April 18, 2019
April 18, 2019
Tax and budget debates are now mostly complete in Alabama, Arkansas, and Colorado, but just starting or just getting interesting in several other states. Delaware and Massachusetts lawmakers, for example, are looking at progressive income tax increases on wealthy households, and New Hampshire may use a progressive tax on capital gains to simultaneously improve its upside-down tax code and invest in education. Nebraska and Texas, on the other hand, are also looking to improve school funding but plan to do so on the backs of low- and middle-income families through regressive sales tax increases. Fiscal debates are heating up in California and Louisiana as well.
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- NEBRASKA lawmakers put forward a plan to reduce property taxes through greater state investment in K-12 schools, but unfortunately are proposing to fund it by increasing regressive sales taxes rather than improving the state’s upside-down tax code by asking high-income households to pay a fairer share. — DYLAN GRUNDMAN
- The NEW HAMPSHIRE House passed its version of the state budget which includes funding for education—mostly for property-poor districts—paid for by a new tax on capital gains. Among other things, the budget would eliminate scheduled cuts for business taxes which are set to take effect in tax years 2019 and 2020. Gov. Chris Sununu has signaled his displeasure with the budget and is awaiting the Senate’s version. — AIDAN DAVIS
- TEXAS lawmakers are hashing out the details of their bi-annual budget. GOP leaders have committed to increasing education funding and cutting property taxes, leaving a budget hole they’ve now proposed filling with the first increase to the state sales tax in 30 years. — MISHA HILL
- The ALABAMA House unanimously passed a general fund budget which included a two percent cost of living raise for state employees and fully funded Medicaid.
- ARKANSAS lawmakers wrapped up their 2019 legislative session passing their budget and finalizing the tax bills passed this session. Read here for a review of the major tax legislation passed this session.
- Here’s an update on various tax happenings in CALIFORNIA. Lawmakers are holding their breaths to see how April revenues perform—the outcome of which may necessitate revised budget proposals in May. The California Tax Foundation estimates that there are more than $6.2 billion in tax increase bills currently pending in the legislature, among them a bill to create a statewide soda tax (which has passed out of committee). As part of Gov. Newsom’s plan to cut child poverty in half by 2039, he is proposing that the state double its investment in the working families tax credit. And federal banking restrictions continue to pose tax paying challenges for legal cannabis businesses in the state.
- COLORADO lawmakers have finalized their state budget and continue to work on legislation to account for the collection of sales taxes from online retailers.
- In DELAWARE, where the current top income tax bracket begins at only $60,000 of taxable income, lawmakers are considering modernizing the income tax to better reflect today’s economic realities. The bill would add two new brackets at $125,000 and $250,000.
- FLORIDA teachers, legally prohibited from striking, held a “walk-in” Wednesday to agitate for better state investment in education.
- GEORGIA legislators are debating how to raise transportation and infrastructure funds as their session comes to a close. Senate Bill 200 was amended by the House to include a 50-cent per ride tax on ridesharing companies like Uber to fund rural transit expansion and a jet fuel tax break for airlines. While two other bills introduced in the House, HB 511 and HB 276, would also levy a tax on shared rides.
- Some IOWA lawmakers are attempting to put a “supermajority” requirement on the ballot that, if approved, would require a two-thirds vote in the legislature to make income tax changes. Read up here on why such procedural obstacles are bad policy.
- The budget process is finally underway in LOUISIANA. This being an election year, controversy isn’t expected (but in case you’re curious what a delayed budget bill would mean, learn more here). And not even a year after being suspended as part of a deal to end the fiscal cliff, legislation is moving forward to restore three sales tax holidays for guns, hurricane prep materials, and school supplies.
- New proposals in MAINE would tax feminine hygiene products and raise taxes on certain alcohol purchases.
- Last week, lawmakers in MASSACHUSETTS revisited the attempted surcharge on the wealthy with a legislative hearing. Expect the Fair Share Amendment to be a much discussed topic in the coming months and years as many supporters and lawmakers push for a more equitable tax system.
- Jackson, MISSISSIPPI, residents will soon be able to form community improvement districts (CID) with taxing authorities. A CID will be able to levy an additional property tax of up to six percent with 60 percent voter approval.
- MONTANA legislators have passed several tax bills as their bi-annual legislative session ends. Big Sky Country may follow the Big Apple as the second state to tax opioids. House Bill 654, passed yesterday, would levy a 10 percent tax on the initial sale of opioids on the seller. Gov. Bullock has not indicated if he will sign that bill or SB 217, a bill expanding the amount of social security income exempt from state taxation. ITEP analysis showed the proposal would mostly benefit upper-income seniors. SB 241, which would allow designated resort towns in the state to hold a referendum on increasing the local sales tax by one percentage point, passed and will likely be signed by the governor, as will HB 725 to legalize sports betting.
- NEW MEXICO’s latest credit ratings reveal improved fiscal outlook from the state’s recently passed budget but ongoing concerns about unfunded pension liabilities. The state also joined the growing list of states to passing legislation enabling it to collect taxes from out of state sellers and marketplace providers.
- SOUTH CAROLINA legislators put forth proposals to make the state’s tax code even more regressive by flattening the income tax and expanding the sales tax. The bills were introduced without time to be fully considered this year, but will set the stage for the debate in 2020.
- WISCONSIN Gov. Tony Evers continues to advocate for a plan to raise the gas tax by 8 cents a gallon despite poll data indicating low support of the measure.
What We’re Reading
- A new report by ITEP and the Center on Poverty and Social Policy at Columbia University explores two options for states to consider in developing child tax credits. Each option would greatly reduce child poverty and restore some equity to states’ upside-down tax systems. Also, check out Vox’s write-up of the research.
- Most ILLINOISans pay a disproportionate share of their incomes in taxes. Researchers at the Illinois Economic Policy Institute and Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign explain how a progressive income tax can help fix that.
- What causes teacher strikes? Not surprisingly, low pay. Governing has the story.
- Curious to understand the various taxes cannabis businesses pay? Learn more here.
- The underwhelming experience of legal sports betting among early adopters may be a cautionary tale for other jurisdictions.
- Low-income taxpayers are the hardest hit when the IRS is gutted.
- Concerns about outmigration of rich residents from blue states most impacted by changes in federal tax laws have yet to pan out according to a Moody’s Investors Service report.
- Vanessa Williamson of the Brookings Institute outlines why taxation is more effective than philanthropy to fund public goods and protect democracy.
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