Just Taxes Blog by ITEP

State Rundown 6/12: Progress in Taxing the Rich, Expanding EITCs, and Taming Tax Subsidies

State Rundown 6/12: Progress in Taxing the Rich, Expanding EITCs, and Taming Tax Subsidies

June 12, 2019

Meg Wiehe
Meg Wiehe
Deputy Director

This week saw lawmakers in Ohio propose significant harmful tax cuts, leaders in California and Oregon work toward strengthening the state Earned Income Tax Credits (EITCs), and governors in Missouri and Kansas declare a truce to end the practice of bribing businesses in the Kansas City area with tax cuts to move from one side of the state line to the other. Meanwhile, Massachusetts leaders are discussing ways of raising taxes on their richest households, which our latest Just Taxes blog post notes is a promising trend this year across many states.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals and Developments

  • The OHIO legislature continues its trend of deep tax cuts over meaningful investment. The state’s Senate Finance Committee yesterday released a plan to deepen cuts to Ohio’s personal income tax—cuts of 8 percent by 2020—while rolling back the House-proposed reductions to the $250,000 tax deduction for businesses. — AIDAN DAVIS
  • CALIFORNIA is getting close to finalizing its budget, ironing out the details over the next few days. Key tax provisions include increasing the EITC for families with children under the age of 6 to $1,000 and allowing for monthly payments of the credit (pending federal approval). The $800 million tax increase is proposed to be funded primarily by coupling to certain TCJA provisions that raise taxes on businesses. — LISA CHRISTENSEN GEE

State Roundup

  • This week, the ALASKA Senate sent the legislature’s compromise budget to Gov. Mike Dunleavy. The major missing component? No set amount for the permanent fund dividend.
  • MAINE lawmakers are getting closer to a deal on their two-year budget. A range of bills remain unfunded as activists and supporters of those programs continue to call for an end to tax cuts benefiting the wealthy.
  • The MASSACHUSETTS House and Senate hold a constitutional convention today to vote on a proposal that would create a 4 percent surcharge on the portion of a person’s income exceeding $1 million. The Millionaire’s Tax, or Fair Share Amendment, would be used to support transportation and public education. If it passes, the amendment could appear on the 2022 ballot for a vote. Revisiting the possibility of a graduated income tax may be up for discussion today as well.
  • In other MASSACHUSETTS news, lawmakers have agreed to delay the state’s new payroll tax by 3 months. The tax will ultimately finance a new paid family and medical leave program.
  • LOUISIANA lawmakers wrapped up their 2019 legislative session last week passing a budget that fully funded college scholarships, increased K-12 education funding, and allocated new dollars for early learning. In the least controversial fiscal session the state has faced in several years, what is most notable on the tax policy landscape is the set of tax bills that failed, including attempts to roll back the sales tax compromise that stabilized the state’s finances, bills to dilute local input on the approval of industrial tax breaks, and failure of a bill to allow fantasy sports betting.
  • MISSOURI Gov. Mike Parson signed a bill implementing a tax subsidy truce with KANSAS. Tax incentives will no longer be available to companies that simply move across state lines within the Kansas City area.
  • Late last week, NEW HAMPSHIRE passed its $13 billion state budget. The proposal includes targeted funding and tax changes—including a mandatory paid leave program funded by a 0.5 percent withholding of employees’ weekly wages—which Gov. Chris Sununu is likely to veto.
  • Nothing much has changed in NEW JERSEY’s impasse over the state budget and Gov. Phil Murphy’s proposed millionaires’ tax and property tax cuts, but there are some helpful overviews of where the battle lines are drawn, including “a simple guide to the mess.”
  • OREGON lawmakers still have a few weeks of legislative session, which is plenty of time to extend and enhance their EITC for low- and middle-income working families.
  • UTAH lawmakers are being encouraged to take bold action to expand and modernize their sales tax. If they were to enact broad reforms, they would in fact be setting a positive precedent for other states to follow. However, as this Salt Lake Tribune contributor reminds us, modernization shouldn’t come at the expense of adequately funding other important state priorities like public education.
  • Seattle’s attempt to enact a local income tax had its first day in the WASHINGTON state Court of Appeals.
  • Lawmakers in WISCONSIN are expected to release a budget plan this week that includes a $400 million tax cut. The tax cut is anticipated to look like the middle class tax cut vetoed earlier this session by Gov. Tony Evers.
  • Also in WISCONSIN, a state audit shows that the agency responsible for awarding state tax credits—including the infamous Foxconn tax incentives—has problematic oversight practices.

What We’re Reading

  • A wide range of city governments have found their residents are willing to foot the bill for high quality early childhood education through higher taxes.
  • Author Anand Giridharadas and former Trump advisor Art Laffer debate causes of income inequality and whether it’s even a problem.
  • For states looking to maximize revenues from newly legalized recreational marijuana, look to lessons from decades of regulating tobacco.
  • Strong job numbers can be misleading as to the true state of the US economy. Jared Bernstein et al reveal worrisome indicators related to wage growth, economic insecurity, affordable housing, growing inequality, and costly tax cuts that paint a fuller picture of where things stand.
  • Thanks to whistleblowing journalism, we now have new estimates as to how wealthy the world’s wealthiest citizens are and the scale of taxes they are avoiding. Spoiler alert: It’s a lot. Inequality.org 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.