June 21, 2018
June 21, 2018
The U.S. Supreme Court made big news this morning by allowing states to collect taxes due on internet purchases, which will help put main-street and online retailers on an even playing field while also improving state and local revenues and the long-term viability of the sales tax as a revenue source. Many states remain focused on more local issues, however, as Louisiana’s third special session of the year kicked off, Massachusetts won a living wage battle while losing an opportunity to put a popular millionaires tax proposal before voters, and major fiscal debates continue in Maine, New Jersey, and Vermont.
— Meg Wiehe, ITEP Deputy Director, @megwiehe
Major State Tax Proposals/Developments:
- In a landmark ruling today in South Dakota v. Wayfair, the U.S. Supreme Court overturned the 1992 Quill decision that has prevented states from collecting the taxes due on many online purchases. Echoing the arguments tax policy experts have been making for years, the court decided that the prior ruling “limited States’ ability to seek long-term prosperity and has prevented market participants from competing on an even playing field.” See ITEP Research Director Carl Davis’s post here for more on what to expect from states in the wake of this decision.
- This week has been a rollercoaster ride for Massachusetts. Despite popular support and potentially $1.9 billion in new revenue, the state’s Supreme Court struck down the Fair Share Amendment on technical grounds with an argument that the language contains two separate and unrelated subjects. Also this week, lawmakers approved paid family leave, a sales tax holiday and a minimum wage increase to $15 per hour. This legislation heads to Gov. Charlie Bakers desk for signature.
- Louisiana‘s third special session of the year began Monday with the sales tax rate remaining a central sticking point. Gov. John bel Edwards wants to raise the rate by half of a percentage point to address the state’s budget shortfall, but the budget so far falls short of that, only incorporating an increase of one-third of a percentage point.
- Lawmakers are back in Augusta, Maine this week, working on a range of unresolved bills. Under consideration, among other things, are changes to the state’s tax system in response to the federal tax law and a supplemental spending bill.
- Vermont’s budget standoff continues with taxes at the heart of the debate. Last week, for the second time, Gov. Phil Scott vetoed the Legislature’s state budget and tax bills — this time taking issue with the possibility that residential property tax rates could increase. In response, the House attempted to override the veto but was unable to gather the needed two-thirds vote.
- The standoff between New Jersey legislators and Gov. Phil Murphy continues even as a potential shutdown looms. The two sides agree on several points, including an increased Earned Income Tax Credit (EITC), an expansion of the property tax deduction, improved school and transit funding, and cannabis taxation. But the proposal advanced in the legislature this week leaves out Murphy’s proposed millionaires tax and the restoration of a sales tax cut enacted under Chris Christie, while only temporarily increasing corporate taxes and leaving longer-term revenue needs unmet. Murphy has pledged to veto any such incomplete plan, and public opinion and local advocates support his stance.
- A restrictive income tax cap is making its way through the North Carolina legislature, despite warnings of the potentially disastrous impact.
Further State Fiscal News:
- Rhode Island’s budget passed both the House and Senate and will now head to Gov. Gina Raimondo who is expected to sign off. The budget includes expected funds from sports betting and borrows for school repairs.
- Legislators in Pennsylvania are making progress on the Keystone State’s budget as well. The House passed legislation that would increase spending. The legislation does not raise any additional revenue.
- An effort to ban all taxes on food, which opponents say is too broadly drafted, has qualified for the fall ballot in Oregon.
- Washington revenues are up, though lawmakers might want to review Pew’s advice below on treating unusual gains as non-recurring revenues.
- California legislators renewed the state’s film tax credits in the recently passed budget and added new requirements to encourage diversity in hiring and better reporting of sexual harassment.
- Florida voters will decide on multiple issues at the ballot this November, including three tax-related questions that are raising major concerns: an expanded homestead exemption for homesteads valued at more than $100,000 that would squeeze funding for schools and local services, a property valuation growth cap for non-homestead properties, and an amendment to place an arbitrary supermajority hurdle that would permanently hamper responsible budgeting and worsen the state’s K-12 funding crisis.
- Some Nebraska lawmakers are already working on next year’s attempt to find agreement on property tax and school funding reform, a perpetual issue over the last several years.
- Connecticut’s Dannel Malloy signed an Amazon-type marketplace sales tax into law, making the Nutmeg State the sixth state to require online retailers to collect sales and use tax from third-party sellers.
What We’re Reading…
- Pew’s State Fiscal Health project provides excellent practical advice on how to identify and manage non-recurring and volatile revenue sources, highlighting best practices in several states including Alabama, Florida, Louisiana, Tennessee, Utah, and Washington.
- Route Fifty reviews some of the ways localities are trying to maintain autonomy and revenue streams in the face of preemption efforts from their state leaders.
- Governing reports on the unfortunate state of many state unemployment insurance funds, 11 of which have less than half the funding they would need to weather a recession.
- The Union of Concerned Scientists has released a new study estimating potential losses of property – and property tax revenue – due to rising sea levels. Florida, New Jersey, and New York top the list of states where they expect to see the biggest losses.
- A forthcoming book by inequality expert Sam Pizzigati makes “The Case for a Maximum Wage.”
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