State Rundown 6/24: Late June State Fiscal Debates Unusually Active

Delayed legislative sessions and protracted federal aid debates have made for a busier June than normal for state fiscal debates. Arizona, New Hampshire, and North Carolina legislators, for example, are still pushing for expensive and regressive tax cuts in their states while they remain in session. Meanwhile, lawmakers head into special summer sessions to discuss tax cuts in Arkansas, finalize the budget and permanent fund dividend in Alaska, and fill a major revenue hole left in their budget in Missouri. New Jersey leaders are uncharacteristically ahead of schedule for this time of year, having reached a budget deal that will make important investments in affordable higher education and advancing tax justice.

Major State Tax Proposals and Developments

• The ARIZONA Senate approved a massive tax cut that includes phasing out the graduated income tax and implementing 2.5 percent flat rate for most taxpayers and a 4.5 percent cap on the income tax paid by wealthy taxpayers. – MARCO GUZMAN
• NEW HAMPSHIRE lawmakers will vote on a massive tax overhaul that would cut business taxes and entirely eliminate the state’s narrow income tax on interest and dividends by 2027. Opponents warn that nearly half of the benefits of eliminating the interest and dividends tax would flow to the top 1 percent of earners. – KAMOLIKA DAS
• NEW JERSEY Gov. Phil Murphy and legislative leaders have reached a budget deal that will advance tax justice and reduce inequities by investing in New Jerseyans. The deal will send $500 payments to more than 760,000 families, improve the homestead property tax relief credit, expand Child and Dependent Care Credit and make it refundable, and remove age limits from the Earned Income Tax Credit that kept childless workers under 21 and over 65 from accessing it. The budget also features investments to make college more affordable. – DYLAN GRUNDMAN O’NEILL

State Roundup

• Alabamians are now allowed to deduct contributions to an ALABAMA ABLE Savings Plan account, a tax-advantaged savings account for individuals with disabilities and their families, of up to $5000 per year per filer.
• Lawmakers in ALASKA head into their second special session this week, in hopes of avoiding a government shutdown on July 1. The size of the Permanent Fund dividend remains a controversial issue.
• ARKANSAS Gov. Asa Hutchinson plans to call a special session this fall so the General Assembly can adopt new tax cuts. His plan would lower the top tax rate for people in the middle- and high-income tables and shift from tax cliffs to gradual tax increases for people on the cusp of the different tax tables.
• CALIFORNIA Gov. Gavin Newsom is proposing to use $5.2 billion of federal pandemic relief aid to pay the unpaid rent of low-income Californians.
• A petition in COLORADO is circulating that would increase the excise tax on marijuana by 5 percent to help fund out-of-school tutoring and other educational services.
• A new DISTRICT OF COLUMBIA poll found that 80 percent of voters support raising marginal taxes on annual individual income above $250,000 to sustain DC’s pandemic recovery.
• LOUISIANA‘s new sports betting regime will tax wagers at 10 percent if bets are placed in-person at sportsbook lounges or casinos and at 15 percent if placed online.
• The MINNESOTA legislature has sent a tax bill to the governor that includes tax relief for federal Paycheck Protection Program loans and up to $10,200 in unemployment insurance benefits.
• MISSOURI lawmakers will be heading into a special session to address the hole they left when they failed to renew the state’s Medicaid provider taxes. Failure to fix this would be devastating for Missourians’ health and would also put education, other services, and federal fiscal relief at risk.
• The NORTH CAROLINA Senate proposed deeper tax cuts than those recommended by the House after learning that the state brought in more tax revenue than expected this year. The proposal would lower the personal income tax rate, over time, from 5.25 percent to 3.99 percent (as opposed to the House’s 4.99 percent) and would still fully eliminate the state’s corporate income tax and increase standard and child deductions. Teachers and workers may see less of a pay raise as tax cuts—primarily targeted to the top 20 percent of taxpayers—take precedence over investments.
• The RHODE ISLAND Senate voted this week to legalize and regulate cannabis in The Ocean State. However, the bill is unlikely to be taken up by the House this session.
• A plan in WISCONSIN that would eliminate tax on personal property recently passed out of the legislature’s finance committee. Republicans have also put forward a plan in recent weeks that would reduce the second-highest income tax bracket.

What We’re Reading

• An op-ed in the Arkansas Times questions the logic of adopting new tax cuts when Arkansan children, especially children of color, are lagging behind in a number of key metrics such as child health and the number of children with health insurance.
• Governing highlights the debate over increasing the gas tax, and how this reluctance to adequately raise taxes has led to crumbling infrastructure in the US.
• Pew’s Race and Research podcast brings in David Williams of Harvard and Andre Perry from Brookings to discuss how race impacts economic mobility and what can be done to improve economic outcomes.
• Route Fifty reports on states using federal fiscal relief to boost their tourism and hospitality industries in the economic recovery. Stateline covers other cases of states using the funds to invest in their park systems.
• The Center on Budget and Policy Priorities has the latest on how states do, don’t, and could tax inherited wealth.

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.

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