Just Taxes Blog by ITEP

State Rundown 4/27: Arbor Day Brings Some Fruitful Tax Developments, Some Shady Proposals

April 27, 2018

This Arbor Day week, the seeds of discontent with underfunded school systems and underpaid teachers continued to spread, with walkouts occurring in both Arizona and Colorado. And recognizing the need to see the forest as well as the trees, the Arizona teachers have presented revenue solutions to get to the true root of the problem. In the plains states, tax cut proposals continue to pop up like weeds in Kansas and threaten to spread to Iowa and Missouri, where lawmakers are running out of time but are still hoping their efforts to pass destructive tax cuts will bear fruit.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

Major State Tax Proposals/Developments:

  • Statewide teacher walkouts commenced in Arizona and Colorado this week. Arizona teachers are pushing for revenue solutions and an end to the state’s long history of tax cuts, which continue even up until this week with a new law exempting coal from the state’s sales tax. Read ITEP’s statement on the drivers and potential solutions here.
  • Iowa lawmakers, now ten days past their scheduled adjournment date, spent the week chipping away at some of the less controversial aspects of the budget while waiting for leaders to hash out their final tax plan behind closed doors. That tax plan is supposedly near completion. One sticking point is some legislators’ insistence on adopting the federal tax-cut bill’s deduction for pass-through business income, which would predominantly benefit the wealthiest
  • Missouri lawmakers are considering impeaching Eric Greitens while also trying to wrap up legislation for the session, including the state budget, which could underfund K-12 education by $50 million. Tax cut deliberations are also ongoing, with a “ruinouspackage passing the House and moving on to the Senate. A 10-cent gas tax increase to restore roads funding is on the table as well.
  • 10 months after rolling back some of former-Gov. Brownback’s tax cuts, Kansas lawmakers are considering enacting a new cut raising the state’s standard deduction, even while lawmakers are still scrambling to figure out how to meet court demands for adequate funding for public education.
  • Lawmakers in Oregon will convene for a Special Session on May 21 to address the governor’s proposal to extend the state’s preferential tax rate for business pass-through income to sole proprietorships. The proposal followed signing a law to decouple from a 20% exclusion for business pass-through income at the federal level.
  • The Minnesota House Tax Committee has introduced an omnibus bill that would respond to federal conformity by changing the base of the state’s personal income tax from federal taxable to adjusted gross income along with unrelated cuts to the corporate and personal income taxes: cutting corporate income tax rate, eliminating the corporate alternative minimum tax, increasing the standard deduction for joint-filers, and reducing the income tax rate for the second bracket.
  • A California initiative to repeal a recently enacted gas tax increase has received enough signatures to qualify for the November ballot.

In Other News:

  • Alaska legislators continue to work past the scheduled end of legislative session to complete the state’s operating budget. The state is expected to tap permanent fund earnings to fund operating expenses.
  • Large beverage and oil companies are prepared to spend tens of millions of dollars in California on a campaign to require future ballot measures that would increase taxes to receive supermajority support for passage.
  • The Massachusetts House rejected two major tax cut proposals this week that would have reduced the state’s sales tax and income tax rates to 5 percent. A ballot initiative to lower the 6.5 percent sales tax rate to 5 percent continues to be pushed by the state’s retail community. Advocates for adequate public services are pushing back.
  • Maine’s budget remains unresolved as Gov. Paul LePage fights Medicaid expansion. As a result, tax conformity debates have been pushed to the sideline, but continue.
  • A busy session for fiscal policy in Maryland is wrapping up with a mixed bag of results, including an expansion of the state’s Earned Income Tax Credit (EITC), a corporate tax cut in the form of “Single Sales Factor apportionment,” a multi-billion-dollar tax subsidy package designed to lure Amazon, and funding for needed DC-area transit repairs.
  • New Jersey tax debates may be heating up again. Gov. Phil Murphy continues to tout his bold revenue-raising plan, while the Senate president is cold on Murphy’s millionaires tax but does support raising revenue from large corporations. Residents are also watching a U.S. Supreme Court case that could legalize sports betting in the state.
  • North Dakota Doug Burgum is proposing another cut to higher education funding, which would add up to a one-third cut in state funding in just four years.
  • Nevada cannabis tax revenues continue to exceed projections.
  • The Colorado State Supreme Court ruled that taxing districts’ extension of the sales tax to previous exempt items (candy, soft drinks, cigarettes and food containers) didn’t constitute a large enough change to tax policy to require voter approval under TABOR.
  • Lawmakers on The Arkansas Tax Reform and Relief Tax Force have been reviewing sales tax exemptions, subjecting several to further review and potential elimination, including the preferential tax rate on groceries combined with an offsetting tax credit targeted to low- and moderate-income families.
  • Hawaii voters will see a surcharge on investment property to fund public education appear on their ballots this fall. SB 2922, making that possible, passed this week. The state currently authorizes counties to levy property taxes.

What We’re Reading…

  • Governing reports on new research finding that cities that make more use of economic development tax subsidies tend to have higher levels of income inequality.
  • In an opinion piece, the Economic Progress Institute’s Rachel Flum argues for tax increases as investments in the Ocean State. Specifically, she suggests expanding Rhode Island’s income tax, restoring the corporate minimum tax, and further modernizing the state’s sales tax.
  • In Education Week, a Kentucky superintendent calls for more investment in public education and pushes back against supply-side reasoning for tax cuts.
  • As Nebraskans prepare to consider a property tax cut ballot initiative, one senator soberly reminds voters that identifying revenue sources is key to responsible, sustainable tax reform.
  • A new poll released by the Associated Press-NORC Center for Public Affairs Research found that Americans overwhelmingly believe teachers don’t make enough money and half say they would support paying higher taxes to give teachers a raise.
  • Daniel Chomsky writes for the Institute for New Economic Thinking about the frequent misrepresentation of American attitudes toward taxes. Americans oppose tax cuts for the wealthy and support more fair and adequate revenue systems, despite common media depictions otherwise.

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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