State Rundown 5/29: In Taxes and Television, Endings Can Be Hard

Like certain recent controversially concluded television shows, tax and budget debates can end in many ways and often receive mixed reviews. Illinois leaders, for example, ended on a cliffhanger by approving a historic constitutional amendment to create a graduated income tax in the state, whose ultimate conclusion will be crowdsourced by voters next November. Arizona’s fiscal finale fell flat with many observers due to corner-cutting on needed investments and a heavy focus on tax cuts. Texas legislators went for crowd-pleasing property tax cuts and school funding increases but left a gigantic “but how will we pay for this” plot hole in their script. And after appearing ready to conclude after countless seasons, Nebraska lawmakers left their school funding, tax reform, and business tax break storylines on the cutting room floor to be picked up for yet another season next year.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals and Developments

• ILLINOIS voters will have a historic opportunity to amend the state constitution in November 2020 to allow for a graduated income tax. The Senate approved legislation for the constitutional amendment earlier in May and lawmakers in the House voted to put the measure on the ballot on Memorial Day. — LISA CHRISTENSEN GEE
• MINNESOTA lawmakers finalized a budget deal in one day of special session earlier this week. Tax policy outcomes? No gas tax increase, but the health care provider tax will not expire at the end of this year but rather continue at 1.8% (compared to 2%). And the top 80% of Minnesotans will receive a tax cut due to lowering the second marginal income tax rate. — LISA CHRISTENSEN GEE
• ARIZONA’s session came to an end this week with the approval of an $11.8 billion budget, ridden with $386 million in permanent tax cuts. The plan includes tax conformity coupled with tax cuts – replacing personal and dependent exemptions with a new dependent tax credit, increasing the standard deduction and charitable contribution deduction, and cutting tax rates. It also increases the state’s reserves to $1 billion. — AIDAN DAVIS
• NEBRASKA legislators will end their session this week despite having failed to reach agreement on the major tax questions raised this year. Senators’ resistance to raising progressive income tax revenues and Gov. Pete Rickett’s refusal to consider tax increases in any form spelled doom for both comprehensive and scaled-down efforts to bring down property taxes and improve school funding. And enmity between rural and urban lawmakers over those debates also brought down a proposed revamp of the state’s business tax subsidies programs. All these issues will be waiting for lawmakers when they return next year. — DYLAN GRUNDMAN
• TEXAS legislators passed the state’s two-year budget including increases to school funding and property tax relief. Notably lacking is a pay-for for the $9.5 billion plan after the next two years. After the property-sales tax “swap” failed in the legislature lawmakers were unable to agree on another funding source and will rely on “a robust Texas economy.” Lawmakers agreed to increase state funding of public schools by $5 billion. They also settled on a school property tax change that will reduce school property tax rates by an average of 8 cents per $100 of a home’s value in 2020 and by 13 cents in 2021 and a 2.5% rollback rate. For local property taxes, the rollback rate was cut to 3.5% from the current 8%. — MISHA HILL

State Roundup

• In CALIFORNIA, a Senate Panel has approved a budget that includes expanding the state’s EITC to residents with Individual Taxpayer Identification Numbers (ITINs); a second measure to increase resources for education may appear on the 2020 ballot; and new data released on cannabis taxes has folks talking growth and reasons for why collections may be falling short of expectations.
• Lawmakers in CONNECTICUT are narrowing in on a budget deal. The latest iteration would create a new mansion tax but exclude an income tax increase on the state’s wealthiest, which would raise a substantial amount of revenue ($262 million per year). Additional revenue raisers remain up for discussion.
• In the DISTRICT OF COLUMBIA, as parking enforcement collections have declined with the advent of online parking payment methods, city councilmembers are considering allowing resident parking enforcers. Fee enforcement from public officials is already fraught with racial and other implicit biases and expanding this authority to all citizens would likely exacerbate these inequities.
• IOWA legislators’ attempt to obstruct local jurisdictions’ ability to fund education and other priorities through special hearings and supermajority votes is now law.
• KANSAS lawmakers hold their final day of legislative session today where they are expected to attempt to override several gubernatorial vetoes, including a bill that sought to cut taxes for multinational corporations, wealthy individuals, and the sales tax on food.
• In LOUISIANA a Senate panel advanced a bill that would restrict spending to 98% of the official forecast, earmarking all additional funding as “surplus” for restricted uses like infrastructure spending, debt payments, and building up the state’s “rainy day” fund. And a constitutional amendment to allow local governments to enter directly into tax abatement agreements with manufacturers passed the House on its second try.
• In MAINE, lawmakers are a step closer to expanding the state’s Earned Income Tax Credit (EITC). A bill that would expand the credit from 5 to 23 percent of the federal credit, while making additional enhancements, has passed out of committee.
• Also in MAINE, a bill to allow cities and towns to add a 1 percent sales tax to meals and lodging was approved by the Legislature’s Taxation Committee.
• NEW JERSEY Gov. Phil Murphy continues to fight for progressive improvements to the state’s tax code and bottom line, saying he may veto the state budget if lawmakers do not enact a millionaires’ tax.
• OHIO’s Senate continues to weigh potential changes to the House-passed budget deal. Lawmakers are receiving pressure from the state’s business groups (and wealthy residents who are the primary beneficiaries of the policy) to fully maintain the state’s pricey pass-through tax break.
• OREGON’s experiment with a “gigabit tax break” is ending after a four-year saga that started with an attempt to lure Google Fiber to Portland and will end with repeal because the bill’s consequences were poorly understood and threatened funding for public services, while also failing to win over Google.
• In addition to the budget bills on their way to TEXAS Gov. Greg Abbott’s desk, the legislature also moved toward passing a constitutional amendment that would make it even harder for Texas to establish an income tax. Legal experts worry that poor wording in the bill could imperil the state’s business franchise tax.
• VERMONT lawmakers are also gearing up for session’s end. The state House has adjourned, whereas the Senate continues to work into this week.

What We’re Reading

• The Black Census Project, the largest survey of Black people conducted in the United States since Reconstruction, released a report exploring the political opinions of Black folks.
• The Peach State’s extremely restrictive abortion law has brought attention to Georgia’s generous film tax credits as progressive filmmakers consider pulling projects in protest.
• A new study adds to the evidence showing the effectiveness of soda taxes.
• The Off The Charts blog reviews state efforts this year to tax capital gains income more fairly.
• Are massive donations by tech millionaires bribes to society at large? Vox has the story.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.

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