July 16, 2020
July 16, 2020
With tax day finally coming at the federal level and in many states this week, policymakers in Nevada and New Jersey began to talk about revenue solutions to their revenue shortfalls, even if they fell well short of wholeheartedly backing needed reforms. Like their counterparts in most states, they remain primarily focused on temporary solutions to their short-term emergencies. Still, advocates in these and other states continue to push for more fundamental fixes to their inadequate and upside-down tax codes, including a new campaign for better tax policy in Massachusetts and efforts to rein in tax subsidies and loopholes in Ohio and elsewhere.
Major State Tax Proposals and Developments
- After introducing his initial plan last week to close NEVADA’s $1.2 billion shortfall through a combination of funding cuts, transfers, and timing shifts, Gov. Steve Sisolak is leaving the ball in the legislature’s court for the rest of the ongoing special session, arguing that raising taxes now would be unlikely, out of his hands, and slow to produce revenue, but he also suggested he would support tax increases if legislators brought him one. And, legislators are indeed looking at the state’s mining tax regime and considering at least requiring some early payments of those taxes. Other ideas put forth include covering the state’s emergency needs through loans to be paid back out of future revenues and raising short-term funds though an amnesty period for delinquent taxpayers. – DYLAN GRUNDMAN
- NEW JERSEY Gov. Phil Murphy is adopting a somewhat similar tack, readily admitting that the state will need tax increases but stopping short of making specific proposals, focusing instead on his proposal to borrow $5 billion in bonds for its near-term needs. Meanwhile a probe initiated by Murphy into business tax subsidies found that the state could save $578 million in the long run by clawing back or cancelling subsidies awarded inappropriately. And a new report shows how expanding the state’s Earned Income Tax Credit (EITC) to immigrants who file taxes using an Individual Taxpayer Identification Number (ITIN) make the its tax code fairer and more inclusive. – DYLAN GRUNDMAN
- COLORADO Gov. Jared Polis signed a law that increases taxes on cigarette tobacco and nicotine products. The measure, if approved by voters on the November ballot, will go into effect January 1, 2021.
- The COLORADO governor also signed a law that temporarily suspends the surcharge on employer payroll taxes for two years. The surcharge is an automatic mechanism meant to help refill the state’s depleted unemployment fund.
- And despite sporting events declining due to the coronavirus pandemic, COLORADO reported that it took in almost $97,000 in tax revenue from about $25.6 million in online wagers placed in May–the first month of legal sports betting in the state.
- GEORGIA‘s net tax collections for FY 2020 reflect a decrease of roughly 4.4 percent compared to the fiscal year ending June 30, 2019. That said, total net collections are not yet final due to the income tax filing deadline extension.
- IOWA’s Department of Revenue has issued guidance clarifying that the state is not coupled to business tax giveaways in the federal CARES Act and has established its own independent rules for applying business losses against income from prior or future years.
- LOUISIANA Gov. John Bel Edwards signed legislation approving a one-time $250 hazard pay rebate for essential, front-line workers making $50,000 or less. The Governor also approved an 8 percent tax rate on fantasy sports betting and numerous tax breaks for businesses.
- In MASSACHUSETTS, a coalition of community groups, faith-based organizations and labor unions are launching a campaign to advocate for increased state taxes on profitable corporations and their wealthy shareholders. They warn that severe budget cuts will only worsen the state’s economic recovery.
- MINNESOTA lawmakers are getting closer to a deal on legislation that would help fund construction projects and conform to provisions in the federal tax code that would provide a tax break for purchases of new equipment.
- NEW HAMPSHIRE Gov. Chris Sununu vetoed a paid family and medical leave bill that would have given workers up to twelve weeks off to care for a sick family member or after the birth or adoption of a child. The program would have been funded by a payroll deduction from workers’ paychecks, which the governor claimed was essentially an “income tax.”
- Proponents of cutting tax loopholes to fund schools and hospitals make their voices heard in OHIO. The state’s LLC Loophole alone could bring in over $1 billion annually.
- OKLAHOMA state tax officials are recommending that taxpayers continue filing their returns like normal after the U.S. Supreme Court’s decision in McGirt v. Oklahoma, which held that a significant portion of the state falls within Native American reservations.
- Lawmakers in PENNSYLVANIA passed legislation that would provide millions of dollars in tax credits to companies that construct natural gas manufacturing facilities. Gov. Tom Wolf plans to sign.
- Meanwhile, PENNSYLVANIA’s Lt. Gov. John Fetterman is urging state lawmakers to legalize cannabis to help reduce the state’s $3.2 billion revenue shortfall. And professors at the University of Pennsylvania are petitioning the school to make payments in lieu of taxes to support Philadelphia public schools. Penn, like other nonprofit institutions in the city, is exempt from paying property taxes.
- In Fort Worth, TEXAS, a local effort to nix a half-cent sales tax that funded more than 20 percent of the Forth Worth police budget failed with 65 percent of residents voting in favor of maintaining the tax. Two hundred miles south, Travis County voted to give Tesla tax breaks worth at least $14.7 million to build a new car plant. Critics voiced concerns over worker safety guarantees, adequate pay, and Tesla’s history of blocking unionization efforts.
- VIRGINIA‘s budget deficit of $235.5 million is lower than earlier projections, with payroll withholding and sales taxes taking the hardest hits.
- Some WEST VIRGINIA lawmakers have taken issue with Gov. Jim Justice’s use of federal CARES Act funds to plug state budget deficits. The House Finance Minority Chair has led efforts to call for a special session to increase oversight, but there may not be enough support for a special session in the Senate.
What We’re Reading
- The New York Times highlights how budget cuts at the IRS have made it easier for the wealthy to dodge taxes.
- Relatedly, ITEP Communications Director Jenice Robinson explained last week how adequately funding the IRS could help advance racial equity.
- Research from the Tax Policy Center shows state sales taxes took a $6 billion hit in May 2020 compared to May 2019—a 21 percent decline.
- Inequality.org explores some of the policy options cities may be able to use to address their pandemic-induced revenue shortfalls while reducing inequalities.
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