Just Taxes Blog by ITEP

State Rundown 4/24: It’s Crunch Time

April 24, 2024

As many state legislative sessions are wrapping up, lawmakers are taking steps to: deepen, accelerate, and attempt to memorialize existing tax income tax cuts (in Iowa); veto expensive, top-heavy tax cuts (in Kansas); punt conversations on property tax cuts and pay-fors to special session (in Nebraska); and weigh various options for revenue raising (in Vermont).

Meanwhile, in his recent budget proposal, North Carolina’s Gov. Roy Cooper calls for fewer giveaways for corporations and the wealthy by pushing back against taxpayer-funded private school vouchers and proposing to keep the state’s corporate income tax rate at its current 2.5 percent rate rather than allowing it to fully phase out.

Major State Tax Proposals and Developments

  • Lawmakers in IOWA wrapped up their session with a bill to accelerate and deepen the state’s personal income tax cuts (originally passed in 2022). The new legislation would bring the state’s flat rate to 3.8 percent in 2025 as opposed to 3.9 percent in 2026 – doubling down on the already regressive tax cut currently phasing in. Additionally, the legislature also passed two constitutional amendment proposals that would mandate flat personal income taxes and require a supermajority to raise taxes in the future. These proposed amendments must make it through both chambers in an additional legislative session before making it to voters. – NEVA BUTKUS
  • KANSAS Gov. Laura Kelly vetoed the latest tax cut package passed by the Republican-controlled legislature. The vetoed package would have cut existing personal income tax rates while preserving and flattening the tiered rate structure. It also would have fully exempted Social Security income from tax, increased the state’s standard deduction and personal exemption, created a new dependent exemption, increased the homestead exemption, and reduced the property tax millage for schools. Upon vetoing, Gov. Kelly announced her newest proposed tax plan which preserves many of the same aspects and costs $90 million less. – NEVA BUTKUS
  • NEBRASKA lawmakers ended their legislative session by allowing Gov. Jim Pillen’s tax plan—to reduce property taxes by raising and expanding sales and excise taxes—to die without a final vote. The bill had been whittled down to a smaller compromise, but lacked support because it was still a regressive tax shift overall and included a digital ads tax. Gov. Pillen and lawmakers are now planning for a tax-focused special session this summer. – DYLAN GRUNDMAN O’NEILL
  • NORTH CAROLINA Gov. Roy Cooper introduced his budget proposal today, which includes an increase to teacher pay, a moratorium on private school vouchers, and funding for childcare. On the latter, he recommended a refundable child and dependent care credit that is equal to up to 50 percent of the federal credit. – MILES TRINIDAD
  • The VERMONT Senate passed a budget that raises financial regulation fees, resulting in $19 million in new revenue. The Senate bill takes a much different approach than the budget passed by the House, which would raise $125 million through progressive revenue raisers by creating a new surtax on high-income earners, increasing corporate taxes and the state’s property transfer tax. – MILES TRINIDAD

State Roundup

  • Legislation in ALABAMA that exempted overtime pay from state income tax last year could end up costing $150 million more than initially anticipated.
  • COLORADO lawmakers will soon begin to debate legislation that seeks to overhaul their property tax system. The proposal would allow filers to exempt 10 percent (up to $75,000) of their primary residence and spread property value increases over several years.
  • The KENTUCKY legislative session ended without major tax changes. Although there was some discussion of further personal income tax cuts, and a proposal to freeze property taxes for seniors. Neither idea passed this session.
  • House Democrats in MINNESOTA proposed expanding their state’s Child Tax Credit to include dependents who are 18 years old. The current credit only allows filers to claim dependents 17 and younger.
  • Though NEBRASKA legislators did not pass a major tax bill this year, they did enact an effort to undercut voters’ opportunity to repeal last year’s private school scholarship tax credit and enacted several smaller changes, including a sales tax exemption for diapers and a film credit.
  • In NEW JERSEY, business lobbyists proposed that, instead of funding New Jersey Transit with corporate tax increases, the state use revenue from the sales tax to fill the gap.
  • NEW YORK lawmakers completed work on the state budget over the weekend. Tax increases on high-income families were left out. And despite advocates’ best efforts to simplify and improve the state’s system of tax credits for middle- and low-income families, the budget included only a one-time boost to the existing Empire State Child Credit.
  • The TENNESSEE House and Senate remain at odds over the details of a cut to the state’s franchise tax. Both versions propose removing property from the state’s franchise tax base, costing about $410 million annually. The Senate, with the support of Gov. Bill Lee, also proposed authorizing refunds for the last 3 years. The House proposes a smaller refund window and a public disclosure requirement for refund recipients.
  • WYOMING Gov. Mark Gordon was censured over his veto of a property tax cut bill by the state Republican Party. The legislation would have allowed a 25 percent exemption to the first $2 million of a home’s fair market value. A spokesperson for the governor noted that the veto “reflects the fact that he was not interested in giving 25% tax cuts to millionaires and billionaires, including those who just moved to Wyoming and were part of the very reason that longtime residents saw their assessments increase.”

What We’re Reading

  • In case you missed it, in a new Q&A blog, Professor Andrew Kahrl, the author of the new book, The Black Tax: 150 Years of Theft, Exploitation, and Dispossession in America, discusses tax history and property tax policy with ITEP’s Brakeyshia Samms.

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