 years of tax cuts in Ohio has ultimately made Ohioans better off and boosted the economy. Spoiler alert: they didn’t.
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