Trends We’re Watching in 2019: Raising Revenue and Spending Surpluses to Prioritize Critical Public Investments

This is part three of a seven-part series on state trends we’re watching in 2019.

A second notable trend in 2019 is states raising revenue to address longstanding needs and states allocating their surpluses to invest in critical public priorities such as early childhood programs, education and other human services.

In WASHINGTON state, Gov. Jay Inslee has proposed an excise tax on capital gains in his executive budget, which is estimated to raise $975 million annually once in full effect. The 9 percent tax on gains over $25,000 ($50,000 for couples) would apply to gains on stocks, bonds, and other assets, while exempting homes, farms, and retirement savings. The added revenue would help fund the state budget and allow Washington to begin addressing the underlying tax inequities for which it is notorious for its designation as the most regressive state and local tax system in the nation.

In NEW YORK, Gov. Cuomo’s budget calls for increasing student aid and extending the state’s millionaires’ tax through 2024 (it’s currently set to expire at the end of 2019). The tax generates about $4 billion a year by levying an 8.82 percent rate on single filers earning more than $1 million and on married couples earning more than $2.1 million. Alternative proposals that would enhance and permanently extend the millionaires’ tax have received legislative support in the past and are expected to surface again this year.

CALIFORNIA Gov. Gavin Newsom is calling for increased funding for many priorities, including building early childhood education classrooms, expanding health care and doubling the state’s EITC, which he plans to fund through a combination of one-time spending and closing corporate loopholes that allow businesses to pay less than their fair share post-TCJA.

The fight for adequate resources to invest in schools and colleges, infrastructure and public transit systems in MASSACHUSETTS continues with the revival of the Fair Share Amendment (millionaires’ tax)—this time through legislative channels. Advocates in ARIZONA are moving toward the goal of increased education investments with a proposal to raise the sales tax. Similarly, advocates in the DISTRICT OF COLUMBIA and MARYLAND are laying groundwork to respectively boost investments in pre-K and K-12 education.  And, newly-elected ILLINOIS Gov. J.B. Pritzker remains committed to pursuing a progressive graduated income tax at the ballot in 2020.

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Trends We’re Watching in 2019:

1. Using Targeted Tax Breaks to Help Address Poverty and Inequality
2. Raising Revenue and Spending Surpluses to Prioritize Critical Public Investments
3. Addressing Lingering Federal Conformity Questions and Opportunities
4. Attempting to Double Down on Failed Trickle-Down Regressive Tax Cuts
5. Reforming and Implementing Cannabis Laws
6. Consumption Taxes: the Good, Bad and the Ugly

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