State Rundown 4/7: Bad Ideas Die Hard

Kansas Gov. Sam Brownback doubled down on defending his disastrous tax cuts, insisting that the state would benefit from a shift away from income taxes to consumption taxes. The governor claimed that such taxes, which fall more heavily on middle and working-class citizens, are more “growth oriented” than the income tax, despite the problems with this claim. Brownback has proposed increases in taxes on cigarette and alcohol consumption this session to make up for freefalling revenues, and has indicated willingness to increase the sales tax. Meanwhile, the deep budget cuts enacted in the wake of Brownback’s tax cuts means Kansas schools will close early this year. 

It seems as if New Jersey Gov. Chris Christie’s lottery privatization plan is a bust. The Associated Press reports that the New Jersey lottery, once among the most profitable in the nation, has failed to meet state revenue targets for the second year in a row. Legislators have already lowered income expectations for the struggling lottery, but Gtech, the private firm in charge of operations is trailing even the revised number by $64 million. Gtech is the same company responsible for the abysmal performance of the Illinois State Lottery after it was privatized in 2011. Former Gov. Pat Quinn fired the firm last summer.

Nevada Gov. Brian Sandoval hit back at critics of his proposed increase in business license fees, singling out a report by the Tax Foundation as irresponsible and “intellectually dishonest.” Sandoval wants to replace Nevada’s flat fee of $200 for a business license with a tiered system that takes into account gross receipts and the type of business. The new fees would range from $400 to $4 million a year and would raise $430 million. The governor would use the new revenue to help increase education funding by nearly $782 million. He has gained the support of business and interfaith groups, as well as the majority of Nevada voters.

Following Up:
North Carolina: An editorial in The News and Observer blasted the income tax cut proposal offered by state Senate leaders, noting that “while they’ve been cutting taxes for the wealthy and businesses, which have gotten most of the breaks, they’ve bashed the public schools, cut the university system and put the state in such a tight revenue margin that further tax cuts could be catastrophic.”

Idaho: The state Senate killed the tax plan offered by House leaders that would have removed the sales tax on groceries, increased the gas excise tax and lowered income taxes for the wealthy. ITEP found that the overall impact (PDF) of these changes would be higher taxes for low- and middle-income taxpayers, and dramatically lower taxes for the affluent (the top 1 percent of earners would receive an average benefit of $5,000 per year).  While an alternative plan has yet to be formulated, the Senate appears to be interested in refocusing efforts on the original objective of this legislation: raising money for transportation.

Nebraska: The proposed gas tax increase continued its progress through the state’s unicameral legislature, when senators voted 26-10 to advance the measure. Two more votes are required before the bill reaches Gov. Pete Ricketts, who does not support increasing the gas tax.

Things We Missed:
The Georgia legislature approved a sweeping transportation deal last Tuesday that will raise $1 billion for infrastructure maintenance and improvements through a mix of new revenue sources. The final version of House Bill 170 raises the existing state gas tax by 6.7 cents and reforms the tax so that it will grow alongside fuel-efficiency gains and general inflation, rather than being tied to gas prices. The bill also introduced a new $5-per-night hotel and motel tax and a new fee of $50 to $100 on heavy commercial trucks. The measure eliminated tax breaks for commercial airlines and electric cars to raise revenue as well. Gov. Nathan Deal has indicated that he will sign the measure into law.

States Ending Session This Week:
Mississippi (Sunday) (note: the end of the session means no new tax cut proposals can be considered in Mississippi this year)