Just Taxes Blog by ITEP

State Rundown 5/15: The Merry Merry Month of May(be)

May 15, 2024

Uncertainty abounds in state tax debates lately, as California leaders explore ideas to fill their revenue shortfall, Colorado lawmakers enact another EITC boost, North Carolina policymakers try to figure out where their revenue surplus came from and how to use it, and Vermont lawmakers pass a budget while already expecting Gov. Phil Scott to veto it. At least Ohioans have certainty about where their budget woes came from: misguided tax cuts.

Major State Tax Proposals and Developments

  • A COLORADO bill that would increase the state Earned Income Tax Credit from 38 percent of the federal credit to 50 percent in 2024 was signed by Gov. Jared Polis. The rate will then drop to 35 percent in 2025 and 25 percent in 2026 and beyond, with conditional increases to the credit (up to 50 percent) based on revenue growth subject to TABOR. The state has been on a trajectory to reduce its EITC to 20 percent of the federal. The bill also combines two childcare credits into one credit and modifies requirements for corporations filing combined returns. – MARCO GUZMAN
  • The VERMONT legislature passed a budget that would raise statewide property tax rates for schools by 13.8 percent on average. The budget aims to address the rising costs of pre-K-12 education and the end of federal pandemic aid. The bill also includes a repeal of the state’s sales tax exemption for pre-written software and a 3 percent surcharge on short-term rentals, estimated to raise $26 million for the education fund. However, Gov. Phil Scott is expected to veto the legislation. – MILES TRINIDAD
  • VIRGINIA Gov. Glenn Youngkin signed budget legislation passed by the Democratic-led General Assembly that leaves the state’s tax policy mostly unchanged after vetoing the original budget. The enacted budget did not include repeal of the state’s exemption of digital goods from the sales tax, which was estimated to raise over $1 billion over the two-year budget cycle, or legalization of skills games. – MILES TRINIDAD

State Roundup

  • Gov. Kay Ivey of ALABAMA signed a bill that will provide tax credits to businesses who provide childcare as well as certain childcare facilities.
  • ALASKA lawmakers are considering tripling the state’s property tax exemption for seniors, the disabled, and widows. The plan, which comes days before the end of the regular session, would raise the exemption from $150,000 to $450,000 and cost as much as $200 million per year to fund.
  • As part of his May revised budget proposal CALIFORNIA Gov. Gavin Newsom proposed a suspension of the state’s net operating loss (NOL) deduction and a limit to the deduction of $5 million. Although the proposal is for a temporary change, it would raise $5.5 billion in fiscal year 2026.
  • Two additional COLORADO bills have also reached the governor’s desk and are awaiting his signature. The first, a new Family Affordability Tax Credit, that will revamp and expand the state Child Tax Credit providing a credit of up to $3,200 for children under 17. A separate credit for those in the care workforce, that would provide a credit of up to $1,200 for those earning under $100,000 a year, is also now with the governor for consideration.
  • Legislators in ILLINOIS are considering numerous tax credits this session. Noticeably absent from the list of credits is the “Invest in Kids” credit – which allowed households to take a tax credit when donating to the state’s private school voucher program – that was left to sunset last year after much debate.
  • As part of the state budgeting process, MICHIGAN lawmakers are considering a study to examine a road usage charge. The proposed study comes as the final tranche of funding reserved in 2019 for highway reconstruction projects is scheduled to end this year, and lawmakers are looking to additional revenue sources as the state faces a revenue shortfall.
  • The NEVADA Supreme Court ruled against the organization Schools Over Stadiums in their effort to give voters a chance to call off $380 million in public funding that legislators approved for a new Major League Baseball stadium. The initiative was ruled ineligible to appear on the ballot due to inadequate wording.
  • Some NEW JERSEY lawmakers are floating the idea of a revenue raising alternative to Gov. Phil Murphy’s proposed corporate transit fee that includes increasing the sales tax from 6.625 percent to 7 percent. By comparison, the sales tax revenue option is notably more regressive.
  • NORTH CAROLINA lawmakers are considering whether to provide tax rebate checks citing a recent report that estimates an extra $1.4 billion in revenue for the state.
  • OKLAHOMA State Senate President Pro Tempore Greg Treat has again shut down efforts from Gov. Kevin Stitt to pass a personal income tax cut. The cuts would come this year on top of an already enacted elimination of the state’s grocery tax.
  • OHIO Gov. Mike DeWine said that the state’s lower-than-expected tax revenue this year “is a direct result of a cut in taxes” after the legislature passed laws resulting in $3.1 billion in tax cuts that went into effect last July. Currently, the Ohio Office of Budget and Management projects that state revenue is about a half billion dollars less compared to this point last year.

What We’re Reading

  • The Economic Policy Institute published a blog on the many ways in which school voucher programs undermine public education.
  • Governing explains how state and local organizations supporting victims of crimes like sexual assault, domestic violence, and child abuse are losing funding because a federal fund to support those victims is funded solely by court fees and fines, which have been declining rapidly in recent years. These services and victims will continue to suffer without a new funding model, which points to either federal tax dollars or new state and local revenue streams.
  • Governing also delves into how inconsistent and declining federal funding for Unemployment Insurance administration has undermined the system and states’ efforts to prevent fraud.


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