State Rundown 9/25: No Rest for the Weary as State Tax and Budget Debates Wind Down, Ramp Up

Last week, Wisconsin leaders finally came to agreement on a state budget, while their peers in Connecticut appear to be close behind them. Iowa lawmakers avoided a special session with a short-term fix and will have to return to their structural deficit issues next session, as will those in Louisiana who will face a $1 billion shortfall. Meanwhile, District of Columbia leaders have already resumed meeting and discussing tax and budget issues there.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• Wisconsin finally has a state budget and has finalized tax incentives for Foxconn—the largest state tax subsidy ever awarded to a foreign recipient. Tax law changes enacted include several tax cuts for businesses and the wealthy, including eliminating the state property tax, reducing the business personal property tax, and eliminating the alternative minimum tax, as well as doubling the registration fees for hybrid vehicles.
• Connecticut lawmakers have also passed a budget at last, but Gov. Dannel Malloy may yet veto the deal.
• Iowa Kim Reynolds announced the legislature will not be called into special session to balance the budget this year, pulling another $13 million from reserves to temporarily fill the funding gap, but budgetary uncertainty remains a problem. For example, promised reimbursements to cities, counties, and schools for a state-approved property tax cut four years ago are already coming up short, and those local entities are concerned the reimbursements could stop altogether. The Des Moines Register summarizes the case for taxing sugar-sweetened beverages as a partial solution.
• A second proposal for a ballot initiative to repeal California‘s recent gas tax increase has been filed. In addition to rolling back the recent tax and vehicle registration fee changes that were enacted to fund transportation projects over the next decade, this proposal seeks a constitutional amendment to prevent future motor vehicle and gas tax increases without voter approval.
• Louisiana may have closed out the recent fiscal year with a surplus, but that $100 million won’t go far when state revenues face a $1 billion deficit this coming summer. Contrary to this past legislative session, the political landscape is beginning to show signs of positively addressing tax reform, though industry players are lobbying hard for a permanent increase to the sales tax—a “solution” which, not surprisingly, would leave many of them unaffected given preferential tax rates and exemptions.
• The District of Columbia Council resumed meeting last week, with a special regional sales tax to improve public transportation and an effort to regulate and tax Airbnb and other short-term rentals both near the top of the agenda.
• Mississippi and Kentucky both made progress on how to regulate and tax Airbnb and similar short-term lodging rentals.
• A new audit report on tax breaks in New Mexico shows the state is doing a better job reporting how much it spends on tax breaks and who receives them, but falls short in determining whether such breaks deliver any return on investment. See how other states are doing here.
• Next stop for the soda tax—Portland, Oregon. An effort is under way to get a soda tax initiative on the ballot in Multnomah County for May 2018. The proposed tax would levy 1.5 cents per ounce on sugary drinks.
• The South Dakota Supreme Court has ruled the state’s attempt to tax online sales unconstitutional. This expected result will likely now lead to a U.S. Supreme Court hearing of the case, which could ultimately reverse existing precedent that prevents states from collecting taxes on such purchases.
• Despite a needed gas tax increase last year, a new report concludes that New Jersey‘s transit authority needs more dedicated funding sources to properly keep up with costs rather than relying on transfers from the state’s general budget. Dedicated transit funding would also improve the outlook for the state’s other general budget priorities like schools and public safety.
• A budget and tax symposium in Nebraska last week highlighted the high cost per job associated with the state’s business tax subsidies and ways the state can improve oversight to determine if the subsidies are meeting their intended goals.

What We’re Reading…

• A University of Chicago law professor explains in Slate how the Supreme Court’s previous rulings on business activities and sales taxes didn’t anticipate e-commerce and how the court should self-correct when given the opportunity in the near future, thanks to a South Dakota Supreme Court ruling.
• The Washington Post looks at the consequences for states of the “Cassidy-Graham” proposal to repeal the Affordable Care Act, highlighting 34 states that would see funding cuts.
• Governing provides a crash course on what “blockchain” is and how bitcoin and similar digital currencies will impact government.
• The Hill summarizes a new report from the Rockefeller Institute showing that while state revenue growth may appear strong in early 2017, a closer look reveals a less rosy outlook, due in part to federal uncertainty and to rapid growth in just two large states, New York and California.
• Local mayors and county officials are uniting to fight against one potential federal tax change: ending the federal deduction for state and local taxes.

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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