State Rundown 8/9: And Then There Were Three

This week, Rhode Island lawmakers agreed on a budget, leaving only three states – Connecticut, Pennsylvania, and Wisconsin – without complete budgets. Texas, however, remains in special session and West Virginia could go back into another special session over tax issues. And in New York City, the mayor proposes a tax on the wealthy to address the city’s struggling subway system.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• After operating without a budget for just over a month, Rhode Island lawmakers ended their budget stalemate late last week. Gov. Gina Raimondo signed a $9.2 billion budget, which includes a $26 million cut in the car tax (with a requirement that the affordability of the tax cut be studied in the coming years), a cigarette tax increase, free community college tuition, and an increase in the minimum wage.
• The Connecticut legislature recently approved a package of benefits changes for public employees that is expected to lower the projected two-year deficit by $1.57 billion. But despite ongoing negotiations, lawmakers appear far from agreeing on closing the remaining $3.5b shortfall. Discussions continue to revolve around municipal aid cuts and the possibility of a sales tax increase.
• Wisconsin is vying with Connecticut and Pennsylvania to be the last state to pass a budget. While transportation funding remains a sticking point, so too are the Foxconn incentives. Recent studies have shown the $3 billion in tax breaks would include $150 million in losses of sales tax revenues and that the state wouldn’t even break even from the incentives for 25 years.
• In the second half of its special session, Texas lawmakers are seeing dozens of property tax bills ranging from exemptions for Purple Heart recipients, lowering the threshold that subjects local levy increases to voter referendum, changing appraisal processes, and full abolishment of property taxes.
• Focused on two particular pieces of legislation, a state personal income tax exemption for military veterans and a 5 percent fee to be paid by bid-winning contractors on road construction projects, West Virginia Jim Justice has discussed calling legislators back for an additional special session.
• New York City Mayor Bill de Blasio is pushing for a tax on the wealthy the fix the city’s subway system. The plan, which would increase the city’s highest income tax rate by about one-half a percentage point for married couples with income over $1 million and individuals earning more than $500,000, would raise $700 to $800 million a year to fund the subway and pay for half-priced MetroCards for low-income riders.
• The major newspapers in Nebraska‘s two largest cities – Omaha and Lincoln – both recently issued editorials urging a careful, revenue-neutral approach to easing the troubles facing the state’s agricultural sector, rather than a knee-jerk overreaction that could cut property taxes on farmers while causing funding shortfalls for the state’s schools and other services.
• The anticipated budget crisis in Louisiana will affect more than education and other human services that are funded through the state’s operating budget. Construction and other capital outlay projects may also slow as the loss of more than $1 billion in revenue from the state’s temporary sales tax increase affects bonding.
• Tax reform is needed to stave off more harmful budget cuts in Montana, writes the Montana Budget and Policy Center
• 17 states have signed on to a voluntary disclosure initiative through the Multistate Tax Commission that incentivizes companies selling goods through Amazon to collect sales taxes going forward by offering them amnesty on previously uncollected taxes.

What We’re Reading…

• The Center on Budget and Policy Priorities urges states to follow Colorado’s lead in requiring online retailers to inform buyers of their sales tax obligations.
• Education Week has started counting how much funding America’s schools are losing due to the “dark store” tactic that big-box retailers have been using to drastically reduce their property tax bills. An estimate out of Texas predicts a $2.6 billion annual loss within five years, with $1.2 billion of that coming from schools.
• Only 18 states’ rainy day funds are in a better position now than they were in 2007, according to Route Fifty.
• The Commonwealth Institute in Virginia recently released a comprehensive toolkit of ways to improve the state’s economy, health, education, and more, including recommendations to modernize and clean up the tax code.
• Stateline reports on the declining popularity of sales tax holidays around the country as they are shown to be costly and ineffective, echoing the findings of our brief and blog on the topic.

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