Just Taxes Blog by ITEP

State Rundown 6/18: States Work to “Finalize” Budgets in Uncertain Times

June 18, 2020

.ITEP Staff

Despite uncertainty all around the nation, a few states passed budgets this week and many more are negotiating to enact theirs before fiscal years close at the end of June. Colorado notably pared back some of its own tax breaks and limited the potential damage on its budget from new federal breaks. California also passed a budget but few in the state actually think the dealing is done. Iowa quietly enacted its budget too, though advocates in the state are making noise about non-fiscal bills that were added late in the game.

Major State Tax Proposals and Developments

  • COLORADO lawmakers sent several tax bills to the governor’s desk as the special legislative session to respond to the coronavirus pandemic concluded. They include a stripped-down version of a bill that would repeal or limit TCJA and CARES Act tax breaks, legislation that will ask voters to consider a tax increase on nicotine products, and a ballot measure that would repeal the Gallagher Amendment. One bill would also increase the state earned income tax credit from 10 percent of the federal credit to 15 percent and expand access to taxpayers filing with an individual taxpayer identification number. – MARCO GUZMAN

State Roundup

  • CALIFORNIA legislators passed a budget this week in time to meet their June 15 deadline, but are considering it a placeholder with amendments likely down the road. As passed, the bill relies on federal aid that has not yet been enacted, but triggers a combination of deferments, reserve fund withdrawals, funding cuts, and minor revenue measures if Congress does not approve the needed aid.
  • At the local level, San Francisco, CALIFORNIA, voters will decide on a tax on companies with highly paid executives in November, and Seattle, WASHINGTON, councilmembers are considering a similar measure.
  • GEORGIA lawmakers reconvened on Monday after a three-month suspension to pass a 2021 fiscal budget. Gov. Brian Kemp projects that the state will have $2.6 billion less in revenue for the new budget. Georgia senators are considering eliminating or reducing about forty special-interest tax breaks that benefit historic preservationists, gold dealers, owners of high-end yachts, and others.
  • INDIANA‘s phased reopening that began after the expiration of the governor’s stay-at-home order on May 4 is being credited with boosting May tax collections. Revenues were only $187.4 million, or 16.4 percent, lower than May 2019, while April revenues were down $964 million, or 44 percent, from the same time in 2019.
  • IOWA lawmakers abandoned Gov. Kim Reynolds’s proposal to shift taxes off of high-income households and onto those with lower incomes, focusing instead on social policy and enacting a generally flat budget before adjourning.
  • LOUISIANA lawmakers advanced additional tax breaks and incentives including $50 million to provide $500 tax credits for providing broadband internet service and a sales tax exemption for fiber optic cables. The Senate Revenue and Fiscal Affairs Committee extended the Angel Investor Tax Credit program through 2025 and doubled its value to $7.2 million.
  • MICHIGAN Gov. Gretchen Whitmer approved a bill codifying an executive order signed in response to the coronavirus pandemic that extends tax tribunal appeal deadlines.
  • MINNESOTA House Democrats have proposed a $300 million plan to help repair businesses that were damaged as a result of recent protests, which includes property tax breaks for certain eligible businesses.
  • Earlier projections in MISSISSIPPI estimated 12 percent shortfalls but currently, state agencies should be able to manage with agency cuts of less than 5 percent.
  • NEVADA legislators enacted most of Gov. Steve Sisolak’s proposal for addressing the most immediate aspects of the state’s fiscal emergency, using the state’s $400 million Rainy Day Fund and federal aid to limit other initial changes to $88 million of funding cuts. A coalition of more than 75 Nevada groups is urging lawmakers to consider progressive tax reforms and apply a racial equity lens to the more permanent changes to come in future sessions.
  • Advocacy groups in NORTH CAROLINA have come together with other southern states to develop a shared vision for their response to COVID-19. Among other things, they agreed on a response that includes equitable taxation.
  • OHIO’s Development Services Agency has demanded that General Motors repay the more than $60 million in tax incentives issued by the state to the automaker. Under the 15-year agreement, GM had committed to retaining 3,700 full-time employees at the now shuttered facility in Lordstown.
  • Meanwhile OHIO, facing a $2.4 billion revenue shortfall for the coming fiscal year, has restructured upcoming principal payments, allowing for immediate cash flow savings through a “scoop and toss” general obligation refunding deal.
  • RHODE ISLAND’s House Finance Committee passed a supplemental budget for this fiscal year. The plan would plug the state’s projected $235 million revenue shortfall by tapping the rainy-day fund and would bring in more than $1 billion in federal funds. The bill will go to the full House for a vote this Thursday.
  • The TENNESSEE House and Senate have introduced different proposals in response to revenue losses. The House proposed two sales-tax holidays totaling $100 million and cutting $1.5 billion over two years. Instead, the Senate proposed cutting $1.5 billion over three years and eliminating the state’s Hall income tax on stocks and bonds.
  • A recent report by the Kinder Institute for Urban Research found that three TEXAS cities – Dallas, Houston, and San Antonio – face monumental revenue losses of $33 million, $169 million, and $200 million, respectively. Other cities that benefit from internet sales are faring better.
  • WASHINGTON State lawmakers are considering all options to close their $9 billion shortfall and address their upside-down tax code, including progressive revenue ideas like a tax on capital gains transactions.

What We’re Reading

  • The National Immigration Law Center released a statement celebrating today’s U.S. Supreme Court decision in Wolf v. Batalla Vidal regarding the Deferred Action for Childhood Arrivals program (DACA). The decision strikes down the Trump administration’s recent efforts to end the program, returning it to its original form and reopening it for new applicants. Though ancillary to the core importance of valuing immigrant lives and many contributions, ITEP research has helped debunk myths about the tax contributions of immigrants, including DACA “Dreamers,” at state, local, and federal levels in the U.S.
  • The Center on Budget and Policy Priorities updated their state-by-state and aggregate figures on the fiscal fallout from the pandemic this week, now adding up to $615 billion over less than three years. They also offer guidance on how states can help make sure federal stimulus payments reach as many of their residents as possible.
  • Stateline reports on growing Medicaid caseloads adding to state fiscal troubles.
  • Pew’s State Fiscal Health initiative covers states considering borrowing to help cover pandemic-related shortfalls.
  • The New York Times breaks down how decreased spending during the pandemic is affecting the livelihoods of lower-income service sector workers whose income relies on consumption by more affluent households.
  • The Michigan League for Public Policy published a report that highlights options for raising revenue as state lawmakers prepare to respond to the budget shortfall resulting from the coronavirus outbreak.
  • The Nation discusses how the welfare queen myth continues to harm Black women today.

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