State Rundown 9/14: Sales Tax Reform and Other Developments

This week we are bringing you news about potential sales tax changes (and vetoes) in California, New Jersey, and Iowa, voter disapproval of income tax elimination in Arizona, and other state tax policy developments from across the country. Thanks for reading the Rundown!

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• The campaign to enact an Earned Income Tax Credit (EITC) in West Virginia continues, as supporters gain more endorsements and work towards building bipartisan support for a bill in 2017.

• A recent poll shows that a majority of Arizona voters oppose (40%) or are uncertain (24%) about the idea of eliminating the state income tax in exchange for a higher sales tax. 

• Alabama legislators last week sent a plan to Gov. Bentley (which he has promised to sign) to spend the state’s $1 billion BP oil spill settlement. Most of the money will be used to pay down state debt, fund road projects, and free up money to plug the state’s $85 million Medicaid shortfall. The state also recently rejected a regressive lottery proposal and established a budget reform task force that will begin looking at some of Alabama’s revenue and spending processes later this month.

• Sales taxes and water quality will be in the news in Iowa again next year, as a coalition has announced a new initiative to increase the sales tax by 3/8 of a cent and devote the $180 million raised to cleaning up waterways, increasing soil conservation efforts, and improving programs for wildlife and outdoor recreation.

• Sales tax cuts are being discussed in New Jersey again as part of a package including a much-needed gas tax increase to bring the state’s roads department – currently operating on an emergency shoe-string budget – back to life.

• New Mexico Gov. Martinez’s refusal to entertain revenue solutions in the face of a $650 million budget gap and empty reserve funds won’t stop some from attempting to get tax increases on the agenda for the upcoming special session anyway, as groups are currently working to promote both alcohol and tobacco tax increases.

• California Gov. Brown vetoed legislation this week that would have exempted feminine hygiene products and diapers from the state sales tax, citing these tax breaks as new spending that must be considered during the upcoming budget session.

What We’re Reading…  

• New Census data from the Current Population Survey shows the first increase in real terms of median income since 2007 and a decrease in Americans living in poverty (though the poverty rate still exceeds 2007 levels).

• The OK Policy Institute summarizes State Question 779—the ballot question to increase the sales tax to fund education.

• CNBC reports on the federal and possibly state tax treatment of federal loans forgiven through the Income Based Repayment Plan.

• A new paper by the Federal Reserve Bank of Boston studying income mobility in the US from 1977-2012 shows lower family income mobility in more recent decades, especially for those in the bottom 20% of earners.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.