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State Rundown 6/13: Decisions are falling into place, but some states will come back for more

June 13, 2024

State budgets are falling into place as lawmakers near the end of their legislative sessions. Illinois and the District of Columbia have both now approved budgets, with several notable changes. Illinois has added a child benefit for working families and financed the program with revenues from sports betting. For its part, D.C. raised revenue in several ways including increasing its payroll tax, sales tax, and property tax on high value properties. The District also, notably, created a new Child Tax Credit for children under 6.

Meanwhile, several special sessions, with a tax policy focus, are in the works. We’re keeping an eye on Arkansas, Kansas, and Nebraska where developing special session debates are heating up.

Major State Tax Proposals and Developments

  • The DISTRICT OF COLUMBIA Council unanimously approved the city’s budget, which includes a new Child Tax Credit of up to $420 per child under the age of 6; property tax increase for high-value properties (those valued at or above $2.5 million); a payroll tax increase from 0.62 percent to 0.75 percent; and a 1 percentage point sales tax increase over two years. – MARCO GUZMAN
  • ILLINOIS Gov. JB Pritzker signed the state’s 2025 budget into law. Included are a new tiered tax structure on sports betting which is expected to raise roughly $200 million a year. This new revenue will fund a new benefit for children that will provide an income boost to families who receive the state Earned Income Tax Credit and have children 12 and younger. The new budget also eliminates the state’s 1 percent sales tax on groceries. – NEVA BUTKUS
  • VERMONT Gov. Phil Scott vetoed legislation that would raise property taxes to fund schools and levy new taxes on cloud-based software and short-term rentals. The legislation included a 13.8 percent increase in the property tax. In his opposition, Scott called on the state to reform education funding. The legislature will reconvene on June 17 to address this bill and other bills the governor vetoed. – MILES TRINIDAD


State Roundup

  • A group of business leaders working with ALASKA‘s Anchorage Economic Development Corp. proposed a 3 percent sales tax to allow for property tax cuts and fund new construction projects. The proposed tax base would not include groceries, rent payments, childcare, gas, medical expenses, and items that are resold. Previous competing proposals would levy a statewide personal income tax.
  • A preliminary budget document out of ARIZONA shows that lawmakers and the governor are considering cutting almost every state agency’s budget by around 3.45 percent, totaling roughly $44.3 million in cuts. Arizona State University would see the biggest monetary reduction at $10.9 million. The state faces a significant budget deficit primarily due to the implementation of a flat income tax and universal expansion of the state school voucher program put in place by the previous governor.
  • Gov. Sarah Huckabee Sanders of ARKANSAS announced another special session focused on tax cuts, making this the fourth session on tax cuts in less than two years. She has proposed cutting the state’s top personal income tax rate from 4.4 to 3.9 percent, cutting the state’s corporate income tax rate from 4.8 to 4.3 percent, and increasing the state’s homestead tax credit. The cuts are expected to cost upwards of $500 million.
  • A special session will be held in KANSAS next week as lawmakers attempt to reach a compromise on tax cuts. While Republicans have pushed for personal income tax cuts in every proposed plan this year, some Democrats want to turn the focus to property tax cuts.
  • NEBRASKA Gov. Jim Pillen is eyeing late July or early August for a special session on tax changes. After initially proposing to raise the sales tax to the highest rate in the nation in order to pay for property tax cuts, Gov. Pillen’s more recent comments suggest he wants to raise the funds solely through broadening the sales tax base – even to business inputs like machinery and agricultural equipment, which is widely considered unsound tax policy and economically detrimental.
  • NEW YORK Gov. Kathy Hochul proposed using a new payroll tax to replace the revenue from Manhattan congestion pricing tolls she indefinitely postponed last week, but lawmakers are not interested so far.
  • While some OHIO lawmakers are seeking to expand the state’s school voucher program, known as EdChoice, to increase access to private schools, an analysis from the Dayton Daily News found that the nearly $1 billion program largely subsidizes families that already send their children to private schools.
  • Both House and Senate finance committees in the RHODE ISLAND legislature approved legislation allowing banks to elect single sales factor apportionment in response to demands by Citizens Bank, which is located in the state. The legislation is estimated to reduce corporate income tax revenue by $7.5 million in fiscal year 2025 and by $15 million in fiscal year 2026, once fully implemented.
  • WASHINGTON State voters will see a few tax-related ballot questions when they go to the polls this November. State law requires each of those to include information about impacts on state funding and services – for example, the question of whether to repeal the state’s Capital Gains Excise Tax will include the context that doing so means forgoing hundreds of millions of dollars for schools each year. But anti-tax interests are filing a lawsuit in an attempt to evade that requirement.


What We’re Reading

  • Policy Matters Ohio released a report on the damaging effects that a full elimination of the state’s income tax, which Republican lawmakers have proposed, would have on the state. Overall, the proposal would massively benefit the wealthy, with the top 20 percent of earners capturing nearly 70 percent of the tax cut’s value of over $11 billion.
  • Route Fifty explores why so many cities are experiencing budget shortfalls, and what cuts and revenue options are being considered to make ends meet.
  • Kentucky Center for Economic Policy’s Jason Bailey discusses the belated acknowledgment by Kentucky’s House Speaker that the state cannot eliminate its individual income tax through their existing automatic cut scheme. The piece—which was also published in the Lexington Herald-Ledger—considerthe impact of the existing cuts and welcomes Speaker Osborne’s change in position to reflect the state’s fiscal reality.


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