Fiscal policy takes center stage during budget and primary season – ITEP

.ITEP Staff

State Rundown 6/8: Fiscal policy takes center stage during budget and primary season

As voters head to the polls to weigh in on their state’s primary election and lawmakers gather to hammer out budget deals, tax policy remains high on the agenda. South Dakota voters strongly rejected a proposed constitutional amendment that would have imposed a supermajority requirement to approve tax and spending increases through a ballot. New York lawmakers and the governor, meanwhile, made confusing choices when approving a budget that included a massive tax subsidy for businesses. To the east, in Vermont, the governor has put his final stamp of approval on a refundable child tax credit that will go a long way toward improving outcomes for families with children under six. And while budget negotiations are ongoing in Arizona and Massachusettsamong other states, Virginia assembly members passed their budget to the governor, which includes doubling the standard deduction, one-time rebate checks, eliminating the state’s share of the grocery tax, and the partial refund of state EITC.

ITEP would also like to take a moment to congratulate Aidan Davis on accepting the position of Director of State Policy. She previously served as acting director after the departure of Meg Wiehe.

Be sure to keep an eye on ITEP’s State Tax Watch for the most recent tax policy changes in your state.

Major State Tax Proposals and Developments

  • The VIRGINIA The General Assembly sent Governor Glenn Youngkin the two-year budget after months of negotiations. The proposed budget nearly double the standard tax deduction, allow one-time refund checks of up to $250 per single filer and $500 per joint filer, eliminate the 1.5% portion of food tax, and return the tax credit to partially refundable earned income. The Governor should amend the state finance bill adding funding to controversial “lab schools” and reducing the gas tax. – KAMOLIKA DAS
  • Primary voters in SOUTH DAKOTA rejected amendment C, a proposed constitutional amendment that would have required future ballot measures raising taxes or spending by $10 million over five years to pass with 60% of the vote. The vote increases the likelihood that Amendment D will pass — the Medicaid expansion measure that will be on the ballot in November. – MARCO GUZMAN
  • As NEW YORK lawmakers wrapped up their session last week, fiscal policy took one step forward and two big steps back: transparency advocates were able to restore a government contract review processbut Governor Kathy Hochul and lawmakers have moved forward with a misguided gasoline tax exemption although Hochul herself admits that she “cannot guarantee that the savings…will end up in the consumer’s pocket”, then imposed a $10 billion tax subsidy on businesses with virtually no debate in the final moments of an all-night session. – DYLAN GRUNDMAN O’NEILL
  • VERMONT Governor Phil Scott signed the bill we talked about in the previous preview to create a $1,000 child tax credit for children under 6. The Exemplary Credit — it’s permanent, refundable, and targeted to households with incomes below $125,000 — will go a long way to helping families in need and advancing tax justice in Green Mountain State. Other approved tax bills included a reduction in the property tax rate and administrative changes meant to help student borrowers and manufacturing companies. – DYLAN GRUNDMAN O’NEILL

State Overview

  • CALIFORNIA cannabis retailers may be eligible for a tax credit up to $250,000 whether legislation recently passed by the State Senate becomes law.
  • COLORADO has recently become another state where residents can purchase feminine hygiene products and products used for incontinence exempt from sales and use tax.
  • The DISTRICT OF COLOMBIA final budget included extending the DC Earned Income Tax Credit to undocumented workers.
  • GEORGIA Governor Brian Kemp signed a Emergency Executive Order Extending State Gasoline Tax Exemption until mid-July. Gasoline taxes normally bring in about $150 million in revenue per month to maintain infrastructure.
  • KENTUCKY Governor Andy Beshear filed an emergency settlement to suspend an impending 2-cent-per-gallon increase in the state gasoline tax that would have taken effect July 1.
  • Despite record surpluses, the LOUISIANA the legislature voted against the tax cut proposals for infrastructure investment. Republican leaders cited heartburn over the 2008 tax cut plan as their reasoning, which led to years of budget crises and disinvestment in health care and higher education.
  • A special session was scheduled for MINNESOTA after the legislature failed to pass its compromise tax cut package before sine die, but there was little movement leadership on the compromise or a special session since the adjournment more than two weeks ago.
  • The future of a 500 million dollar MISSOURI reimbursement invoice is still uncertain after Governor Mike Parsons expressed his preference for a permanent tax cut.
  • The OHIO The general meeting voted temporarily double its historic preservation tax credit and extending its Opportunity Zones program through 2024.
  • Sales of flow-through entities may be considered business income instead of personal income on state income tax in OHIO if the owner has not recently “materially participated” in the operation of the business being sold. Given Ohio’s already generous treatment of business income, this legislation would cost millions of dollars.
  • OKLAHOMA lawmakers ended their regular session but plan to return for a special session next month to discuss food tax and income tax cuts. Governor Kevin Stitt vetoed one-time rebates passed by the legislature, as well as a bill that reduced state sales tax on motor vehicle purchases.
  • In PENNSYLVANIA, negotiations on the state budget are ongoing. Legislators reintroduced the Fair Share Tax Bill this would reduce the rate of personal income tax on wages and interest while increasing the rate on income from assets. Other legislators seem more interested in enact massive corporate tax cuts this would reduce revenue by more than $1.2 billion in the first three years. On another note, a coalition of advocates is pushing for a state earned income tax credit which would initially be set at 10% of the federal credit and would gradually increase to 25%.
  • With Governor Dan McKee signing this week, RHODE ISLAND became the 19e state to legalize, regulate and tax the use of cannabis for recreational purposes. Rhode Island cannabis revenues will include a 10% state excise tax, a 7% state sales tax, and a 3% municipal tax.
  • House and Senate leadership in CAROLINE FROM THE SOUTH met this week but did not find an agreement over their competing budget and tax cut plans. Both plans include $1 billion in tax cuts, with the House plan staggering the cuts over five years.
  • Annual tax holidays start in TENNESSEE. After the tax holiday on clothing, school supplies and computers, sales taxes on groceries will also be suspended for the entire month of August.

What we read

  • The New Republic highlights new research that shows economic recessions accelerating income inequality.
  • Kasia Tarczynska Explain in Non-profit quarterly how state and local tax subsidies are too often given without considering their costs, which are explored in more detail for each state in its entirety state economic development transparency report by Tarczynska and others at Good Jobs First.
  • Alan Krinsky of the Economic Progress Institute written in the boston globe (paywall) who Rhode Island should steer its fiscal surplus toward reinvestment in neglected public programs, rather than misguided or deep-seated tax cuts.

If you like what you see in the recap (or even if you don’t), please send comments or tips for future posts to Aidan Davis at [email protected]. Click here to sign up to receive the Rundown by email.


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