With many state legislatures already adjourned, developments in tax policy have slowed. But Oklahoma voters still delivered a decisive rebuke to a measure attempting to shift the cost of a manufacturing tax break to local governments. Meanwhile, an administrative judge in Maryland ruled that state’s digital advertising tax measure violates the federal Internet Tax Freedom Act. Yet the ruling should not stop other states from considering ad taxes – more on that here and here. Elsewhere, debates about tax subsidies to data centers continue to rock communities throughout the nation, most recently in suburban Chicago.
Also, if you’re interested in ITEP, tax justice, and all things data and tax, consider coming to work for us. We’re hiring a new Senior Analyst on our State Team. You can apply here.
Major State Tax Proposals and Developments
- An administrative judge in MARYLAND struck down the state’s first-in-the-nation digital advertising tax. The tax was first approved in 2021 and was estimated to raise about $250 million a year to fund K-12 education funding. However, as ITEP writes, other states should not be deterred. – MILES TRINIDAD
- OKLAHOMA voters rejected State Question 844, which would have loosened the state’s requirement to reimburse local governments for a manufacturing tax exemption. – ELI BYERLY-DUKE
State Roundup
- Data centers being built in the Northwest suburbs of Chicago, ILLINOIS are set to receive nearly $100 million in local tax breaks, shifting property taxes to residents. In the suburb of Northlake, homeowners could have seen an average annual reduction of $2,000 on their property taxes if local data centers paid property taxes on their full valuation.
- Elsewhere in ILLINOIS, Chicago has a midyear deficit of $85.1 million. New fees and charges created in last year’s budget, including selling ad space and privatizing debt collection, have not yet resulted in new cash for the city. New taxes on sports betting and social media companies have pulled in more than expected but both taxes are being litigated.
- Localities throughout IOWA are rethinking tax abatements as the fallout from a new 2 percent growth cap on local property tax revenue spreads.
- LOUISIANA has made a deal with SpaceX, which will be building a $100 billion spaceport in the marshland of Vermilion Parish. SpaceX has negotiated a PILOT of $25 million annually instead of remitting property taxes. The deal likely includes tax incentives from the state economic development agency, which are unknown to the public, as the state used non-disclosure agreements to engage in negotiations.
- NEBRASKA Gov. Jim Pillen recently ordered state agencies to make plans for midyear budget cuts after the income tax cuts and budget gimmicks he championed opened up a large and growing hole in the state budget. The proposals that came back make a compelling list of reasons not to pass misguided and unaffordable tax cuts: state inspectors told to sleep in their cars, reduced training for firefighters, less tourism promotion, higher fees all around the state, disinvestment from community colleges, and cuts to the homestead exemption program that allows very-low-income seniors and disabled people to stay in their homes. Separately but for similar reasons, the University of Nebraska will be ending several degree programs (shortly after its third consecutive tuition hike).
- Counties in NEW YORK are likely to have to come up with more than $1 billion a year – through property tax hikes, fee increases, and budget cuts – to cover the federal cuts to nutrition assistance (SNAP) contained in the 2025 federal tax and spending law. Advocates say only New York and two other states, NEW JERSEY and NORTH CAROLINA, place so much of this responsibility on local jurisdictions.
- A revised estimate projects WASHINGTON’s new millionaires’ tax will raise even more than originally expected — $3.1 billion in its first year and $8.3 billion total for the state’s 2029-31 budget – information that will be available to voters at the ballot in November when they decide whether to repeal the already-popular tax.
What We’re Reading
- ITEP’s Sarah Austin lays out the long-term trends of state income tax cuts. Although there have been prior waves, the latest wave has been larger than ever before. Anti-tax interests have shifted to favoring more numerous gradual cuts instead of large bites into revenue. Although this frog in boiling water approach has generated lots of cuts, it has not delivered promised economic gains. These policies postpone real debates over the trade-offs and leave future generations to face the harm.
- UC Davis Professor Darien Shanske lays out the implication of the recent decision to strike down Maryland’s tax on digital advertising. He argues the idea is not decisively defeated and can still be pulled off in other states.
- The Idaho Capital Sun breaks down the attempts at transparency for private school tax credits. Reporter Ryan Suppe discusses the history of the program and the few data points the state would release.
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