Maryland

The tepid economic recovery is leaving millions behind. The nation still has nearly 10 million jobs less than it did in February, according to the latest jobs report. The number of people living in or near poverty is rising. Twelve million workers are about to lose their unemployment insurance, roughly four in 10 people report experiencing food insecurity for the first time, and conditions are likely to deteriorate further in the weeks ahead as we brace for another deadly surge in COVID cases and new or tightened restrictions on business and personal activity.

Although progressive tax policy doesn’t always succeed in in statehouses or voting booths, Arizona voters showed once again that when offered a clear choice, most people resoundingly support requiring fairer tax contributions from rich individuals and highly profitable corporations over allowing their schools and other shared priorities to wither and decay. Still, a similar effort in Illinois and a more complicated measure in California were defeated, and anti-tax zealots in West Virginia and many other states will continue to push for tax cuts for the rich and defunding public investments, leaving much work to be done to advance tax justice.

Even with Halloween coming up this weekend, months of dealing with the horrors of the Covid-19 pandemic have made it hard to scare anyone in the closing months of 2020, which state lawmakers and residents are showing by voting in droves and supporting policies they had been more trepidatious about in recent years.

The federal tax system and every state treat income from capital gains more favorably than income from work. Preferential capital gains tax treatment includes exclusions and seldom-discussed provisions like deferral and stepped-up basis, as well as more direct tax subsidies for profits realized from local investments and, in some instances, from investments around the world. This policy brief explains state capital gains taxation, examines the flaws in state capital gains tax breaks, and proposes reform options that will help make state tax systems more progressive and more equitable.

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.

The Earned Income Tax Credit (EITC) is a policy designed to bolster the incomes of low-wage workers and offset some of the taxes they pay, providing the opportunity for families struggling to afford the high cost of living to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been amplified as many states have enacted and expanded their own credits.

Reductions in critical state and local investments, including health care and education, would only exacerbate the economic crisis brought on by COVID-19 and worsen racial and income inequality for years to come. Higher taxes on top earners are among the best options for addressing pandemic-related state revenue shortfalls in the coming months.

Lawmakers in many states have enacted “sales tax holidays” (16 states will hold them in 2020) to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. These holidays may seem to lessen the regressive impacts of the sales tax, but their benefits are minimal while their downsides are significant—and amplified in the context of the COVID-19 pandemic. This policy brief looks at sales tax holidays as a tax reduction device.

As ITEP analyst Kamolika Das wrote today, July 1 is typically the beginning of state fiscal years and “a point when one can take a step back and reflect on the wins and disappointments of the past state legislative sessions.” Not so in 2020, she writes, as uncertainty surrounding the virus, state revenues, and potential federal action give state lawmakers no such time to relax and reflect. Although most recent state actions, such as those covered below in California, Mississippi, and West Virginia, have focused on funding cuts and temporary measures to bring budgets into short-term balance, the need for…

A bipartisan group of governors and senators from Louisiana to Maryland to Ohio have called for at least $500 billion in state and local fiscal relief. They also need specific help with testing, protective equipment, unemployment costs, Medicaid costs, social services, education and infrastructure. States can’t be on their own as they address the double whammy of plunging revenue and skyrocketing needs.

Many states are making the decline in sales tax collection worse by failing to apply their sales taxes to digital goods (such as downloads of music, movies, or software) and services (such as digital streaming). A state that taxes movie theater tickets but not digital streaming, for instance, is needlessly hastening the decline of its own sales tax.

April 15 is traditionally the day federal and state income taxes are due, but like so much else, Tax Day is on hold for the time being. Meanwhile the pandemic’s disastrous and uneven effects on communities and shared institutions are decidedly not suspended. But nor are the efforts of individuals, advocates, and policymakers to develop solutions to respond to the immediate crisis while also building better systems going forward. ITEP’s recommendations for state tax policy responses are now available here, and this week’s Rundown includes experiences and perspectives on paths forward from around the country.

The COVID-19 pandemic is an extraordinarily challenging time, as we see harm and struggle affecting the vast majority of our families, businesses, public services, and economic sectors. No one will be unaffected by the crisis, and everyone has a stake in the recovery and faces tough decisions. In the world of state fiscal policy, where revenue shortfalls are likely to be far bigger than can be filled by the initial $150 billion in federal aid or absorbed through funding cuts without causing major harm, tax increases must be among those decisions. Even with more federal support, states will need home-grown…

The COVID-19 pandemic continued this week to wreak havoc on lives and communities around the world. The fiscal fallout of the virus in the states is growing as well, and beginning this week to come into sharper focus. This week’s Rundown brings together what we know of that slowly clarifying picture and how states are responding so far.

States and families got good news this week as Congress came together to pass major aid to help during the COVID-19 coronavirus pandemic. But that bright spot came amid an onslaught of very difficult news about the public health crisis and the economic and fiscal fallout accompanying it. This week’s Rundown brings you the latest on these developments and state and local responses to them.

The House Democrats have plenty of ideas to help workers and families and boost the economy, but Speaker Nancy Pelosi’s recent idea to repeal the cap on deductions for state and local taxes (SALT) is not one of them. The 2017 Trump-GOP tax law includes many provisions that should be repealed. Unfortunately, Congressional Democrats have long made it clear that they want to start by repealing the $10,000 cap on SALT deductions, which is one of the law's few provisions that restrict tax breaks for the rich.

This week’s Rundown brings you the most useful reading and resources about how states are affected by and responding to the COVID-19 pandemic. These include: landing pages for the most up-to-date lists of state policy responses; ITEP’s own materials on state policy options and the federal response bills; insights on how a race-forward approach can improve these efforts at all levels; updates on state fiscal troubles and legislative postponements; and the developing picture of which states and communities could be affected more than others.

As the COVID-19 pandemic continues to disrupt more and more aspects of life and cause greater and greater harms to public health and the economy, information is changing by the hour. State policymakers, if they are even able to convene, are wholly focused on how to respond to the crisis. The pandemic is certain to pose a series of fiscal challenges for states and their economies, and this week’s Rundown focuses on the most helpful resources and the latest state-by-state updates available.

With all eyes on the potential effects of the oil price war and COVID-19 coronavirus on lives, communities, and economies, Georgia House lawmakers this week crammed through a regressive and costly tax cut for the rich with essentially no debate, information, or transparency. Most states are proceeding much more responsibly, assessing the ramifications for their service provision needs and revenues to fund those needs.

Wisconsin’s expansion of a capital gains tax break for high-income households represents a dark spot on this week’s state fiscal news, and the growing threat of COVID-19 is casting an ominous shadow over all of it, but otherwise the picture is pleasantly sunny, featuring small steps forward for sound, progressive tax policy. An initiative to create a graduated income tax in Illinois, for example, got a vote of confidence from a major ratings agency, while a similar effort went public in Michigan and two progressive income tax improvements were debated in Rhode Island. Gas tax updates made encouraging progress in…

This testimony explains the advantages of the cannabis tax structure proposed in Connecticut’s Senate Bill 16 and offers additional background information as well as ideas for potential changes to the bill.

This weekend’s Leap Day should be a welcome extra day for state lawmakers, advocates, and observers who care about tax and budget policy, as there is an overflow of proposals and information to digest. Most importantly, as emphasized in our “What We’re Reading” section, there are never enough days in a month to do justice to the importance of Black History Month and Black Futures Month. In state-specific debates, Oregon and Washington leaders are hoping to take a leap forward in raising funds for homelessness and housing affordability measures. Lawmakers in West Virginia and Wisconsin could use a day to…

The federal Earned Income Tax Credit (or EITC) lifts millions out of poverty each year, but it is not created equal for everyone. Childless workers under 25 and over 64 receive no benefit from the existing federal credit. In the absence of immediate federal action, states have led–and continue to lead–the way.

For 45 years, the federal Earned Income Tax Credit (EITC) has benefited low- and moderate-income workers. Yet, throughout its history, the EITC has provided little or no benefit to workers without children in the home—a group that includes noncustodial parents whose children live the majority of the year with another parent.

We wrote earlier this week about Trends We’re Watching in 2020, and this week’s Rundown includes news on several of those trends. Maine lawmakers are considering a refundable credit for caregivers. Efforts to tax high-income households made news in Maryland, Oregon, and Washington. Grocery taxes are receiving scrutiny in Alabama, Idaho, and Tennessee. Tax cuts or shifts are being discussed in Arizona, Nebraska, and West Virginia. And Arizona, Maryland, and Nevada continue to seek funding solutions for K-12 education as Alaska and Virginia do the same for transportation infrastructure.