State Rundown 9/30: Fall Budget Tumbles

Michiganders will pay sales and use tax on online purchases for the first time when a new law goes into effect this Thursday. The Main Street Fairness Act, signed by Gov. Rick Snyder in January, requires out-of-state companies with a physical presence in the state, such as a warehouse or distribution center, to collect and remit sales and use taxes on online purchases made by Michigan residents. State analysts estimate that the measure will increase revenue by $60 million annually. The Michigan law is the latest in a series of so-called “Amazon laws,” named after the largest online retailer most likely to be affected by such measures. For more on this story, check out this ITEP blog post.

Conservative lawmakers in Arizona could be gearing up for a push to eliminate the state’s income tax, according to trial balloons in Forbes and by the Arizona Free Enterprise Club (AFEC). The recent advocacy comes from none other than Travis Brown and Stephen Moore, the Scooby Doo villains seemingly behind every terrible state tax plan. In Forbes, Brown uses praise for Gov. Doug Ducey’s education plan as an excuse to argue that Arizona should eliminate its income tax because “now is the time to end the price on work…. There’s no need for such an innovative and financially attractive place as Arizona to slap a growth-discouraging premium on doing business in the state.” Moore argues in a paper on behalf of AFEC that eliminating the income tax would make Arizona more competitive and attract jobs, investments and new residents. Left unmentioned were the disaster in Kansas, where lawmakers took such advice to heart, or the numerous studies showing that businesses and residents don’t follow income tax cuts. 

The budget impasse in Illinois continues with no end in sight. This week, Illinois Sec. of State Jesse White warned that the lights at the state capitol could be cut off if lawmakers can’t reach a deal. Moody’s noted that even reinstating the income tax increase that expired in January, a source of continuing conflict between Gov. Bruce Rauner and the legislature, won’t be enough to close the $5 billion gap. Illinois Comptroller Leslie Munger says the state’s backlog of unpaid bills could hit $8.5 billion by the end of December. Meanwhile, Chicago Mayor Rahm Emmanuel has proposed a city property tax increase of $543 million over the next three years to avoid huge spending cuts.

Deadlock is the name of the game in Pennsylvania, too, where Gov. Tom Wolf and the legislature have yet to agree on a new budget. The governor and key lawmakers met on and off on Monday, which marked 90 days since the start of the fiscal year, but there were no breakthroughs. Gov. Wolf has proposed a tax plan  that would increase education funding and eliminate the budget deficit, while legislators want to privatize state-run wine and liquor stores and reduce pension spending. Wolf says he plans to veto a continuing resolution passed by the legislature since the state has waited too long for a permanent solution. Yields on state bonds have increased as investors see Pennsylvania’s financial situation as increasingly risky.