State Rundown 4/3: Some States Buck the Trend on Foolish Tax Policy

This week tax cuts were debated across the upper Midwest. Nebraska finally put to bed plans for a regressive swap of sales tax revenue for property tax cuts, sparing the state’s working families a net tax increase. Wisconsin Gov. Tony Evers vetoed yet another income tax cut passed by the GOP controlled legislature. And Idaho Gov. Brad Little signed a cut into law, dropping the state’s income tax rates from 5.8 to 5.695 percent. Meanwhile in the South, Virginia Gov. Glenn Youngkin vetoed legalizing recreational cannabis sales, which would have included an 8 percent excise tax, and Georgia Gov. Brian Kemp was sent several property tax cut bills by the state’s legislature. One increases the state’s modest homestead exemption, while another would cause long-term harm by capping assessment growth.

Major State Tax Proposals and Developments

• GEORGIA lawmakers sent multiple property tax cut bills to the desk of Gov. Brian Kemp. One measure would cap the growth in value of a home, as assessed for property taxes, to the rate of inflation. Municipalities will have a one-time opportunity to opt out of this mandate and can also increase sales tax by a penny to replace lost property tax revenue. The second measure will double the state’s homestead exemption from $2,000 to $4,000. – NEVA BUTKUS
• Gov. Tony Evers of WISCONSIN vetoed the Republican-controlled legislature’s final attempt to pass income tax cuts this legislative session. The latest proposal included expanding the state’s second 4.4 percent personal income tax bracket to include income up to $304,170 for single filers and $405,550 for joint filers. The bill would have also excluded the first $150,000 of retirement income, for retirees over 67, from tax. The tax cuts would have cost the state $3.2 billion in lost revenue over two years. – NEVA BUTKUS
• Jackson County MISSOURI voters rejected a 3/8 cent sales tax to subsidize developing a new stadium for the Kansas City Royals and renovating Arrowhead Stadium for the Kansas City Chiefs. The measure was supported by both teams and Mayor Quinton Lucas. However, public discontent about corporate tax benefits, the stadium’s location, and the opposition of the Kansas City Tenants Union resulted in a decisive defeat. – ELI BYERLY-DUKE
• NEBRASKA legislators have agreed they won’t raise the sales tax rate this year, finally putting to rest Gov. Jim Pillen’s proposed means of funding property tax cuts, which would have amounted to a regressive tax shift. Lawmakers may still fund those cuts by pausing previously enacted income tax cuts, but are running out of time to reach a deal this session. – DYLAN GRUNDMAN O’NEILL

State Roundup

• DISTRICT OF COLUMBIA Mayor Muriel Bowser released her 2025 budget proposal and, in the absence of revenue raisers, includes freezing the scheduled Earned Income Tax Credit increase at 70 percent of the federal amount; an increase to the sales tax rate to 6.5 percent in fiscal 2026 and 7 percent in fiscal 2027; and an electric vehicle tax of up to 3 percent.
• GEORGIA lawmakers were unable to come to a consensus on capping the state’s billion-dollar film credit, effectively killing the effort this session.
• IDAHO Gov. Brad Little signed a bill into law that will, among other things, cut the state’s individual and corporate income tax rates from 5.8 percent to 5.695 percent.
• The IOWA House and Senate released their own respective budget targets for Fiscal Year 2025. The $82 million difference in the two chambers’ plans indicates that a final tax cut compromise has not been finalized. Meanwhile, lawmakers approved a rural jobs tax credit bill – oftentimes referred to as a New Markets Tax Credits or CAPCO credits. Despite lobbyists’ claims of job creation in rural areas, these credits have repeatedly been shown to lack transparency and primarily benefit wealthy insurance companies and investment firms.
• MARYLAND House and Senate leaders announced that they have reached an agreement on next year’s budget. The announcement comes after budget negotiations stalled over a $1.2 billion revenue package proposed by the House, and the Senate opposed broad tax increases and gaming expansion. Details are expected to be released in an upcoming news conference.
• NEVADA could face a big revenue shortfall for roads and bridges if a policy allowing gas taxes to grow in pace with construction inflation expires as scheduled at the end of 2026.
• A lawsuit challenging aspects of NEW YORK City’s property tax system can move forward, a court has ruled. The case could change some of the inequitable practices that currently cause local property taxes to widen racial and economic disparities.
• OREGON Gov. Tina Kotek signed legislation that allows a subtraction from federal taxable income for amounts received in settlement of civil actions from certain wildfires or legal fees incurred for wildfire-related litigation. It allows for a subtraction regardless of whether a taxpayer itemized their deduction on their federal returns and applies, retroactively, to tax years 2018 through 2021.
• The TENNESSEE House Finance Committee advanced a bill to cut the state’s franchise tax to the full body on a voice vote. The measure would change the tax’s base at an annual cost of about $400 million and provide a backwards looking rebate that would cost a total of $700 million. Unlike a similar Senate measure, the House version would require firms receiving the rebate to be publicly identified on the state’s website.
• VIRGINIA Gov. Glenn Youngkin vetoed legislation that would have legalized retail marijuana sales. The legislation would have included an 8 percent sales tax on recreational cannabis with an option for localities to levy an additional 2.5 percent tax.

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