May 9, 2019
May 9, 2019
Lawmakers in Illinois and Ohio have advanced major tax proposals but cannot rest just yet, as they must still get past the other legislative chamber. Their counterparts in Michigan, Minnesota, Nebraska, and Oregon, meanwhile, are all at impasses over education funding, as those in Texas left their school funding disagreement unresolved at least until they reconvene…in 2021. And in an era of many states pre-empting smaller jurisdictions by revoking local decision-making powers, leaders in Colorado and Delaware made moves in the opposite direction, entrusting cities and school districts with more local control.
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- Lawmakers are moving in the direction of enacting a graduated income tax in ILLINOIS. The Senate approved legislation to amend the state constitution last week along with a rate structure, elimination of the estate tax, and a property tax freeze. The issue is expected to be taken up in the House over the next week or so, though not without negotiation. In the meantime, Gov. J.B. Pritzker released his plan for legalizing and taxing recreational marijuana—a plan that House Speaker Michael Madigan has indicated is already being “ratcheted down” in the House—and the Senate is considering a bill to increase the state’s gas tax by 44 cents per gallon along with increased registration fees. — LISA CHRISTENSEN GEE
- The KANSAS legislative session has come to an end, with lawmakers passing a budget and a second attempt at tax conformity in the final hours of the session. The tax bill would allow individuals to choose to claim either the state standard or itemized deductions, reduce the sales tax on food over time with increased revenue from online sales, and gives favorable treatment for multinational corporations repatriating income. Gov. Laura Kelly is expected to veto the bill this bill as she did the first one earlier this session. — LISA CHRISTENSEN GEE
- Budget negotiations in MINNESOTA have hit a brick wall. The North Star State has a divided government this year and those divisions are stark as lawmakers attempt to agree to common terms on issues including: transportation funding (House passed a gas tax increase; Senate relies on existing revenue and small fee increases); education funding (House wants to increase by $700 million; Senate by $200 million); the state’s medical provider tax (House wants to extend this important funding source for the health and human services budget; Senate disagrees); and competing tax bills. The deadline for the end of session is May 20. — LISA CHRISTENSEN GEE
- Lawmakers in the OHIO House released a budget proposal that would, among other things, lower the state’s costly business income deduction from $250,000 to $100,000, eliminate the preferential 3 percent flat rate on business income and cut personal income tax rates across the board. The amended budget will now move to the Senate for consideration. — AIDAN DAVIS
- Teachers and Senate Republicans in OREGON each staged walkouts of sorts over the state of education funding and proposals to improve it. Teachers walked out over overcrowded classes and staffing issues, while all of the Republicans in the Senate opted to disappear for the day so that a quorum could not be reached to vote on a bill to raise $1 billion for schools to address concerns like those the teachers raised with their demonstration. — DYLAN GRUNDMAN
- A hard-fought Republican proposal in TEXAS to swap a sales tax increase for a property tax cut was successfully postponed until the next legislative session in 2021. The proposal supported by the “Big Three” in state leadership—Gov. Greg Abbot, Lt. Gov. Patrick and Speaker Bonnen—was defeated in part based on data showing it would have led to a tax increase for most lawmakers’ constituents. — LISA CHRISTENSEN GEE
- ALABAMA lawmakers are considering establishing a state lottery to add funds to the general fund. As ITEP has previously noted, state lotteries gamble public funds and operate more like a regressive tax for public services.
- As federal conformity discussions for 2018 begin to wrap up, ARIZONA lawmakers are now considering proposals to cut taxes (and investments) in the coming year.
- Among the tax provisions included in CALIFORNIA Gov. Gavin Newsom’s revised budget is the proposal to eliminate the sales tax on diapers and menstrual products.
- COLORADO lawmakers wrapped up their 2019 legislative session last week having enacted major bills related to health, the environment, and education. In tax happenings, a bill to tax vaping and raise the tax on tobacco products that would have increased investments in state pre-k programs was defeated while lawmakers were successful in putting on the ballot a question to voters for the state to retain TABOR money to invest in roads, education, and other public priorities.
- COLORADO lawmakers also approved a bill to reverse an existing law and allow local governments to set their own minimum wages.
- The CONNECTICUT House, Senate and governor continue to work toward a compromise tax and spending plan as Democrats continue to pressure Gov. Ned Lamont to consider tax increases on the state’s wealthiest households. Further, the taxation of cannabis remains a hot topic in the state capital this week.
- The Council of the DISTRICT OF COLUMBIA included several fee increases in their budget recommendations. The fees aim to reduce congestion and the number of cars on the road. First, a proposal to increase the price of residential parking permits from $35 to $50 per year. Then, a study to explore the possibility of adding tolls or congestion pricing in the District. And finally, councilmembers pushed back against the mayor’s proposal to permanently eliminate the one-dollar fare on the District’s Circulator bus line. Mayor Bowser also announced plans to move forward with taxation and regulation of cannabis which has been legal to use and grow in the District since 2014.
- DELAWARE leaders are considering granting school boards the ability to raise needed property tax revenues without holding a referendum each time.
- FLORIDA budget negotiators struck a few last-minute deals before wrapping up for the year. Among them, they approved two ill-advised sales tax holidays and a business rental tax rate cut, and will require public schools to share teacher pay-raise funds approved last year with charter schools. They also decided to restrict voting rights for former felons by requiring full payment of fines first, a move similar to once-prevalent racist poll taxes.
- A GEORGIA legislator introduced a bill to reinstate the state electric vehicle (EV) tax credit. The state had a $5,000 credit for EVs that was eliminated in 2015. The proposal from a Republican lawmaker would establish a $2,500 credit for new purchases of EVs, plug-in hybrids or zero emission vehicles.
- HAWAII lawmakers wrapped up their 2019 legislative session. A range of tax bills, including a vacation rental tax bill and a bill to tax real estate investment trusts (REITs), now make their way to Gov. David Ige for his approval or veto in the coming weeks.
- Lawmakers in MICHIGAN are miles apart not only on Gov. Gretchen Whitmer’s proposed gas tax increase but also on education funding—how much of a boost K-12 and colleges and universities will see and where that money will come from. For years the state has been directing School Aid to universities and revenue from income taxes to roads—two “shell games” the governor wants to correct in order to redirect funding to investing in kids, particularly for schools with higher concentrations of need.
- The MASSACHUSETTS state Senate released its budget proposal this week. Included are new taxes on e-cigarettes, vaping products and opioid drugs.
- MONTANA Gov. Steve Bullock vetoed a bill that would have increased the amount of social security income exempt from state taxation because it would have disproportionately benefited high-income seniors. A bill to protect low-income residents of mobile homes from losing their property in tax auctions was signed into law.
- NEBRASKA lawmakers are trying yet again to find common ground on taxes and school funding after a proposal finally made it out of the Revenue Committee only to flounder badly before the full legislature. The bill will not come back up for debate unless its sponsors can prove they have substantial support to overcome filibuster and veto threats.
- NEW JERSEY Gov. Phil Murphy has amended his proposal to improve the state’s fiscal situation and upside-down tax code with a millionaires’ tax, offering to use part of the revenue generated to fund a $250 million property tax reduction. But the powerful Senate President remains opposed.
- In NORTH CAROLINA, the House approved its version of the budget. Included is an increase to the state’s standard deduction and a reduction in the franchise tax. Planned reductions to the state’s personal and corporate income taxes remain in place. The state Senate will now develop a budget for consideration by the month’s end.
- While their session has come to a close, WYOMING lawmakers are now reconsidering tax proposals that failed to pass in committee. Proposals that remain under consideration include a corporate income tax for large retailers, proposals to raise the state’s gas tax and the possibility of allowing additional local option taxes.
What We’re Reading
- ITEP Deputy Director Meg Wiehe and Christopher Wimer of Columbia University write in Governing about how states can reduce child poverty with Child Tax Credits.
- The New York Times Editorial Board delves into the costly and losing strategy of corporate kickbacks for local sales taxes in CALIFORNIA.
- ProPublica reports on the evisceration of the IRS and why the rich don’t get audited, enabling tax avoidance and cheats.
- State revenues have been looking good in many states this year, finally surpassing pre-recession levels, but Governing reminds that the good times won’t always roll, pointing to indicators that the upswing is waning and reminding of the importance of long-term fiscal planning.
- CityLab explores the geographic patterns of “brain drain” in the U.S. and what some states are doing to try to stem the out-flow of educated and skilled people.
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