State Rundown 8/22: Wayfair Fallout Could Hit the Pavement Soon

Arizona voters learned this week that they will have an opportunity this fall to restore school funding through a progressive tax measure. The effects of the Supreme Court’s Wayfair decision could soon be seen on Michigan and Mississippi roads, as leaders in both states have proposed devoting new online sales tax revenues to infrastructure needs. And new research highlighted in our “What We’re Reading” section discredits one-size-fits-all prescriptions for state economic growth such as supply-side tax-cut orthodoxy, advocating instead for more nuanced and state-specific policymaking.

— MEG WIEHE, ITEP Deputy Director, @megwiehe

Major State Tax Proposals/Developments:

• ARIZONA’S Invest in Education Act, which if approved by voters would raise taxes on the state’s wealthiest to fund public education, will appear on the state’s ballot this fall despite harsh opposition from vested interests. Polling shows broad public support for the initiative which would mark a stark contrast from decades of tax and budget cuts. — AIDAN DAVIS
• MISSISSIPPI legislators will go into special session Thursday to attempt yet again to improve funding for the state’s dilapidated transportation infrastructure, including more than 80 bridges closed this year due to safety concerns. Prior proposals to raise gas taxes while slashing income taxes or fill the gap with borrowed money met understandable opposition. But agreement appears possible this time around because there will be new revenue coming from online sales taxes and sports betting, as well as potentially a state lottery. — DYLAN GRUNDMAN

State Roundup:

• After a few false starts, MAINE legislators are expected to return to Augusta next week to tackle the state’s response to federal conformity.
• A new report by the LA Times examines the inequities of CALIFORNIA’s inheritance property tax break—a policy unique to the state that shields inherited properties from increased property tax rates even if they are used as second residences or investment properties (which the Times finds most are).
• MICHIGAN Rick Snyder would like to use all $200 million the state expects to collect from online sales and use taxes to help fund infrastructure projects. He will have to recruit lawmakers from both Chambers to his cause.
• Also in MICHIGAN, a state task force on broadband access is recommending the creation of a yet-to-be-defined tax credit to increase access in the state.
• Tax talk is heating up in WISCONSIN as the gubernatorial election advances. Gov. Scott Walker is advertising his support for a trio of new tax cuts in attempts to appeal to moderate voters—including a tax break for college students, a child tax credit (proposed by democratic lawmakers this past session but never taken up), and a credit that would help seniors stay in their homes.
• A coalition of city, school, and nonprofit officials in St. Paul, MINNESOTA have been making plans to advocate for a dedicated half-penny or one cent sales tax to heavily subsidize or make free preschool for 3- and 4-year-olds. Plans are being formed now with the hope of putting the initiative before voters in 2020. Final enactment would require approval by the state legislature. A similar proposal in Kansas City, MISSOURI, has been postponed from November to April.
• Dozens of school districts across TEXAS are preparing to ask voters to raise property tax rates this fall as costs and demands increase but relief from the state lags.

What We’re Reading…

• An August 2018 review of the academic literature on the economic effects of state and local fiscal policy confirms “that state and local tax fiscal policy is not predictably a major driver of economic growth in the U.S., particularly in more recent decades” and speaks to the errors of making tax policy decisions based on universal economic principles or ideological tenants.
• The Atlantic reports on the high percentage of teachers who have flocked to the shared economy, finding that one in ten of Airbnb hosts are U.S. teachers likely looking to supplement their income.
• Governing reports that Amazon has been able to use the “HQ2” bidding process to research how to get the biggest possible tax breaks for other projects such as distribution centers.
• West Virginia Center on Budget and Policy’s Ted Boettner and the Center for Economic and Policy Research’s Dean Baker co-authored a piece that pushes back against claims that West Virginia’s economy is booming.
• The Commonwealth Institute in Virginia explains the options for the state’s upcoming federal tax conformity debate, including the proposed refundable Earned Income Tax Credit (EITC).

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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