Just Taxes Blog by ITEP

State Rundown 6/7: The Budget Race Continues

June 7, 2023

Across the country, the marathon budget season has held pace, with a steady stream of bills continuing to cross the finish line. Included in many of those, like Connecticut, for example, are tax changes that will have an impact on the state for years to come. The governor of the Constitution State, Ned Lamont, is expected to sign the two-year budget that includes income tax cuts that are targeted to families making under $150k for single filers and $300k for joint, and an increase to the state Earned Income Tax Credit. In Ohio, the state Senate released their own budget plan that directs a large chunk of the proposed income tax cuts toward the wealthiest residents and would cost roughly $1.5 billion. And lastly, though the Alabama governor has already signed the state’s budget bills, a bill that aims to eventually cut the sales tax on food in half (to 2 percent) has also reached her desk. In addition to that bill, Gov. Kay Ivey has also recently signed into law one-time refundable rebate checks of up to $300.

Major State Tax Proposals and Developments

  • In CONNECTICUT, the two-year, $51 billion state budget—which includes significant tax cuts—has passed through the General Assembly and is expected to be signed by Gov. Ned Lamont. The bill cuts the 5 percent marginal income tax rate to 4.5 percent and the 3 percent marginal rate to 2 percent, increases the state Earned Income Tax Credit from 30.5 percent to 40 percent, and halts the scheduled increases to the state diesel tax. – MARCO GUZMAN
  • The ALABAMA legislature sent a bill to Gov. Kay Ivey’s desk that would reduce the sales tax on food from 4 to 2 percent as long as the state Education Trust Fund hits a growth target. The bill received unanimous approval in both the House and Senate. Gov. Ivey has also signed a one-time refundable tax rebate of $150 for single filers and $300 for joint filers. The legislation also allows for local reductions on food sales tax if local budgets grow at least 2 percent annually. – NEVA BUTKUS
  • The OHIO Senate released its budget proposal that includes major income tax cuts, particularly for wealthier Ohioans. The plan would reduce the number of income-tax brackets from four to two, with the first bracket having a tax rate of 2.75 percent for income above $26,050 and a tax rate of 3.5% for those income above $92,150. The income tax changes are estimated to cost about $1.5 billion. – MILES TRINIDAD

State Roundup

  • An amendment from ALABAMA Gov. Kay Ivey removes a $25 million annual cap on a bill that provides a tax exemption on overtime pay, and sunsets the exemption in 2025 instead of 2027. The House and Senate concurred with Gov. Ivey’s amendment.
  • ARIZONA Gov. Katie Hobbs is in negotiations with Republican leaders to get a half-cent sales tax, known as Proposition 400, on the ballot. The tax has helped fund transportation projects for almost 40 years.
  • The CALIFORNIA Senate narrowly passed Senate Bill 584, which would impose a 15 percent sales tax on short-term rentals, with receipts dedicated to the construction of affordable housing. The tax, which would affect companies like AirBnB and Vrbo, could raise about $150 million annually.
  • A bill package in LOUISIANA was sent to Gov. John Bel Edwards that would phase-down the state franchise tax by 25 percent each year corporate and franchise tax collections exceed $600 million, resulting in a $631 million in revenue over five years. This revenue loss would be partially made up by slashing the Quality Jobs tax credit, a payroll tax rebate program that costs the state millions each year with almost no return on investment.
  • The tax plan making its way through the MASSACHUSETTS legislature may be in limbo after lawmakers learned that the previous administration mistakenly used $2.5 billion in federal COVID relief dollars on unemployment benefits instead of using state funds.
  • NEBRASKA has amended its unconstitutional practice of selling property tax liens to third parties—who can then seize Nebraskans homes and keep all of their home equity, regardless of how large their unpaid tax debt was—to ensure that homeowners keep their equity when satisfying unpaid property taxes.
  • The PENNSYLVANIA House overwhelmingly voted to increase the state’s property tax and rent subsidy for seniors and people with disabilities. The legislation would increase the maximum amount of the subsidy and increase the income cap for eligibility, which was last updated in 2007.
  • The PENNSYLVANIA House Finance Committee advanced legislation that would create a state-level Earned Income Tax Credit set at 25 percent of the federal credit. The Committee also advanced legislation that would eliminate the sales and gross receipt tax for cell phone plans, provide a credit up to $2,500 for newly certified teachers, nurses, and police officers, and allow filers to claim a credit for between 20 percent and 25 percent of their work-related childcare expenses.
  • The RHODE ISLAND Senate passed legislation that would exempt the first $50,000 of tangible property — such as computers and furnishings — from the tangible personal property tax for businesses. The legislation is estimated to eliminate the tax for 75 percent of the state’s businesses.
  • TEXAS legislators are still debating between which property tax plan to send to the governor’s desk. However, last week, the House passed their version of a plan and adjourned for the special session. The governor supports their version. The senate – who has backing from the Lt. Governor – is still mulling over their plan and the House’s recent political maneuvering. The state wants to pass property tax cuts, but lawmakers are nowhere near an agreement.

What We’re Reading

  • New Jersey Policy Perspective issued a statement explaining that a property tax proposal announced by the Assembly Speaker to create a Senior Tax Credit program would fall short of providing equitable relief for low-income seniors and renters.


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