A new ITEP report released in collaboration with the Center on Budget and Policy Priorities highlights how “mansion taxes” can help create fairer tax codes and fund vital public services like health care, transportation, education, and housing. The report, which undertakes an in-depth exploration of real estate data compiled by Zillow, was published with substantial appendices that pinpoint the revenue potential of various mansion tax structures in most states.

While Massachusetts legislators recently dropped a real estate transfer tax from their major housing bill, the District of Columbia council sent a budget to the mayor that includes a mansion tax that would increase the tax rate on properties valued over $2.5 million. Meanwhile, lawmakers in New Jersey and South Carolina continue to, respectively, raise and reduce needed revenues. And Maryland’s digital ad tax lives to see another day as the US District Court for the District of Maryland dismissed opposition claims.

Major State Tax Proposals and Developments

• A judge ruled in favor of MARYLAND in a dispute over the state’s digital advertising tax, dismissing claims that it violates First Amendment rights. The tax, which was enacted in 2021 to fund education reforms, has faced multiple legal challenges. Despite some initial successes for opponents in state court, the tax has been upheld and continues to be enforced, collecting over $170 million from major tech firms. The ruling enables the state to continue collecting the tax. – MILES TRINIDAD
• NEW JERSEY corporations with more than $10 million in profits will now pay a top corporate tax rate of 11.5 percent following Gov. Phil Murphy’s approval of a 2.5 percent corporate transit fee which was included in the state budget. The revenue will fund the state transit system. – MARCO GUZMAN
• Lawmakers in SOUTH CAROLINA used a portion of the state’s $600 million surplus to accelerate state income tax cuts. The state’s personal income tax rate was set to decrease from 6.4 to 6.3 percent for 2024 per previous legislation but will now drop to 6.2 percent. The acceleration will cost the state an additional $100 million a year. – NEVA BUTKUS

State Roundup

• City leaders in Denver, COLORADO will ask voters in November to increase the local sales tax by 0.5 percentage points to 9.31 percent. The sales tax increase would raise $100 million a year, dedicated to affordable housing projects.
• MONTANA Democrats previewed their property tax plan for 2025’s legislative session, which includes a new homestead exemption for residential and commercial property owners, a tiered property tax rate structure, and a targeted tax credit for seniors, low- and middle-income homeowners and renters.
• The misguided effort to replace most of NEBRASKA’s tax system with a single consumption tax – dubbed the “EPIC Tax” – will not appear on the November ballot after failing to gather enough signatures. Supporters will still bring their proposal to the legislature during a special session set to occur later this month, but it has repeatedly failed to gain significant support there as well.
• Details of NEBRASKA Gov. Jim Pillen’s plan for that special session are slowly coming into focus. The proposal that will kick off the session is likely to include a state takeover of K-12 school operational funding, strict restrictions on local spending, an assortment of rate hikes on specific items, and an extreme expansion of the state sales tax base, including to business and agricultural inputs. Lawmakers have expressed some openness to the discussion but few believe such a massive overhaul can or should be achieved in a two-week session as Pillen intends.
• NORTH CAROLINA Gov. Roy Cooper signed legislation increasing the aggregate cap on the maximum vehicle registration excise tax rate that transportation authorities can levy on registered motor vehicles from $8 to $10 a year.
• WEST VIRGINIA Gov. Jim Justice announced that the state has triggered an automatic personal income tax cut due to rising state revenues, which will reduce each bracket’s rate by 3 or 4 percent (details remain to be finalized). The legislature may also return for a special session in August to consider a proposed credit for child care or additional personal income tax cuts supported by the governor.

What We’re Reading

• In a recent blog, ITEP highlights the reality check Kentucky policymakers are coming to face after approving automatic tax cuts in 2022. From public education cuts to having to partially finance the mandated tax cuts with debt, the authors explain why Kentucky’s “march to zero” would leave working families with a net tax increase as wealthy households reap the benefits.
• The Tennessee Lookout documents the extensive special tax breaks that large corporations receive in Tennessee. For example, corporate industrial chicken barns—almost all controlled by multinational corporations like Tyson—don’t pay sales tax on the large amounts of water they use, unlike regular Tennesseans. The article also highlights benefits given to FedEx and other large corporations.
• While some Ohio Republicans have introduced legislation to eliminate the income tax and the commercial activities tax, arguing that it would stimulate the economy, a majority of economists surveyed on the proposals disagreed. Out of 19 Ohio economists, 11 disagreed that it would stimulate economic growth, and all but one economist said that eliminating the Ohio income tax would make it difficult to balance the state budget. As we’ve noted, income tax elimination would be an expensive giveaway to the state’s wealthiest.

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