March 9, 2023
March 9, 2023
State 2023 legislative sessions are proving to be eventful ones. With many states eager to make use of their budget surpluses, major tax changes are still being proposed and others signed into law. Michigan residents will soon see an increase to their state Earned Income Tax Credit (from 6 percent to 30 percent) after the governor put her seal of approval on the plan. The law will also exempt retirement income from tax for eligible public employees. Meanwhile, West Virginia went a step further, as the governor signed into law a massive $800 million tax cut. The West Virginia Center on Budget and Policy notes that two out of every three dollars of the legislation’s personal income tax cuts go to the top 20 percent of households. New Mexico also looks to have big things on the horizon, as their omnibus tax bill picks up speed in the legislature. The bill includes myriad changes, including rebate checks, a restructuring of the personal income tax, and an increase to the Child Tax Credit, to name just a few.
Also, be sure to check out ITEP’s newest brief from Carl Davis on the thinly veiled tax avoidance schemes that continue to fuel the push for school privatization efforts through voucher tax credits.
Major State Tax Proposals and Developments
- WEST VIRGINIA Gov. Jim Justice signed into law an $800 million dollar tax cut, which includes an about 21 percent cut in the personal income tax, rebates for the state’s tax on vehicles, and partial rebates for personal property taxes paid by some smaller businesses. Finally, the new law includes automatic triggers for further personal income tax cuts which would eventually eliminate the personal income tax entirely. — ELI BYERLY-DUKE
- MICHIGAN Gov. Gretchen Whitmer signed into law a nearly $1 billion dollar tax cut. The law will increase the state’s Earned Income Tax Credit (EITC) from 6 percent to 30 percent of the federal EITC. It will also gradually phase out the limits on the amount of retirement and pension income that can be deducted from taxable income, as well as expand complete retirement income exemptions from taxable income for specific public employees. A 2015 state law, a tax trigger that tied the income tax to revenues, is expected to soon decrease revenue by another $700 million by lowering the state’s income tax rate to 4.05%. — MILES TRINIDAD
- NEW MEXICO lawmakers have unveiled their omnibus tax bill (HB 547), which includes a restructuring of the state personal income tax, an increase to the Child Tax Credit (CTC), and a cap on the state’s capital gains exclusion. The changes come in addition to corporate income tax and low-income credit increases, among others. — MARCO GUZMAN
Governors’ Annual Addresses and State of State Speeches
- Gov. Kay Ivey of ALABAMA delivered her State of the State address this week. She proposed one-time rebates of $400 and $800 for families. This was a similar idea she spoke about earlier this year. She also called for lowering small businesses’ prepaid sales tax payments but gave no further details.
- In NORTH CAROLINA, Gov. Roy Cooper, started his State of the State speech by saying his budget will not raise taxes. He proceeded to explain that tax cuts at the top will only hurt the state’s growth and there is no need for more corporate tax cuts.
- Gov. Sarah Huckabee-Sanders of ARKANSAS is slated to sign a school voucher bill that would move the state closer to education privatization, paying for private school tuition and home-schooling costs.
- Nearing the midpoint of their 60-day legislative session, HAWAII Legislators have made preliminary votes on an expanded renters’ tax credit, an adjusted EITC, and a new CTC. Specific details of these bills remain to be seen and still need to be hammered out. Also, the bill to cut excise taxes on food has stalled in the state Legislature.
- The KENTUCKY House introduced and immediately passed further tax cuts, mostly excluding politically connected industries from the state’s sales tax.
- MARYLAND‘s Lt. Gov. Aruna Miller urged lawmakers to extend and expand the state’s EITC and Child Tax Credit. Miller said the expanded CTC in 2021 was too narrow after only 87 families claimed the credit in the entire state. Both the extension and expansion of these programs are both priorities of Gov. Wes Moore.
- After a three-day filibuster in NEBRASKA, Legislative Bill 753, which would provide private school scholarship credits, passed the first round of debate.
- A bill to end OKLAHOMA’s state sales tax on groceries has passed a House committee and now heads to the House floor. There remains resistance in passing such a bill in the Senate, but the Governor supports the idea, as he proposed in his State of the Speech earlier this year.
- PENNSYLVANIA Gov. Josh Shapiro unveiled his first budget proposal, which includes increasing the income threshold for a state property tax and rent rebate program for older adults from $35,000 to $45,000 per year. It also includes a tax credit of $7,500 over three years for anyone who earns or moves to the state with a teaching, nursing, or law enforcement certification.
- The SOUTH DAKOTA House failed to override Gov. Kristi Noem’s veto of increasing the state’s occupancy tax, which would have doubled the allowable occupancy tax on lodging in business improvement districts.
- SOUTH DAKOTA House lawmakers rejected efforts to repeal the sales tax on groceries, which was a priority for Gov. Noem, and a proposed $425 property tax credit. Instead, the House called for a conference committee on legislation that would reduce the state’s sales tax from 4.5 percent to 4.2 percent, which the Senate amended to 4.3 percent.
- WYOMING Gov. Mark Gordon signed a joint resolution to place an amendment before voters that would create a new class for residential real property and allow state lawmakers to cut residential property tax assessments.
What We’re Reading
- A report from the California Legislative Analyst’s Office (the legislature’s independent research office) analyzed the legislature’s options to extend and or alter the state’s Film Tax Credit. California dominates the motion picture industry in the US; however, LAO indicates that the credit is not effective at growing the industry.
- A new report from the OpenSky Policy Institute in Nebraska and ITEP, which was used at a hearing last week on Legislative Bill 79, show how the bill’s consumption tax design would create a major revenue loss for the state. The report also estimates that for a revenue-neutral consumption tax, it would have to be 22.1 percent.
- Proposals from both Gov. Evers and the Wisconsin GOP were criticized in a new report from the Wisconsin Policy Forum. The report characterized both the GOP’s proposed flat tax and some of the governor’s proposed new spending as unaffordable. However, the report did speak favorably about the Governor’s plan (which mirrors some past GOP proposals) to increase revenue sharing and taxing authority for local governments.
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