State Rundown 4/26: Capital Gains Taxes Make Gains and Regressive Proposals Regress

Progressive capital gains tax proposals made news this week in Connecticut and Massachusetts, while Nebraskans came out in force to oppose a regressive tax shift, and North Carolina teachers prepare to rally over their legislature’s proclivity to cut taxes on wealthy households while underfunding schools.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals and Developments

• Lawmakers in CONNECTICUT and MASSACHUSETTS are weighing proposals to tax capital gains income at higher rates.  A public hearing set for this Friday will address these issues in CONNECTICUT where there’s a proposal for a 2 percentage point surcharge on the state’s wealthiest residents. In MASSACHUSETTS, Amendment 1357 would increase the rate on the state’s long-term gains to 8.95 percent. However, it’s possible that revenue-related amendments will not be taken up as part of the budget debate. — AIDAN DAVIS
• An attempt to reconfigure NEBRASKA taxes—primarily by raising the sales tax rate from 5.5 percent to 6.25 percent, increasing cigarette taxes from 64 cents to one dollar per pack, closing some sales tax exemptions, and using the revenue to reduce property taxes through increased state school support—was not received well in a hearing this week. The bill met with a “legislative collision course” and a “wall of opposition” as opponents “lined up in force” to voice their many complaints about the bill until around 11 p.m. Echoing public opinion polling across many states, the increased state support for K-12 schools and concomitant property tax cuts were welcomed by many testifying, but there was little support for raising that funding through regressive consumption taxes rather than income or other progressive taxes on wealthy households. — DYLAN GRUNDMAN

State Roundup

• Deep spending cuts remain a theme in the ALASKA Senate’s version of the budget.
• In ARIZONA, lawmakers continue to tussle over key tax and budget issues, including their response to federal conformity and the potential repeal of vehicle registration fees passed last year. This session could be a long one.
• Having already passed a bizarre phased-in state income tax cut last year, anti-tax zealots in IOWA are looking to use red tape to further undermine funding for state and local public services. A bill enacted this week will create new requirements for special public hearings and two-thirds supermajority votes for local property taxes, and a proposal to create a two-thirds supermajority requirement for state income tax changes has advanced in the Senate.
• MICHIGAN lawmakers are nearing a stalemate as the legislature passed a budget without a gas tax increase and the governor is threatening to veto.
• MINNESOTA lawmakers tackle education and jobs budget bills with four weeks left in session. Democrats have proposed a 20-cent per gallon increase in the state’s gasoline tax to fund transportation plus the closing of corporate loopholes to fund education. Republicans find these ideas to be nonstarters given the state’s projected surplus.
• NORTH CAROLINA teachers gear up for a rally next week with the message that “you have chosen to cut taxes – mostly to the benefit of the wealthy and large corporations – instead of adequately funding public schools.”
• Lawmakers in the OKLAHOMA state House are considering controversial legislation this week that would raise the cap on total available tax credits from $5 to $30 million for the state’s Opportunity Scholarship Fund, allowing donors for private schools or foundations that support public schools to reduce their tax liability.

What We’re Reading

• In a Bangor Daily News editorial, the board makes the case for expanding MAINE’s Earned Income Tax Credit. A handful of bills that would do just that are moving through the state Legislature.
• A recent academic paper in the Maryland Law Review explores the tension between innovation efforts that reduce jobs and a public finance model that funds the safety net through taxes on jobs.
• DISTRICT OF COLUMBIA lawmaker Kenyan McDuffie has introduced a bill that would require the District to take an active role in advancing racial equity.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.

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