State Rundown 8/18: End of Summer Tax Update

Summer is quickly (and sadly) coming to an end and if you’ve been away enjoying the great outdoors or off the grid, we’re here to help keep you up to date on what’s been happening on the tax front around the country. The District of Columbia and Delaware are steadily improving their respective EITC’s – the former will, over time, increase their credit to 100 percent of the federal credit for eligible filers, while the latter will be making their credit partially refundable. Tax cuts may be on the horizon: After approving their budget plan, representatives in the North Carolina House are now negotiating with the Senate on what version they’ll send to the governor. The House plan includes slightly less regressive cuts to the personal income tax and corporate income tax than the Senate version did. In Mississippi, lawmakers are holding a hearing on eliminating or cutting the individual income tax, and in Nebraska, a group of business interests have released a plan that includes expanding the sales tax base and flattening the income tax rate.

Major State Tax Proposals and Developments

• The DISTRICT OF COLUMBIA will gradually increase the DC Earned Income Tax Credit (EITC) from 40 percent of the federal credit for tax filers with qualifying children to 100 percent by 2026. This will make the DC EITC the most effective state EITC in the nation. – KAMOLIKA DAS
• DELAWARE lawmakers and Gov. John Carney reached a compromise this summer, which Carney has now signed into law, making the state’s EITC partially refundable. Middle- and low-income families eligible for the federal credit can now choose between a nonrefundable state credit at 20 percent of federal or a refundable state credit at 4.5 percent of federal. – DYLAN GRUNDMAN O’NEILL

State Roundup

• Independent insurance agencies in ALABAMA are urging legislators to eliminate a $40 million-a-year tax credit that is supposed to incentivize insurance companies to house facilities in Alabama, but in reality, only two large companies qualify for the credit.
• An ARIZONA judge sided with those challenging the governor’s recently enacted flat tax plan and gave Invest in Arizona until September 28 (the deadline to collect signatures to overturn the tax cuts) before the court would hear arguments on whether the group’s efforts are legal.
• ARKANSAS GOP gubernatorial candidate Leslie Rutledge announced that she will try to get a proposed constitutional amendment on the 2022 general election ballot that would eliminate the state’s individual income tax.
• With the passage of CONNECTICUT’s budget and Gov. Ned Lamont’s signature, the state’s EITC officially increases from 23 percent of the federal credit to 30.5 percent.
• MISSISSIPPI lawmakers will hold hearings on eliminating or cutting the state individual income tax next Wednesday and Thursday. There has been opposition from advocates for low- and middle-income families as well as corporate interests.
• A group in NEBRASKA has unveiled a tax plan, which ITEP has not yet analyzed but features the classic elements of an effort to slash taxes on rich households and push them onto middle- and low-income families while also undermining funding for public priorities. The plan is based on lowering and flattening personal income tax rates (to 4.99 percent) and expanding the sales tax base.
• Upon the approval of the House budget, the NORTH CAROLINA House and Senate are now negotiating a version that will move to Gov. Roy Cooper. The tax components of the House version include a cut to the state’s flat income tax rate (from 5.25 to 4.99 percent), a standard deduction increase, and a gradual corporate income tax rate cut (from 2.5 to 1.99 percent).

What We’re Reading

• One Voice in MISSISSIPPI released a report that demonstrates the inequities in the current state tax system and provides recommendations for improvement. Adopting a more graduated personal income tax structure would be a step in the right direction while eliminating the personal income tax would have devastating impacts on low- and middle-income families.
• Ambika Sinha of ITEP recently wrote powerfully about how local governments can adopt an anti-racist approach to property assessment.
• Route Fifty has a new special report out on Federal Recover Funding and how state and local governments are preparing to spend it.
• Governing covers how states and localities are seeking to complement federal tax credits with localized measures to support childcare and thereby boost employment.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.

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