Quick Hits in State News: Election Signals Changes in California, and More

A non-partisan group called “TBD Colorado” spent much of 2012 talking to Coloradans about the state’s long-term problems, and now has some sensible things to say about the state’s tax policies. While light on specifics, TBD urges (PDF) lawmakers to consider raising more revenue for things like education and transportation, and said that the state’s tax base should be broadened “so that it more accurately reflects Colorado’s underlying economy.”

For Colorado lawmakers that want a more specific assessment of what’s wrong with the state’s tax system, the Bell Policy Center’s new infographic: “5 trends that explain why Colorado’s revenue resources are shrinking” provides some additional insights.  The problems facing Colorado are familiar to many states, including exempting sales taxes for services (PDF), the decline of the gas tax and recent federal tax cuts on which the state has piggybacked.

A comprehensive overhaul of Minnesota’s tax and budget system is in the works for 2013. Governor Mark Dayton and other state policymakers are looking at long-term solutions that will set the state’s revenues on a sustainable path now and into the future.  At a public forum this week, Revenue Commissioner Myron Frans said that the Dayton administration is looking for changes that will make the system “fair, simple and support a strong and growing economy.”

A lot of attention has been given this past week to the passage of California’s revenue-raising ballot measure, Proposition 30.  But, the arguably more important election news from the Golden State is that when the dust settled, Democrats ended up with a supermajority in both houses, giving lawmakers the ability to tackle tax policy through the legislative process versus the ballot.  Senate leader Darrell Steinberg intends to make the most of the new makeup and will pursue tax reform in the coming year saying, “when we talk about revenue it ought to be in the context of tax reform, about broadening the base, about lowering rates, about creating a more competitive environment for business, and potentially bringing in more revenue.”

Utah lawmakers are looking at a proposal to double the sales tax applied to the purchase of food. They would couple the sales tax increase with two new refundable credits to offset the impact of the tax increase on low- and moderate-income families: a food credit (PDF) and state Earned Income Tax Credit (EITC) (PDF).  Generally, exempting food from a state’s sales tax base is a poorly targeted and costly policy since it makes the base much narrower, yields less revenue, and gives a large tax break to wealthier taxpayers who can easily afford to pay the sales tax on food.  Refundable credits of the nature being proposed in Utah are a less costly alternative that can be designed to reduce taxes for specific income groups.