State News Quick Hits: State Lawmakers Not Getting the Message

Less than a year after enacting a significant (and progressive) revenue raising tax package, Minnesota Governor Mark Dayton signed off last week on more than $400 million of tax cuts. The new legislation repeals several changes put into place last year including removing warehouse storage and 2 other primarily business services from the sales tax base and eliminating a new gift tax. The tax cuts also include reductions in the personal income tax via aligning the state’s tax code more closely to federal rules. Low- and moderate-income working families will also see a small benefit from two changes made to the state’s Working Families Credit (Minnesota’s version of a state Earned Income Tax credit (EITC).

A mother of two in Kentucky has made an impassioned plea to her state legislators to support the creation of a state Earned Income Tax Credit (EITC). More than half of all states have enacted such a credit, which is proven to increase workforce participation and improve health outcomes for children. As Jeanie Smith writes in her op-ed, “I know that we could have put that tax credit to good use. We could have used it toward the textbooks for my husband, or to take the stress out of a month’s bills.” There are lots of strong arguments for adding a state EITC to Kentucky’s quite regressive tax code (PDF), and the Governor has proposed establishing a state EITC as part of his tax reform plan. Hopefully, Jeanie’s articulation of what a state EITC would mean for her and other families like hers will persuade those not yet on board.

The Montgomery Advertiser recently ran a very powerful editorial about the problems with low taxes. Lawmakers should give careful thought to one of the questions the editors pose in the piece: “We don’t pay a lot in taxes in Alabama and historically have taken a perverse pride in that. But is this really a bargain, or is it a fine example of false economy, of short-changing public investment to the detriment of our people?”

Our colleagues at the Institute on Taxation and Economic Policy (ITEP) have long been critical of gimmicky sales tax holidays that provide little help to the poor or the economy. But Florida lawmakers don’t appear to have gotten the message, as the state House’s tax-writing committee recently advanced four “super-sized” sales tax holidays for purchases as varied as school supplies and gym memberships. Altogether, the package would drain $141 million from the state’s budget that could otherwise be been spent on education, infrastructure, and other public investments.

Newspapers in Oregon and North Carolina published editorials using data from ITEP and CTJ’s latest report on state corporate income taxes to highlight the need for corporate tax reform in their states. Check out The Oregonian’s editorial, “Extremes of Corporate Tax System Show Need for Reform” and one from the Greensboro News & Record, “Next to Nothing.”