April 6, 2023
April 6, 2023
This week, a bill out of Arkansas that would cut the top personal income tax rate and the corporate income tax rate found its way to the governor’s desk. While it’s being sold as a cut for the middle class, ITEP analysis shows that a vast majority of the benefits will go to households in the top 20 percent.
Also, the recent success of the capital gains excise tax in Washington state’s highest court has officials in Seattle considering similar options. And if you want to continue following news and analysis related to stories like this, be sure to keep an eye on our newly launched Local Policy work, which highlights the important role of local tax policy and ways to move toward equitable local tax systems.
Major State Tax Proposals and Developments
- A bill that would drop ARKANSAS’ top personal income tax rate from 4.9 to 4.7 percent and drop the corporate income tax rate from 5.3 to 5.1 percent has been sent to Gov. Sarah Huckabee Sanders where it is expected to be approved. Despite being touted as another tax cut for middle-income households, the wealthiest 20 percent of Arkansans will see 80 percent of the savings. – NEVA BUTKUS
- ALABAMA’s legislature is considering two bills that would cut the state’s personal income tax by $57 million when fully phased in. The first bill would reduce their top bracket from 5 to 4.95 percent, which applies to income over $3,000 for single filers and $6,000 for married. The second bill would eliminate the first 2 percent bracket.
- The ARKANSAS House passed a bill to phase-out the state’s throwback rule that requires multi-state corporations based in Arkansas to pay taxes on revenue made from out-of-state sales that are not otherwise taxable. The repeal would cost $74 million annually when fully implemented.
- A new study projects that CONNECTICUT tax revenues will likely plunge in the final few months of the year. The study expects the state to miss the official revenue forecast by $1.1 billion. The news comes as Gov. Ned Lamont spars with legislators over his recent tax cut plan.
- The KENTUCKY legislature passed, and Gov. Andy Beshear signed into law, a bill phasing out the property tax on bourbon barrels. Localities currently collect about $40 million annually, but the revenue source has been growing rapidly thanks to the bourbon industry’s boom.
- MINNESOTA Gov. Tim Walz expressed support for exempting Social Security from income tax for more Minnesotans but does not believe the highest earning Minnesotans should be included in the exemption.
- Localities across MISSOURI approved sales taxes on cannabis—often by wide margins. While the state already collects a 6 percent tax, elections on April 5 marked localities’ first chance to approve an additional 3 percent tax for their own use.
- The NEBRASKA legislature is continuing debate on major property tax changes—estimated to cost the state about $500 million per year. The measure—LB 243—has now cleared its first round of consideration and will be considered in parallel with major income tax cuts. Although members proposed numerous amendments aiming to target the neediest, all were rejected.
- In NORTH CAROLINA, Senate leadership wants to reduce the income tax rate to 2.49 percent in 2027 instead of 3.99 percent like current law.
- The NORTH DAKOTA Senate passed legislation that would reduce property taxes statewide by about 16.7 percent, expand the Homestead Property Tax Credit, and eliminate the personal income tax for single filers earning less than $44,725 or joint filers earning $74,750 annually. The proposal is expected to cost $546 million. The Senate’s legislation amended a bill passed by the House that originally included a flat income tax of 1.99 percent.
- In OKLAHOMA, the Senate passed HB 1935, which allows for $7,500 tax credits for each student in a household for private school tuition, or $1,000 for approved expenses for homeschooling. The bill now heads to a house committee hearing.
- RHODE ISLAND Senate leadership is supporting legislation to create a statewide tangible property tax exemption of $100,000, which would eliminate the tax for an estimated 85 percent of businesses in the state. The proposal is estimated to cost $36.6 million per year.
- In SOUTH CAROLINA, the House voted to repeal the state’s sales tax from period products to help make menstrual necessities more affordable.
- WASHINGTON, D.C. Mayor Muriel Bowser is proposing to increase the tax breaks available to owners of downtown office buildings who remodel them into housing.
What We’re Reading
- Former Colorado legislators published a guest column to warn Arizona leaders that a resolution currently under consideration that would implement TABOR-like provisions would hurt the state’s ability to fund public services and would provide the greatest benefits to the wealthiest residents.
- The Washington state Supreme Court’s approval of the capital gains excise tax has some Seattle officials eyeing similar measures.
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