May 22, 2019
May 22, 2019
Lawmakers and advocates can enjoy their barbeques with only one eye on their work email this weekend in states that have essentially finished their budget debates such as Alaska, Minnesota, Nebraska, and Oklahoma, though both Alaska and Minnesota require special sessions to wrap things up. Getting to those barbeques may be a bumpy ride in Louisiana, Michigan, and other states still working to modernize outdated and inadequate gas taxes.
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- Progressive tax reform in ILLINOIS is one step closer to realization as the bill to amend the state constitution to allow for a graduated income tax was passed out of a House committee and sent to the chamber floor where members are expected to vote on the measure shortly. The Senate has already given its approval. — LISA CHRISTENSEN GEE
- KANSAS Gov. Laura Kelly vetoed for the second time this session a bill that would cut taxes for individuals and corporations post-TCJA tax reforms. Lawmakers are expected to attempt to override the veto on their last day of session—May 29. — LISA CHRISTENSEN GEE
- MINNESOTA lawmakers have reached a budget deal, which includes dropping Gov. Tim Walz’s proposal for a gas tax increase, keeping the state’s medical provider tax at 1.8 percent (down from 2 percent but no longer subject to a sunset), and implementing income tax reforms that create greater alignment to the federal tax code post-TCJA, including higher standard deduction amounts and the reduction/elimination of some credits. Other income tax changes of note include reducing the second marginal tax rate. Because of the quick turnaround time between striking a bargain and the adjournment deadline, lawmakers will need to return for a special session in order to pass the budget to make it official. — LISA CHRISTENSEN GEE
- Lawmakers in ALASKA were convened for a special session to wrap up some unfinished business, including the state budget and how to handle the payout from the state’s Permanent Fund Dividend.
- A new budget deal has surfaced in ARIZONA. The plan cushions the state’s rainy day fund, accelerates the schedule for restoring school program cuts and hands out more than $325 million in tax cuts.
- A CALIFORNIA poll on potential ballot initiatives to raise needed funding for education shows majority support for millionaires’ taxes on wealthy corporations and individuals.
- CONNECTICUT’s Gov. Ned Lamont plans to focus on wrapping up the state budget by session’s end, saving the discussion around highway tolls for special session. Any budget holdups in the meantime will likely revolve around whether, and to what extent, they ask the wealthy to pay their fair share.
- DELAWARE’s bill to tax opioid producers has passed both houses of the legislature and now goes to Gov. John Carney’s desk.
- Legislative updates in LOUISIANA include passage of a bill to exempt diapers and menstrual products from the sales tax, stalling of the gas tax effort, rejection of a bill that sought to change the process whereby tax breaks are approved, and the advancement of the bill to phase out the sales tax increase enacted last year.
- In MASSACHUSETTS, a proposal for a refundable tax credit for family caregivers is under consideration in the legislature.
- The MICHIGAN legislature continues to advance budget bills that omit Gov. Gretchen Whitmer’s top priority of increasing the gas tax. And recent fiscal reports indicate that increased road spending won’t be possible from economic growth alone.
- MISSISSIPPI and MONTANA lawmakers have followed the misguided path of many other state lawmakers in offering tax breaks for film production. Mississippi’s bill will give production companies a 25 percent cut on payroll taxes for non-Mississippi residents. And Montana’s will allow up to a 35 percent tax credit.
- NEBRASKA’s legislature passed a budget that was filibustered at every stage of debate. The budget includes just a $51 million increase to a statewide property tax credit, possibly signaling the end of more ambitious attempts to reform property taxes and school funding. Advocates are encouraging lawmakers to build on the tax conversations had this year and resist a “false sense of urgency” to rush through a tax package before the session ends at the end of the month. A ballot initiative to create an income tax credit for property taxes is also likely dead for the year.
- More NEW MEXICO localities are joining a lawsuit against the state based on complaints that they are not receiving the correct distributions of gross receipts taxes.
- Federal legislation to improve the Child Tax Credit (CTC) would also establish parity in the credit for residents of PUERTO RICO. The Working Families Tax Relief Act would allow Puerto Rico residents to claim the CTC even if they only have one or two children. Currently, Puerto Rico residents can only claim the CTC if they have three or more children.
- TEXAS lawmakers in the House and Senate are still trying to reach an agreement on property tax caps and school finance. The most recent point of contention is if the rollback rate should 3.5 or 2.5 percent.
- TEXAS voters will decide on a constitutional amendment to prohibit the state from enacting a personal income tax this November. A 1993 constitutional amendment already prohibits lawmakers from enacting a personal income tax without voter approval.
- WISCONSIN’s budget process is unfolding in a highly partisan fashion, with conservative lawmakers doing most of the shaping of the fiscal agenda and posturing procedurally to ensure they get more of what they want past anticipated vetoes by Gov. Tony Evers.
What We’re Reading
- Governing reports on new research out of North Carolina State University that comprehensively reviews business tax subsidies from 32 states over 25 years and finds that more often than not, these programs worsen the fiscal health of the jurisdictions that use them.
- Slow growth of the middle-class continues to concern economists. Pew has the story.
- A new research study to be published by the Quarterly Journal of Economics finds the optimal soda tax—that producing the greatest public benefit—would be levied nationwide at between 1 to 2.1 cents per ounce.
- The DISTRICT OF COLUMBIA has joined many other localities in outwardly promoting a policy agenda to advance racial equity, but the mayor’s proposed budget would maintain and in some instances worsen racial inequities in the District according to DCFPI.
- An editorial in OHIO’s Akron Beacon Journal provides an excellent summary of the House’s tax plan and a blueprint for targeted tax relief.
- OKLAHOMA Policy Institute released a statement on the state’s budget deal, which they say includes welcomed progress along with many missed opportunities.
- VIRGINIA’s Commonwealth Institute has released an excellent new report on how the state can expand opportunity and promote equity for all Virginians through its budget and funding choices.
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