Just Taxes Blog by ITEP

State Rundown 9/23: Tax Justice Advanced in New Jersey, On the Ballot in Illinois

September 23, 2020

.ITEP Staff

New Jersey leaders grabbed the biggest headlines of the week by finally agreeing to implement a much-needed and long-discussed millionaires tax to shore up the budget and improve tax fairness. And Illinois residents can begin voting tomorrow to enact a graduated income tax there. Relatedly, ITEP Research Director Carl Davis updated our research debunking the myth that progressive taxes interfere with economic growth. Cannabis legalization and taxation was a hot topic as well, as lawmakers in Vermont reached an agreement to move forward on the matter and others in Connecticut, Kansas, and New Hampshire worked toward the same.

Major State Tax Proposals and Developments

  • NEW JERSEY lawmakers and Gov. Phil Murphy have reached an agreement to implement a millionaires tax on the state’s highest-income households to help make the tax code fairer and raise $400 million annually for the COVID-19 crisis and beyond. The millionaires tax will not solve all the state’s woes—hundreds of millions of dollars in funding cuts are also included in the budget, and the state has a long way to go to address racial wealth gaps—but it nonetheless represents a major victory for New Jerseyans and for tax justice. – DYLAN GRUNDMAN O’NEILL
  • ILLINOIS voting begins tomorrow. A key issue facing voters is whether to amend the state constitution to allow for a graduated income tax. A recent report released by ITEP shows that over the past 20 years, Illinois’s flat income tax has exacerbated income inequality and racial wealth gaps, subsidizing the incomes of the top 3 percent by $27 billion and helping the richest Illinoisans build an additional $50 billion in wealth. – LISA CHRISTENSEN GEE

State Roundup

  • Gas prices in ALABAMA will slightly increase by two cents to 26 cents per-gallon on October 1st. This is the second phase of the state’s gas tax plan for funding infrastructure repairs.
  • CALIFORNIA Proposition 15, a first step to advance tax fairness by allowing commercial and industrial property taxes to be based on their market value, now has the support of Gov. Gavin Newsom, the Los Angeles Times, a lengthy list of economists, and a slim majority of voters.
  • A CONNECTICUT economist estimates the state could raise $784 million or more over five years from legalizing and taxing recreational cannabis.
  • The HAWAII state Council on Revenues predicts that tax revenue will continue to decline in fiscal year 2021 before slightly rebounding in fiscal year 2022. This prediction is based upon tourism returning to the Islands in advance of the holiday season.
  • The LOUISIANA State Legislature will convene a second special session next Monday the 28th to discuss Hurricane Laura recovery, COVID-19 funding, and the state’s unemployment fund.
  • MAINE’s Gov. Janet Mills has signed on to a plan to balance the state’s budget for the next ten months using a combination of federal funding, liquor sales tax receipts, and cost reductions. The Pine Tree State faces a projected $528 million dollar shortfall.
  • MARYLAND General Assembly Democrats proposed increasing the state alcohol tax from 9 percent to 10 percent to fund a Health Equity Resource Communities (HERC) program that would provide communities with racial health disparities with grants and tax incentives. Opponents argue that this would hurt the already-struggling restaurant and bar industry.
  • At a recent House committee session, some Democratic NEW HAMPSHIRE legislators expressed support for marijuana legalization as a tactic for boosting meals and room tax revenue. Last year’s HB 1663, a marijuana legalization proposal, could have raised $36.4 million in its first year but was held back for further study. There’s plenty of need for new revenue; for example, school districts have been using CARES Act dollars to pay for additional equipment necessary for reopening schools. Lawmakers in KANSAS are simultaneously pushing to legalize medical marijuana.
  • NEW JERSEY lawmakers advanced a bill to extend eligibility for the state’s Earned Income Tax Credit (EITC) to workers without children aged 21 to 24.
  • A federal appeals court will allow NEW YORK’s tax on opioid producing drug companies to stand. The tax is expected to raise $100 million per year for the next six years.
  • Last week, the SOUTH CAROLINA Senate voted in favor of an FY20-21 budget that included teacher pay raises, $1,000 bonuses for state employees earning less than $50,000 per year, funding for school nurses and charter schools, and poll worker stipends, among other items. However, Gov. Henry McMaster and House leaders oppose the plan, opting to maintain the previous fiscal year’s spending levels.
  • TEXAS Gov. Greg Abbott has yet to clarify how the state will spend $5.6 billion in CARES Act funding, drawing frustration from Democratic lawmakers. In the meantime,  the Chairman of the House Transportation Committee stated that the upcoming transportation budget, funded largely by the gas tax, faces an $800 million shortfall.
  • A Joint Legislative Audit and Review Commission in VIRGINIA found that the Coalfield Employment Enhancement Tax Credit and the Virginia Coal Employment and Production Incentive Tax Credit, some of the state’s largest economic incentives,  generate negligible economic benefits and should be eliminated. State lawmakers will take up budget issues this week.
  • The VERMONT Senate approved the state budget last week but expects to have to revisit the need for deep budget cuts as revenues decline. Lawmakers have also reached agreement on a bill to legalize cannabis sales in the Green Mountain State. The bill, for an issue garnering increased public support, is now before Gov. Phil Scott for consideration.

What We’re Reading

  • Pew has new research out featuring a comprehensive and evidence-driven approach to making difficult funding cuts during economic downturns. While tax increases are an underappreciated part of states’ options and responses, so too is this type of careful approach to public spending cuts when they are necessary.
  • An investigation by The Chicago Reporter and Type Investigations found that the City of Chicago has intercepted individuals’ state tax refunds throughout the pandemic to collect millions of dollars in unpaid tickets, court fees, ordinance violations, and other debt.
  • The Nation criticizes New York Gov. Andrew Cuomo for failing to tax the rich and relying on austerity measures that threaten massive cuts to state public schools.
  • U.S. News & World Report reports on research from the Urban Institute showing the extent of tax revenue declines in the states.
  • Governing points out that public pension funds face a new challenge in this era of ultra-low interest rates, as some of the safest bonds are now returning negative yields.
  • Governing also reminds us that there are models from our own history for more robust federalism with true cooperation and information sharing between levels of government through this homage to the now defunct Advisory Commission on Intergovernmental Relations.

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