As states prepare for the revenue loss and disruption resulting from the federal tax bill, tax policy is being considered in legislatures across the country. The District of Columbia Council approved a budget that, among other things, fails to fund a recently enacted Child Tax Credit. There are also special sessions in the works, spanning from Colorado to Delaware to Texas, to account for federal changes and to cut property taxes. Meanwhile, Florida lawmakers continue to discuss eliminating the state’s property tax entirely even as voters approve property tax increases to fund increases to school staff wages. And in Puerto Rico, the Trump administration has fired nearly the entire federal fiscal control board that oversees the island’s finances.

Major State Tax Proposals and Developments

• The DISTRICT OF COLUMBIA Council approved a budget that does not fund the recently approved Child Tax Credit and makes other painful cuts. Councilmember Zachary Parker offered an amendment aimed at raising revenue and reversing the cuts that included a capital gains tax surcharge, but it was defeated in a 7-5 vote. – MARCO GUZMAN
• President Trump fired nearly all of the Fiscal Oversight and Management Board of PUERTO RICO. The board is authorized by Congress to oversee the fiscal decisions of the commonwealth and restructure its debt. With 5 of 7 seats now vacant, the impact on fiscal decision-making in Puerto Rico is unclear. – ELI BYERLY-DUKE

State Roundup

• COLORADO lawmakers will return on August 21 for a special session to address an estimated $680 million- $783 million revenue loss resulting from the tax provisions in the federal megabill.
• DELAWARE lawmakers scheduled a special session to consider legislation related to property taxes after property values increased when three counties went decades without conducting property value assessments. The reassessments were conducted after a judge ruled in favor of civil rights groups that filed a lawsuit that argued the lack of current reassessments led to inequities on how schools are funded.
• GEORGIA has issued tax rebates, passed earlier this year, to nearly 3 million filers. Households will receive between $250 and $500 depending on filing status. The policy will cost the state around $1 billion.
• Teachers in Hillsborough County, FLORIDA will receive a $6,000 pay increase this year after voters approved a property tax increase. Support staff will receive $3,000. These raises, funded by the property tax, come as state leadership and Gov. Ron DeSantis push for Florida to eliminate property taxes entirely.
• MINNESOTA will see 70,000 new filers benefit from its renter’s tax credit this year. Previously, applicants had to fill out a separate “Property Tax Refund” form to claim the credit. Lawmakers moved the credit to the state’s personal income tax form in their 2023 tax omnibus bill.
• A state analysis in OREGON found that the Beaver State could lose nearly $1 billion in revenue over the next two years due to the federal megabill. The Legislative Revenue Office estimated the state will forgo $451 million in personal income taxes and $581 million in corporate income taxes.
• Also in OREGON, the Salem Area Mass Transit District is floating the creation of a local payroll tax to support transit funding in and around the capital.
• TEXAS lawmakers are seeking to address property taxes in a special session. Some lawmakers are hoping to lower the cap on annual property tax collection growth without voter approval from 3.5 to 2.5 percent.

What We’re Reading

• Stateline covers considerations for states as they respond to the new national voucher program.
• The Nevada Independent review the reaction to the new federal tip exemption in a state with many tipped workers. Although some are happy to pay lower taxes, many agree that the provision is flawed and that the cuts to programs benefiting working people are more damaging.

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