June 15, 2022
June 15, 2022
With inflation dominating headlines both nationally and locally, state lawmakers around the U.S. are searching for ways to put their revenues to good use, and not surprisingly, some options are better than others. As ITEP’s Carl Davis points out in his most recent blog, lawmakers would be wise to wise to hold off on permanent tax cuts since rising costs have the potential to not only stress taxpayers’ pocketbooks but state budgets as well. This means the cost of things like public infrastructure maintenance, which has increased dramatically year-over-year, will require more attention than a potential tax cut would allow. Legislators should focus first on funding vital public services that will help residents weather these uncertain times and ensure that their (state)house is in order before committing to spending on tax cuts.
Be sure to keep an eye on ITEP’s State Tax Watch for the most up-to-date tax policy changes in your state.
Major State Tax Proposals and Developments
- Gov. Gretchen Whitmer of MICHIGAN has vetoed a second tax cut plan sent to her by the Republican dominated legislature. The now-vetoed plan would have cost $2.7 billion and included personal income tax cuts, restoration of the state’s 20 percent Earned Income Tax Credit (EITC), a $500 credit for dependents and an increase to income tax exemptions for seniors. – NEVA BUTKUS
- SOUTH CAROLINA lawmakers have come to an agreement on a $2 billion tax cut plan that includes a one-time nonrefundable tax rebate of up to $800. The plan will reduce the state’s top income tax rate from 7 to 6.5 percent, dropping it to 6 percent over five years. The middle brackets will be consolidated to a 3 percent rate. – NEVA BUTKUS
- CALIFORNIA lawmakers passed a $300 billion “placeholder” budget but many of the more contentious aspects, such as whether to send payments based on family size or vehicle ownership, have yet to be settled between lawmakers and Gov. Gavin Newsom.
- DELAWARE legislators restored a property tax credit for seniors to a maximum of $500, as it had been five years ago, before it was cut to $400 during a budget shortfall.
- School leaders in two FLORIDA counties are pushing for higher property taxes to support public schools. Despite rising property values, the state-allowed taxation rate has fallen drastically over the past decade.
- IDAHO Democrats reached out to Gov. Brad Little, asking the governor to call a special session to consider suspending the state’s gas tax for six months.
- INDIANA Gov. Eric Holcomb is calling a special session later this month to pass a rebate of $225 per taxpayer. Hoosiers received a $125 rebate late last year.
- Gov. Kim Reynolds of IOWA has signed a bill that eliminates sales tax on labor, maintenance and aircraft parts for airplanes.
- NEVADA Gov. Steve Sisolak is asking lawmakers to address loopholes that have allowed multi-million-dollar real estate sales to be structured in ways to evade the state’s real estate transfer tax.
- NEW YORK could exempt diapers from its sales tax under a bill that has now passed both houses of the legislature.
- Legislative support for cutting the corporate net income tax rate in PENNSYLVANIA is growing, despite some pushback that the revenue would be better spent investing in state programs and the fact that 73 percent of corporations in the state pay no corporate taxes to the state at all.
- PUERTO RICO Gov. Pedro Pierluisi recently signed a measure that will suspend taxes on gasoline and diesel fuel for 45 days.
- RHODE ISLAND House lawmakers’ $13 billion budget proposal includes a temporary Child Tax Credit of $250 per child, up to $750 total, for families with incomes below $100,000 (single parents) or $200,000 (couples). The proposal also includes full elimination of the state car tax, called the motor vehicle excise tax, one year ahead of the schedule they had already set five years ago to phase the tax out.
- OKLAHOMA legislators returned for a special session on tax cuts and COVID-19 relief funds this week. Earlier today, the House voted to eliminate the state sales tax on groceries for some items and to block localities from raising their portion of grocery taxes. House lawmakers also voted to suspend 0.25 percent of the state’s personal income tax and offer corporate tax cuts for two years. It’s unclear which bills will make it across the finish line since the Senate has been urging more caution around cutting taxes.
- VERMONT lawmakers and Gov. Phil Scott have reached a deal on what to do with a $90 million education fund surplus. They will reduce property tax rates by 14 cents per $100 of valuation and also improve funding for career centers and free school meals.
- VIRGINIA Gov. Glenn Youngkin is expected to add line-item amendments and vetoes to the proposed budget by the end of the week. He is still pushing for a 3-month suspension of the gas tax despite lawmakers’ opposition.
- An attempt to eliminate WASHINGTON state’s new excise tax on capital gains-generating sales via ballot initiative has been abandoned without gathering a single signature.
- In November, WEST VIRGINIA residents will vote on a ballot measure that would give the legislature the authority to lower or eliminate certain personal property taxes. Since a reduction in property taxes would hurt county budgets, a lobbyist group representing county elected officials is proposing new revenue streams to backfill potential losses.
What We’re Reading
- Marc Stier, Director of the Pennsylvania Budget and Public Policy Center, writes convincingly in the Pittsburgh Post-Gazette about the need to adopt combined reporting and ensure multinational corporations pay their fair share of taxes in combination with any corporate net income tax (CNIT) rate cuts.
- West Virginia Public Broadcasting interviewed West Virginia University professor and economist Heather Stephens about why gas tax holidays are not very effective at supporting lower-income people most impacted by higher gas prices.
- 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 Aidan Davis at [email protected]. Click here to sign up to receive the Rundown via email.