April 4, 2019
April 4, 2019
Transportation funding was a hot topic this week, as OHIO lawmakers responsibly voted to update their gas tax and offset some of its impact on lower-income families with an Earned Income Tax Credit (EITC) boost, while NEW YORK enacted the nation’s first “congestion pricing” charge, and LOUISIANA and VIRGINIA leaders looked at gas tax updates as well—a trend ITEP’s Carl Davis explored in depth today here. Broad tax packages are also being hashed out in LOUISIANA, NEBRASKA, OREGON, and TEXAS. And MARYLAND became the sixth state with a $15 minimum wage on the horizon.
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- Lawmakers in OHIO have sent a bill to the governor to increase the state’s gas tax for the first time in 14 years. Rates for fuel will go up 10.5 cents per gallon and diesel will go up 19 cents per gallon on July 1. The bill also includes an expansion to the state’s Earned Income Tax Credit (EITC)—tripling the amount of the federal credit residents can file (from 10 to 30 percent) and lifting the cap for those with modestly higher incomes—however the credit remains nonrefundable, so the lowest income Ohioans will not fully benefit under the change. — AIDAN DAVIS
- The NEW YORK state budget has been finalized, receiving mixed reviews. Lawmakers abandoned the proposed “pied-à-terre” tax on ultra-rich mansion owners, replacing it with an increase in the state’s real estate transfer tax. The transfer tax includes a progressive rate structure, but many consider this change a win for the wealthy. The budget also includes a first-in-the-nation “congestion pricing” charge for entering Manhattan, which will raise transportation revenue and disincentivize driving. — AIDAN DAVIS
- Low-income advocates in ALABAMA have long advocated for eliminating the sales tax on groceries and paying for it by getting rid of an expensive deduction for the wealthy. Alabama is the only state that allows unlimited deductions of federal income and payroll tax from state taxes owed—costing the state nearly $1 billion annually.
- ARKANSAS lawmakers continue to move tax legislation, with a House panel giving a nod to a bill that would require sales tax collection from online retailers in addition to cutting the corporate income tax rate, extending net operating losses for businesses, and allowing for single sales apportionment.
- In CALIFORNIA, bills have been introduced to reinstate the state’s estate tax (and a new gift tax) and to create a constitutional amendment that would lower the threshold of support needed to pass ballot measures to raise money for local infrastructure projects.
- A COLORADO panel advanced a bill that would allow voters to permanently allow excess revenues under TABOR to be retained by the state rather than refunded and a companion bill would ask if those funds could be allocated equally between K-12 education spending, roads, and higher education.
- KENTUCKY lawmakers pushed more corporate tax breaks on the last day of legislative session last week, creating more deductions for multi-state and multi-national corporations that will generate losses of an unknown size to state coffers.
- LOUISIANA’s legislative session starts next week and tax topics are among the top priorities on the agenda, including raising the gas tax, consolidation of sales tax collections, and a series of bills that would eliminate the personal income tax deduction for federal taxes paid while also changing the rate structure.
- MARYLAND General Assembly members overwhelmingly voted to override Gov. Larry Hogan’s veto to become the sixth state to raise its minimum wage to $15 per hour. The wage will gradually increase to that amount by 2026.
- A MONTANA bill regarding the treatment of tribal property that is under review by the federal government for placement into trust status has passed out of the House. Tribal communities and other advocates oppose the measure because it could allow localities to “recapture” tax payments from tribes whose trust application was denied.
Another bill to allow a local sales tax option, subject to voter approval, of up to four percent was tabled in committee; while a proposal to increase the amount of Social Security income exempt from taxes that has already passed the Senate passed out of committee.
- Members of NEBRASKA’s revenue committee continue to try to fine-tune a tax package in hopes of getting unanimous approval within the committee by April 15th and enough support in the full legislature to overcome a possible filibuster and/or veto. That will be a difficult feat considering the many opposing interests and already high tensions in the body, additional distrust sewn by a decision to delay voter-approved Medicaid expansion until late 2020, and a revenue forecast coming April 25th that will reflect the effects of devastating floods on the state economy.
- NORTH DAKOTA Gov. Doug Burgum signed into law a bill reflecting a new agreement between the state and tribal governments over revenue sharing from oil taxes.
- OREGON lawmakers are currently looking at three options for new taxes to raise revenue needed to improve school funding around the state, including a “commercial activities tax,” a “value added tax,” and a Texas-style hybrid of the two. Under any of these options, an offsetting credit would be needed to keep the state tax code from becoming even more upside-down than it currently is.
- The TEXAS House unanimously passed a budget bill that includes an additional $9 billion for property tax reductions and K-12 funding increases. The 2.5% cap on property tax increases excludes school districts and special property taxing districts, effectively limiting the cap to cities and counties. The Senate proposal calls for the same $9 billion in funding, allocated slightly differently, and would pay for an increase to the homestead exemption by diverting monies from the rainy day fund.
- VIRGINIA fuel taxes and related fees may be increased to raise $280 million for transportation infrastructure.
What We’re Reading
- An increasing number of states are responding to Trump’s tax cuts for the wealthiest taxpayers with proposals to tax the rich locally. Bloomberg has the story.
- Newly legal sports betting is producing revenue in six states that implemented it last year, but revenues are coming in below projections in four of those states, the Associated Press reports.
- Route Fifty reports on new research from Rutgers and the Shanker Institute showing that in most states, school funding is higher in more affluent districts and lower in higher-needs districts, increasing rather than decreasing barriers to equal opportunity.
- Route Fifty also provides an update on the momentum to raise minimum wages to living wages, as six states have now enacted $15-per-hour minimum wage laws.
- Stateline notes that housing costs are an increasing issue in rural areas as well as in cities.
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