June 5, 2019
June 5, 2019
Illinois made big news in several tax and budget areas recently, including sending a graduated income tax amendment to voters in 2020, as well as legalizing and taxing cannabis and updating gas and cigarette taxes for infrastructure improvements. Connecticut made smaller waves with sales tax reforms, a plastic bag tax, and a progressive mansion tax. Property tax credits were proposed in both Maine and New Jersey. And Nevada extended a business tax to give teachers a raise. And our What We’re Reading section is brimming with good reads on how states are doing with recovering from the Great Recession, funding education, using cannabis tax revenues, and improving Earned Income Tax Credits (EITCs).
— MEG WIEHE, ITEP Deputy Director, @megwiehe
Major State Tax Proposals and Developments
- This past weekend ILLINOIS concluded its most eventful legislative session in decades. Having already approved a constitutional amendment to allow for a graduated income tax, lawmakers also passed a rates bill that would become effective if the amendment passes at the ballot. Lawmakers also legalized recreational marijuana, raised gas and cigarette taxes to fund a massive infrastructure bill, and expanded legal gambling in the state. — LISA CHRISTENSEN GEE
- Both houses of the CONNECTICUT legislature approved a two-year, $43 billion state budget that is expected to be signed by Gov. Ned Lamont. While broad-based tax changes were not included in the package, the bill includes, among other things, some sales tax base broadening, a plastic bag tax and a prepared food tax, a commitment to maintaining the surcharge on corporate profits, a mansion tax of 2.25 percent on homes that sell for more than $2.5 million (with credits for current state residents) and the repeal of the state’s business entity tax. — AIDAN DAVIS
- COLORADO Gov. Jared Polis signed several climate bills into law last week including the extension of tax credits for electric vehicles.
- Also in COLORADO, conversations are brewing around three constitutional limits that complicate the state’s funding model and budgeting processes—focusing on Amendment 23 (K-12 funding mandate), the Gallagher Amendment (limits residential property taxes), and TABOR (requires tax increases to be approved by the people and limits revenue governments can keep). These conversations are timely given that voters will get to weigh in on the latter of these measures this November.
- An effort to restore the state’s EITC from 6% of the federal credit to 12% still underway in MICHIGAN as lawmakers work to finalize the state budget for the coming year.
- Lawmakers in MAINE are close to finalizing the state’s two-year budget. In the latest iteration an increase to the state’s homestead exemption and an expansion of the property tax fairness credit are in while popular EITC improvements are out.
- Just before adjourning for the session, NEVADA lawmakers put more than $100 million toward teacher pay raises and school safety measures, paid for by cancelling a scheduled sunset that would have reduced the state’s Modified Business Tax rate.
- NEW HAMPSHIRE’s proposed state budget is up for a vote this week in the Senate. It is then expected to head to the House, followed by Gov. Chris Sununu. In terms of tax changes, both the House and Senate agree on freezing business tax rates. One major change made by the Senate was to remove the $150 million in new revenue from a capital gains tax that would have been used to fund an education funding reform plan.
- NEW JERSEY Gov. Phil Murphy’s latest proposal to improve the state’s upside-down tax code with a millionaires’ tax pairs it with a $125-per-household property tax refund. But legislators aren’t showing much interest.
- The NORTH CAROLINA House and Senate are at odds over the state’s spending plan. After the House refused to accept the Senate budget, which was approved last week, the two chambers must now work toward a budget compromise. Gov. Roy Cooper has expressed particular concern over the corporate tax cuts and absence of Medicaid expansion in the budget proposals.
- WISCONSIN Gov. Tony Evers is waiting to see what the legislature passes for a transportation bill before determining if he may wield his partial gubernatorial veto powers. The Republican-controlled legislature is not expected to pass a gas tax increase, which the governor had campaigned on and was the centerpiece of his road funding bill.
What We’re Reading
- While most states’ finances looked better this year than they have in a long while, Pew reports that the effects of the Great Recession still linger in the forms of trying to recover from hard budget choices made in response to steep downturns as well as a lost decade of economic growth.
- Relatedly, the Center on Budget and Policy Priorities released fresh research showing that—more than a decade since the Great Recession first struck—K-12 education funding remains below pre-recession levels in many states. And if you’d like to see how education funding is raised and distributed in different states, Governing summarizes the latest data.
- The Urban Institute has a new research brief and 50-state factsheets out on the impact of expanding the federal EITC to workers without children in the home.
- Curious about recent changes to OHIO’s EITC, proposed changes to their passthrough deduction, and suggested improvements to both? Check out these recent reports by Policy Matters Ohio.
- The Tax Policy Center explains what’s wrong with 529 Savings Plans.
- Route Fifty covers the trend of states using cannabis tax revenues to help communities harmed by decades of harsh anti-drug policies. Meanwhile, an effort to pass legislation that would open banking to legal cannabis businesses in the states faces an uncertain future in Congress.
- A few prominent jurisdictions—including DC and San Francisco—have recently cut back on tax breaks offered to tech companies. Perhaps a taste of things to come post-Amazon HQ2 backlash?
- It’s getting worse all the time: Did you know that poor Americans get audited with almost the same frequency as the top 1%? ProPublica has the story.
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