State Rundown 1/22: Twists, Turns and Intrigue

Although it significantly cut income taxes over each of the last three legislative sessions, the North Dakota Legislative Assembly heard the first of 30 bills this week aimed at income tax cuts, One proposal would reduce all personal income tax rates to zero and collapse the state’s current five income brackets to one. The governor’s income tax plan would reduce personal income tax rates by 10 percent and corporate income tax rates by 4.8 percent across the board. Another proposal currently before Senate would reduce the income tax rate on the bottom income bracket from 1.22 percent to 0 percent, eliminating the tax liability for 170,000 North Dakotans. The tax cut would cost $151 million a year and expire after two years. Sponsors of the bill argue that the tax cut would provide relief to renters, who have seen rents skyrocket as a result of the oil boom. Other legislators have suggested a more targeted approach, through an income tax credit for renters. 

South Carolina Gov. Nikki Haley endorsed an increase in the state’s gas tax in her state of the state Wednesday. Previously, the governor pledged to veto any increase in the state’s gas tax, which has not changed since 1987. The catch (and there’s always a catch) is that Haley will not support a gas tax increase without an income tax cut for top earners (from 7 to 5 percent).  Hiking gas taxes while cutting the top income tax rate would result in a tax shift from well-off South Carolinians to middle income and working families. State legislators had varied reactions to the governor’s plan; while Republicans were enthusiastic, Democrats pointed out that the plan would result in a net revenue loss of $117 million.

A state Senate committee approved Arkansas Gov. Asa Hutchinson’s tax plan Wednesday  with an amendment that would eliminate a planned capital gains tax cut. The amendment, offered by Sen. Bill Sample, would reverse a measure passed in 2013 to increase the exemption on capital gains from 30 percent to 50 percent and eliminate the tax on capital gains above $10 million. The amendment reduces the total cost of the governor’s tax plan to $93.4 million, according to the state’s Department of Finance and Administration. Local political prognosticators have noted the unorthodox nature of a Republican governor and legislature introducing a bill with tax increases.

Michigan Governor Rick Snyder signed a package of bills last week related to a ballot question that voters will decide on in May.  If approved, the package will generate $1.2 billion per year for roads and $300 million per year for schools by raising sales taxes, gas taxes, and vehicle registration fees.  In sharp contrast to Governor Haley’s proposal for South Carolina (described above), this package includes an income tax cut targeted toward low-income taxpayers, rather than the wealthy.  If approved, the state’s Earned Income Tax Credit (EITC) would rise to equal 20 percent of the federal credit.

Following Up:

Montana – Debate over tax cut measures continues in the legislature, and Gov. Steve Bullock’s budget director opposed the measures in committee hearings, saying they would endanger the state’s surplus. The Montana Budget and Policy Center, citing ITEP numbers, said that the top 1 percent of Montana taxpayers would see a tax cut of $2,200, while low-income Montanans would see a cut of just $12.

New Hampshire – Gov. Maggie Hassan has announced she opposes  proposed corporate tax cuts, saying that the bills currently before the state senate would create a significant budget hole. It is uncertain if Hassan will veto the bills should they reach her desk.

New York – In a stunning turn of events, state assembly speaker and Cuomo ally Sheldon Silver was arrested this morning on corruption charges. The charges stem from investigations related to the Moreland Commission, which the governor shut down prematurely last year amid controversy. Needless to say, this development will have an impact on Gov. Cuomo’s legislative agenda.