Just Taxes Blog by ITEP

State Rundown 6/11: Fiscal Debates Continue Amid Turmoil

State Rundown 6/11: Fiscal Debates Continue Amid Turmoil

June 11, 2020

ITEP
.ITEP Staff

As calls to defund the police demonstrate, state and local decisions about funding priorities and how those funds are raised are deeply embedded in racial justice issues. Tax justice is also a key component in advancing racial justice. Racial wealth disparities are the result of countless historic inequities and tax policy choices are certainly among them. With that in mind, the State Rundown returns this week with the latest on state and local fiscal debates around the country.

Major State Tax Proposals and Developments

  • A proposed bill out of COLORADO called the Tax Fairness Act has passed out of the House Finance Committee. The bill would decouple from business tax breaks in the CARES Act, increase and expand the state Earned Income Tax Credit (EITC) to Individual Taxpayer Identification Number (ITIN) filers, and repeal sales and use tax exemptions for energy produced for industrial use. – MARCO GUZMAN
  • And as the state continues to try and avoid a worsening budget crisis, a bipartisan group of COLORADO lawmakers have fast-tracked a ballot initiative that would repeal a 1983 constitutional amendment that limits property tax collections. Supporters of the effort believe it will win the two-thirds vote in the General Assembly to pass. – MARCO GUZMAN
  • IDAHO Gov. Brad Little announced that he will use aid from the CARES Act to provide property tax relief to local governments if they certify that they are “not using property taxes to fund salaries for police, fire, and EMS.” Moreover, to receive relief, localities would have to freeze property tax collections for 2021 at current levels, “with the only exception being allowing for new construction.” – MARCO GUZMAN
  • LOUISIANA legislators proposed spending nearly $130 million over five years in tax cuts to support businesses. The measures would suspend part of the corporate franchise tax, expand a payroll subsidy program, broaden a tax credit program, and allow businesses to keep a larger portion of sales tax collections. Opponents fear that additional cuts will strip critical funds from health programs, public safety, and higher education. – KAMOLIKA DAS

State Roundup

  • ALABAMA‘s tax revenues came in 12 percent less in May than the same period last year. However, the Alabama Retail Association claims that sales tax revenue over the first half of 2020 is 0.21 percent higher than in 2019.
  • An ARIZONA ballot initiative that would legalize marijuana and impose a 16 percent excise tax has received enough signatures to appear on the November 2020 ballot. The measure, however, must get final approval from the state.
  • CALIFORNIA lawmakers and Gov. Gavin Newsom have very different proposals for addressing the state’s projected $54 billion revenue shortfall, though both plans hope for federal aid to stave off major harm to state priorities like education and healthcare. State voters will have the chance to lessen some of those harms in November when they decide on several tax-related ballot measures.
  • GEORGIA‘s tax collections in May were 10 percent less than this time last year.  Next week, the legislature will resume its legislative session and begin by cutting spending across state agencies by 11 percent, just slightly less than the 14 percent reductions Gov. Brian Kemp initially ordered.
  • HAWAII County passed a budget that will increase taxes on luxury real estate. Property as second homes valued over $2 million will see an additional $2.50 for each thousand of property value.
  • IOWA lawmakers and Gov. Kim Reynolds are back-tracking on their proposal to restore voting rights for felons, now supporting a bill that would continue to disenfranchise people until their fines and fees have been paid, an obstacle akin to racist “poll taxes” that were once a common way of denying Black Americans the vote.
  • KANSAS Gov. Laura Kelly vetoed two measures approved by the legislature that would have created further financial burdens. The first bill would have required local governments to take public votes when spending extra property tax revenues and the second would have given banks a tax credit.
  • Local governments in MAINE and NORTH CAROLINA are considering deep cuts to account for pandemic-driven revenue loss.
  • State budget officials in MASSACHUSETTS have identified a $2.25 billion revenue shortfall, or 8.3 percent less than anticipated, for this current fiscal year.
  • MISSISSIPPI‘s Marketplace Facilitator Act, which would require third-party sellers with sales over $250,000 to collect the 7 percent use tax, is still under consideration of the full legislature.
  • MONTANA voters in Missoula County narrowly approved a 2-cent per gallon gas tax, with supporters receiving 51 percent of the vote.
  • Also, the city of Cody, MONTANA, passed a resolution supporting an optional 1 percent sales and use tax for the next four years to help sustain public services as revenues from the mineral industry have declined as a result of the coronavirus pandemic.
  • A giveaway to high-income households contained in the federal CARES Act could cost NEBRASKA $230 million over three years unless they de-couple from the provision.
  • NEW JERSEY is looking at a potential $10 billion shortfall and 200,000 public employee jobs lost. A new report from New Jersey Policy Perspective explores how income tax reforms could help with these issues by improving the state’s outdated, inadequate, and unfair tax code.
  • In OHIO, the state’s revenue shortfall for this fiscal year exceeds $1 billion. To cover the gap, lawmakers plan to use an anticipated cash balance carryover and federal Medicaid funding. For the coming fiscal year, budget experts anticipate a $2.5 billion revenue shortfall. Responses to those revenue needs remain under consideration.
  • Beginning July 1st, SOUTH CAROLINA drivers will notice a 2 cent hike on the cost of fuel, raising the overall tax to 24 cents per gallon.
  • TEXAS Comptroller Glenn Hegar announced that the state faced the steepest year-to-year decline in over a decade; tax collections came in 13 percent lower than this time last year.
  • TENNESSEE‘s tax revenues in May were nearly $200 million less than the budgeted monthly estimate due to drops in gas tax receipts, vehicle title and registration taxes, and consumer purchases.
  • Funding cuts to core services in WASHINGTON state could “dwarf” those enacted during the Great Recession due to an estimated $7 billion revenue shortfall over the next three years. Luckily for state lawmakers, the Washington residents strongly support raising taxes on high-income households to fund those services and support families and businesses.
  • WEST VIRGINIA‘s tax collections came in below estimates; as a result, legislators may hold a special session to address a potential budget deficit.

What We’re Reading

  • Governing, Tax Policy Center, and Route Fifty comment on the enormity of the revenue and employment crises facing states and cities.
  • Ben Chin from the Maine’s People Alliance highlights what the COVID-19 health and fiscal crises reveal about the need and opportunity for fair tax movements at the state level.
  • Stateline reports on the pandemic’s disproportionate impacts in Black communities and what states are doing about it.
  • Route Fifty and Stateline point out that unlike the Great Recession, women’s jobs are in particular jeopardy during the pandemic.
  • The Center on Budget and Policy Priorities (CBPP) explains how the current recession could be even worse for schools than the Great Recession was, and Route Fifty explores how the fiscal fallout is likely to affect some school districts more severely and more quickly than others.
  • Governing sums up the case for much more federal aid to state and local jurisdictions, CBPP advises on how states can best put federal aid to use, and Route Fifty notes that small cities are still struggling to access the money already approved by Congress.
  • Stateline also notes that the coronavirus is going to complicate state efforts to mitigate damage from natural disasters as hurricane and severe storm seasons begin around the nation.
  • A Forbes contributor comments on the federal HEROES Act’s provisions improving the EITC and more.

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