Just Taxes Blog by ITEP

State Rundown 9/29: Where There’s Smoke, There’s Revenue?

September 29, 2021

.ITEP Staff

One of the few industries to excel during the economic downturn brought on by the pandemic has been the marijuana business, and lawmakers around the country are taking notice as they try to ensure that sales in their state are both legal and subject to tax. The District of Columbia is holding a public hearing on legalizing marijuana sales, which could streamline the industry better than the current system, and some Maryland lawmakers are considering creating a legal marketplace in their state. A Pennsylvania legalization bill that was reintroduced would impose a 10 percent wholesale tax on business-to-business transactions. And Mississippi Republicans have produced a medical marijuana bill that would levy the state’s 7 percent sales tax and excise tax on growers.

Major State Tax Proposals and Developments

  • Supporters of the Invest in Ed initiative in ARIZONA have submitted over 215,000 signatures to force a vote on Gov. Doug Ducey’s recently signed 2.5 percent flat tax plan. If the supporters’ efforts are upheld, the tax cut will be immediately suspended until voters decide during the November 2022 election. — MARCO GUZMAN
  • ARKANSAS Gov. Asa Hutchinson and legislative leadership are proposing a cut to the state’s top individual income tax rate of 5.9 percent. While Hutchinson is committed to reducing the top rate to 5.5 percent, Republican leadership in the Senate is pushing for a more drastic reduction to 4.9 percent. — NEVA BUTKUS
  • The TEXAS legislature kicked off its third special session and at the behest of Gov. Greg Abbott added property tax changes to the agenda. In a quick turnaround, the State Senate passed a sweeping bill that would reduce property taxes by roughly $2 billion next year. The bill is now in the House awaiting a hearing. — BRAKEYSHIA SAMMS

State Roundup

  • The DISTRICT OF COLUMBIA has finally been able to schedule a public hearing on legalizing marijuana sales after House Democrats removed a six-year congressional ban that kept DC lawmakers from even publicly debating the issue. Currently, adults over 21 can share marijuana but not sell or purchase it. Earlier this year, the DC Fiscal Policy Institute released a report that recommends devoting cannabis tax revenue towards building community wealth for communities disproportionately harmed by the war on drugs. A group of MARYLAND lawmakers have also started a working group to consider options for a legal marketplace for marijuana.
  • Following a surplus, Gov. Kim Reynolds of IOWA is pledging more tax cuts and plans to look at lowering individual income tax rates next year.
  • A new poll shows that two-thirds of MICHIGAN voters would support raising taxes to invest in children.
  • In other cannabis news, MISSISSIPPI GOP lawmakers drafted a medical marijuana bill that subjects marijuana sales to the state’s 7 percent sales tax and taxes growers a $15 excise tax per 1 oz. of cannabis harvested. Yesterday, the Mississippi Legislative Black Caucus held a hearing to help prepare its own medical marijuana bill.
  • Better-than-expected income tax revenues in NEW YORK in recent months have led to an improved revenue forecast going forward. State officials still predict out-year budget gaps but consider them relatively small and the state’s fiscal position strong. But with nothing certain, new Gov. Kathy Hochul is directing the unexpected funding into rainy-day reserves and debt reduction efforts.
  • Legislators in OKLAHOMA are planning to propose legislation that would end the sales tax on groceries. Currently, Oklahomans pay a 4.5% sales tax on groceries. Even though there is a grocery sales tax credit to help offset the costs, it hasn’t changed in decades.
  • Following the trend of cannabis updates, PENNSYLVANIA lawmakers reintroduced a marijuana legalization bill that would create a permitting process as well as a 10 percent wholesale tax on business-to-business transactions. Consumers would pay graduated excise and sales taxes beginning at 6 percent and eventually increasing to 19 percent.
  • A federal judge ruled that TENNESSEE and KENTUCKY are allowed to use federal aid from the American Rescue Plan Act (ARPA) to cut taxes.
  • Tax policy continues to be a central theme in the VIRGINIA gubernatorial race, as evidenced by the debate over tax cuts during Tuesday’s debate. Taxes came up at the first NEW JERSEY gubernatorial debate as well, during which both candidates pledged to not raise taxes for the next four years.

What We’re Reading

  • The Center on Budget and Policy Priorities has an important report out on how state policymakers must eliminate and reform criminal justice fees and fines as a crucial step toward racial justice.
  • The LOUISIANA Budget Project published a brief opposing Constitutional Amendment 2 which will go before the voters this fall. The amendment would rid the state of its federal income tax deduction, lower corporate and individual income tax rates, implement income tax reduction triggers and cap the maximum individual income tax rate at 4.75%.
  • ITEP Research Director Carl Davis explains how federal tax loopholes, specifically “stepped-up basis” of capital gains income, also undermine state-level efforts to raise adequate revenues and advance economic and racial equity.
  • Pew researchers report on stabilizing state pension funds and the lagging public sector job recovery.
  • A new FLORIDA Policy Institute report makes the case for creating a ‘Working Floridians Tax Rebate‘, Florida’s state-level earned income tax credit (EITC).
  • The Institute for New Economic Thinking recently kicked off a five-part video series on Feminist Economics with economist Jayati Ghosh.



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