State Rundown 8/4: Tis the Season…for Unnecessary Sales Tax Holidays

It’s beginning to look a lot like that time of year again. That’s right, it’s sales tax holiday season and states across the country are doing their best to induce spending that would probably occur regardless. Democratic lawmakers in Massachusetts, however, are having none of it, as leaders in the party have rejected the governor’s plan to create a two-month sales tax holiday. It’s also the time of year where states and advocates are beginning to toss around tax policy ideas for upcoming sessions. The Republican governor of Utah has his eye on potential tax cuts to help residents deal with inflation, but he’ll have to convince members of his party first. An Arkansas gubernatorial candidate has made a proposal to eliminate the state personal income tax a central part of her economic platform, and advocates in Colorado got enough signatures to get a sales tax increase on recreational marijuana on the ballot.

Make sure to be on the lookout for ITEP’s updated brief on state sales tax holidays coming soon!

Major State Tax Proposals and Developments

• TENNESSEE and MISSISSIPPI held sales tax holidays last weekend. TEXAS, VIRGINIA, SOUTH CAROLINA, OKLAHOMA, NEW MEXICO, and ARKANSAS will hold sales tax holidays this weekend.
• UTAH Gov. Spencer Cox recently expressed his concern about inflation and noted that tax reductions in the form of a grocery tax cut could be an option next year. Republican Senate President Stuart Adams said it was too early, however, to think about cutting taxes. – MARCO GUZMAN

State Roundup

• ARKANSAS Attorney General and Republican gubernatorial candidate Leslie Rutledge proposed permanently eliminating the state’s personal income tax; she wants the proposal on the November 2022 general election ballot.
• CALIFORNIA Gov. Gavin Newsom signed into law a two-part boost to the state’s film and television tax credit program. The law increases existing credits by $180 million and adds $150 million for soundstage construction. Although this is unlikely to be a cost-effective investment for the state and adds fuel to states’ “race to the bottom” on this front, the new California law makes one significant improvement by requiring recipients to provide demographic diversity information on their workforces and submit a plan identifying how they will help the state’s film production workforce better reflect its population.
• A COLORADO group has submitted 200,000 signatures from supporters of an initiative that aims to increase the sales tax on recreational marijuana to fund tutoring, after school, and mental health services.
• Though CONNECTICUT only recently legalized recreational cannabis, the state now forecasts annual cannabis tax revenue to exceed $70 million per year by 2025.
• GEORGIA Lt. Gov. Geoff Duncan proposed creating a $250 million tax credit for Georgians and companies that directly donate to local police departments and sheriff’s offices.
• A two-month sales tax holiday, proposed by Gov. Charlie Baker, has not gained traction as a top priority for MASSACHUSETTS Democratic leaders. The plan would have cost the state $900 million. Meanwhile, lawmakers recently overrode the governor’s veto of their measure to delay a tax break for charitable deductions again until 2023.
• This week’s NEBRASKA news highlights the folly of basing tax cuts and budget limits on politically determined notions of acceptable growth rates. In this case, Nebraska revenues grew by more than 3.5 percent, triggering additional property tax credits. But state needs are growing by more than 3.5 percent per year, so this artificially imposed trigger will put the state’s budget into the red, instantly creating a more than $100 million projected shortfall.
• As lawmakers in NORTH CAROLINA continue to weigh the severity of potential tax cuts, progressive tax advocates released data showing that the Senate’s proposed income tax reductions would worsen the state’s exclusionary tax code and further racial inequities within the Tar Heel State.
• PENNSYLVANIA Gov. Tom Wolf’s appointed transportation panel, the Transportation Revenue Options Commission (TROC), has begun rolling out recommendations. Among them is a mileage-based user fee, package delivery fee and a toll to use limited-access lanes within the state.
• Former TEXAS state senator and gubernatorial primary challenger Don Huffines is running on a platform to entirely eliminate property taxes. His plan questionably entails the state replacing school property tax revenue while simultaneously capping state spending.
• The VIRGINIA state legislature started their special session on Monday to decide how to spend $4.3 billion in federal American Rescue Plan Act (ARPA) funds. Democratic leaders proposed using funds to replenish the Unemployment Trust Fund to avoid a payroll tax hike on businesses, but some Republicans propose an even higher contribution. In other news, Republican gubernatorial contender Glenn Youngkin proposed a $300 per individual tax refund, a one-year suspension of recent gas tax increases, and a one-year tax holiday for small businesses on the first $250,000 of income.
• WASHINGTON State’s payroll tax to fund its first-of-its-kind long-term care program will take effect in January, and workers have until November 1 to acquire private long-term care insurance in order to opt out of it. The 0.58 percent tax will apply to paycheck income with no cap, and the program will help provide a bridge for aging workers to continue living at home and not have to spend down savings to qualify for Medicaid long-term care coverage.

What We’re Reading

• Pew’s State Fiscal Health initiative shows how local governments—including municipalities and counties—raise their tax dollars to fund some of the investments and services that affect us most directly. They note, however, that taxes are only 60 percent of the money raised by these entities. The rest comes from highly regressive and problematic fines and fees, as well as utility and service charges and other miscellaneous sources.
• Route Fifty reports on the federal infrastructure bill’s impacts at the state and local levels, including its $1 billion for cybersecurity enhancements and $5 billion that could be a turning point for efforts to alleviate homelessness.

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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