State Rundown 6/18: Promising Gas Tax Developments, Pandering Tax Cuts

Wisconsin lawmakers are considering eliminating the state’s Alternative Minimum Tax (AMT), a move that would send tax breaks to the rich and nothing to more than 80 percent of Wisconsinites. The AMT is meant to ensure that wealthy individuals pay a minimum level of income tax, and is therefore assessed at higher incomes. Ironically, as state lawmakers and Gov. Scott Walker slashed top marginal income tax rates for the wealthy, more of these taxpayers were subjected to the AMT. The proposal to eliminate the tax would cost more than $27 million annually in lost revenue.

The Rhode Island House of Representatives unanimously approved the 2016 budget deal on Tuesday night, sending the measure to the Senate Finance Committee for consideration. The unanimous approval cleared the House by 7:30pm, and has been touted as the quickest budget vote in at least 30 years. The $8.7 billion bill exempts Social Security income from the personal income tax for Rhode Islanders over 65 if their income is below $80,000 (single) or $100,000 (married) – a change that will benefit mostly wealthy retirees, as we’ve argued before. The plan also phases out sales taxes on utility bills for non-manufacturing businesses. On a positive note, the budget increases the states refundable Earned Income Tax Credit (EITC), a tax break for working families, from 10 to 12.5 percent.

The Florida Legislature approved a $400 million package of tax cuts on Monday, and Gov. Rick Scott is expected to sign the measure even though it reduces taxes by less than he wanted. Passage of the measure comes after the resolution of a deadlock over healthcare spending; Florida is expected to lose federal aid to state hospitals, and many lawmakers were reluctant to accept Medicaid dollars offered under the Affordable Care Act. In the end, the size of the tax cuts relative to what Scott proposed was reduced by almost half in order to cover healthcare costs. The package of cuts includes tax cuts for cellphone purchases and cable bills, college textbooks, and sailboat repairs that cost more than $60,000.

As the summer travel season heats up, lawmakers in states across the country are mulling gas tax increases as a way to boost road construction and maintenance budgets. Tennessee Gov. Bill Haslam plans to barnstorm the state to stress the need for more transportation funding, though he’s stopped short of endorsing a gas tax increase. Tennessee’s gas tax hasn’t risen in decades, and the average motorist there is paying a third less per mile for roads than a generation ago. An editorial in The New York Times, meanwhile, argues that New Jersey lawmakers must raise their state gas tax to pay for crumbling roads. At 14.5 cents a gallon, the state tax is less than a third of New York’s tax and trails Pennsylvania and Connecticut by similar margins. Meanwhile, New Jersey has 577 structurally deficient bridges and 300,000 potholes. Efforts to increase state gas taxes also received a boost from a recent study that finds gas tax increases do not result in penny-to-penny increases in the price that motorists pay at the pump.

A Delaware House committee will consider a bill that would make their income tax rate structure more progressive. Currently, the top personal income tax rate is 6.6 percent for income above $60,000. The new proposal would institute a rate of 7.1 percent for income between $125,000 and $250,000, and a rate of 7.85 percent for income above $250,000. State officials say the changes would increase revenue by $97.5 million over the next two years.