June 8, 2022
June 8, 2022
State Rundown 6/8: Tax Policy Features Prominently During Budget and Primary Season
As voters head to the polls to weigh in on their state’s primary elections and legislators convene to hash out budget deals, tax policy remains atop the agenda. South Dakota voters soundly rejected a proposed constitutional amendment that would have imposed a supermajority requirement for approving tax and spending increases via the ballot. New York lawmakers and the governor, meanwhile, made some head-scratching choices when they approved a budget that included a massive business tax subsidy. To the east, in Vermont, the governor put his final stamp of approval on a refundable Child Tax Credit that will go a long way in improving outcomes of families with children under the age of six. And while budget negotiations are ongoing in Arizona and Massachusetts, among other states, Virginia assemblymembers have passed on their budget to the governor, which includes doubling the standard deduction, one-time rebate checks, eliminating the state portion of the grocery tax, and making the state EITC partially refundable.
ITEP would also like to take a moment to congratulate Aidan Davis on accepting the role of State Policy Director. She previously served as interim director after the departure of Meg Wiehe.
Be sure to keep an eye on ITEP’s State Tax Watch for the most up-to-date tax policy changes in your state.
Major State Tax Proposals and Developments
- The VIRGINIA General Assembly sent Gov. Glenn Youngkin the two-year budget after months of negotiations. The proposed budget will nearly double the standard tax deduction, authorize one-time rebate checks of up to $250 per single filers and $500 per joint filers, eliminate the 1.5 percent state portion of the grocery tax, and make the state Earned Income Tax Credit partially refundable. The Governor is expected to amend the state budget bill by adding funding to controversial “lab schools” and cutting the gas tax. – KAMOLIKA DAS
- Primary voters in SOUTH DAKOTA rejected Amendment C, a proposed constitutional amendment that would have required future ballot measures that increased taxes or spending by $10 million over five years to pass with 60 percent of the vote. The vote increases the likelihood of Amendment D passing – the Medicaid expansion measure that will be on the ballot in November. – MARCO GUZMAN
- As NEW YORK lawmakers wrapped up their session last week, fiscal policy took one step forward and two big steps back: transparency advocates were able to restore a review process for state contracts, but Gov. Kathy Hochul and lawmakers went ahead with an ill-advised gas tax holiday despite Hochul herself admitting she “can’t guarantee that the savings…is going to end up in the consumer’s pocket,” and then rammed through a $10 billion business tax subsidy with hardly any debate in the closing moments of an all-night session. – DYLAN GRUNDMAN O’NEILL
- VERMONT Gov. Phil Scott signed the bill we reported on in the previous Rundown to create a $1,000 Child Tax Credit for children under 6 years old. The exemplary credit – it is permanent, refundable, and targeted to households with incomes below $125,000 – will go a long way to help families in need and advance tax justice in the Green Mountain State. Other tax bills approved included a property tax rate cut and administrative changes expected to help student loan borrowers and manufacturing businesses. – DYLAN GRUNDMAN O’NEILL
- CALIFORNIA cannabis retailers may be eligible for a tax credit of up to $250,000 if legislation recently passed by the state Senate becomes law.
- COLORADO recently became another state where residents will be able to purchase feminine hygiene products and products used for incontinence exempt from sales and use tax.
- The DISTRICT OF COLUMBIA final budget included the expansion of DC’s Earned Income Tax Credit to undocumented workers.
- GEORGIA Gov. Brian Kemp signed an emergency executive order extending the state’s gas tax holiday through mid-July. Gas taxes normally bring in about $150 million of revenue a month to maintain infrastructure.
- KENTUCKY Gov. Andy Beshear filed an emergency regulation to suspend an impending 2 cent per gallon increase of the state gas tax that would have gone into effect on July 1.
- Despite record surpluses, the LOUISIANA legislature voted against tax cut proposals in favor of investments in infrastructure. Republican leadership cited heartburn over the 2008 tax cut plan as their reasoning, which led to years of budget crises and disinvestment in healthcare and higher education.
- A special session was expected in MINNESOTA after the legislature failed to pass their tax cut compromise package before sine die, but there has been little movement from leadership on the compromise or a special session since adjournment over two weeks ago.
- The future of a $500 million MISSOURI rebate bill is still uncertain after Gov. Mike Parsons expressed preference for a permanent tax cut.
- The OHIO General Assembly voted to temporarily double its Historic Preservation Tax Credit and expand its Opportunity Zone program through 2024.
- Sales of pass-through entities may qualify as business income instead of personal income on state income taxes in OHIO if the owner has not recently “materially participated” in running the business being sold. Considering Ohio’s already generous treatment of pass-through business income, this legislation would cost millions of dollars.
- OKLAHOMA lawmakers ended their regular session but plan on returning in a special session next month to discuss grocery tax and income tax reductions. Gov. Kevin Stitt vetoed the one-time rebates passed by the legislature, as well as a bill that reduced the state sales tax on motor vehicle purchases.
- In PENNSYLVANIA, state budget negotiations are underway. Legislators reintroduced the Fair Share Tax bill that would reduce the individual income tax rate on wages and interest while increasing the rate on income from wealth. Other legislators seem more interested in passing massive corporate tax cuts that would lower revenues by over $1.2 billion in the first three years. On another note, a coalition of advocates are pushing for a state earned income tax credit that would initially be set at 10 percent of the federal credit and gradually increase to 25 percent.
- With Gov. Dan McKee’s signature this week, RHODE ISLAND became the 19th state to legalize, regulate, and tax recreational cannabis use. Rhode Island’s cannabis revenues will comprise a 10 percent state excise tax, 7 percent state sales tax, and 3 percent city tax.
- House and Senate leadership in SOUTH CAROLINA met this week but did not reach an agreement on their competing budget and tax cut plans. Both plans include $1 billion in tax cuts, with the House plan phasing in the cuts over five years.
- Annual tax holidays are starting up in TENNESSEE. After the tax holiday on clothes, school supplies, and computers, sales taxes on groceries will also be suspended for the entire month of August.
What We’re Reading
- The New Republic highlights new research that shows that economic recessions accelerate income inequality.
- Kasia Tarczynska explains in Nonprofit Quarterly how state and local corporate tax subsidies are too often handed out without careful consideration of their costs, which is explored in greater detail for every state in the full report on state economic development transparency by Tarczynska and others at Good Jobs First.
- Alan Krinsky of the Economic Progress Institute writes in the Boston Globe (paywall) that Rhode Island should direct its budget surplus toward reinvesting in neglected public programs, rather than misguided or top-heavy tax cuts.
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