Just Taxes Blog by ITEP

State Rundown 6/13: Budget Crunch Time Sets in as State Fiscal Years Come to Close

State Rundown 6/13: Budget Crunch Time Sets in as State Fiscal Years Come to Close

June 13, 2018

Meg Wiehe
Meg Wiehe
Deputy Director

With many state fiscal years ending June 30th, budget negotiations were completed recently in California, Illinois, Michigan, and North Carolina. New Jersey remains a state to watch as a government shutdown looms but leaders continue to disagree about a proposed millionaires tax, corporate taxes, and school funding. In other states looking to wealthy individuals and large corporations for needed revenues, Arizona‘s teacher pay crisis could be solved with a tax on its highest-income residents and a similar proposal in Massachusetts is polling well, but Seattle’s new “head tax” could be on the chopping block.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

Major State Tax Proposals/Developments:

  • California lawmakers reached a budget deal last week that includes expanding the state’s EITC to young adult workers and seniors, but a proposal to extend the credit to undocumented immigrants was not included.
  • Illinois Bruce Rauner signed his first full budget since starting as governor in 2015.
  • Louisiana‘s second special session collapsed last week with lawmakers passing a sparse budget but no tax deal; however, an increase of the state’s EITC from 3.5% to 5% was approved. The governor has called a third special session to address the state’s sales tax and some limited budget items. The lawmakers who will be the ultimate deciders as to any tax reform this session are currently in talks in advance of the June 18 start date.
  • Michigan lawmakers signed off on a budget this week that boosts funding for K-12 education and road projects. It’s expected to receive quick support from Gov. Rick Snyder who worked with republican leaders in both chambers to craft the budget.
  • North Carolina legislators overrode Gov. Roy Cooper’s veto of the state’s closed-door budget agreement. The budget, which allows $900 million of scheduled personal and corporate income tax cuts to go into place next year, will go into effect on July 1st.
  • With three weeks left before the end of its fiscal year and a possible government shutdown looming, New Jersey‘s budget remains a work in progress. Gov. Phil Murphy’s proposal, which includes reversing Chris Christie’s expensive sales tax cut and instituting a millionaires tax, hasn’t won over all legislative leaders. Some of those leaders are believed to be behind a leaked alternative plan that uses temporary corporate tax increases and a tax amnesty period to plug the budget hole for now but does not represent a sustainable long-term solution to the state’s budget woes. Meanwhile, schools could be forced to raise $615 million in property tax if the state opts to balance its budget by cutting their funding.

Further State Fiscal News:

What We’re Reading…

  • The New York Times summarizes the trend this year of years of state tax cuts and underfunded education systems culminating in teacher strikes and protests.
  • A new report in Arkansas explores the connections between wealth and health. Among the recommendations for improving health outcomes by reducing poverty is enacting a state EITC.
  • Connecticut Voices for Children released a report that summarizes legislative changes and identifies the impact of the budget adjustments on the state’s children and families.
  • The Commonwealth Institute explains that adopting the provisions of the federal tax-cut bill that affect Virginia would help raise needed revenues and keep filing simple for state residents.

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