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Welcome to the State Rundown, your source for the latest in state tax policy! This week, 21 states begin their legislative sessions, including a number of states where newly-elected conservative governors will have to grapple with big budget deficits. Presidential contenders Scott Walker and Chris Christie will deliver highly-anticipated State of the State addresses as well. Here are the top stories we’ll be following this week:
Arizona Gov. Doug Ducey, who campaigned on a pledge to cut income taxes, will likely shift his focus from tax cuts to spending cuts in his State of the State address today. His pledge last week not to raise taxes in his inaugural address was widely seen as a concession that promised tax cuts were untenable given the state’s $500 million deficit this fiscal year and projected $1 billion shortfall in FY 2016. Ducey will instead announce a statewide hiring freeze and his intention to push for a resolution to a long-standing school funding dispute.
New Jersey Gov. Chris Christie will attempt to use his State of the State address to stop his recent slide in the polls and seize the initiative on two issues that threaten his legacy – public employee pension reform and transportation funding. So far the governor has been mum about the contents of his speech, but New Jersey political watchers anticipate Christie will defend his decision to cut back on promised payments to state pension plans. A bipartisan commission appointed by the governor has yet to release recommendations on how to deal with tens of billions of dollars in unfunded health benefits and pension liabilities. Christie must also contend with a nearly insolvent transportation fund that will go broke in July without additional funding. Some observers speculate that the governor will call for a state gas tax increase, which, after adjusting for inflation, is currently at its lowest level in history.
Gov. Pete Ricketts of Nebraska, who identified property tax cuts as his first priority in his inaugural address last week, may also welcom efforts in the legislature to push for income tax cuts as well. Business leaders in the state have made it clear that income tax cuts are their main concern, and the state’s projected budget shortfall makes it unlikely Nebraska could afford both property tax cuts and income tax cuts. The release of the Governor’s budget this week will provide more details on his vision for tax cuts. Proposals already circulating in the legislature include reducing the taxable value of agricultural land, capping property taxes, taxing land based on profit generated instead of market value, or increasing the size of the state’s property tax credit fund.
Tennessee Gov. Bill Haslam could be a victim of his party’s success in the last election, as conservative state lawmakers could push the governor farther to the right than he would like during the legislative session that starts this week. Republicans enjoy supermajorities in both houses of the state legislature, and some lawmakers plan to push to cut or eliminate the Hall Tax over the governor’s objections. The Hall Tax is a six percent tax on income from dividends, interest and capital gains – and a rare progressive feature in a tax system that leans overwhelmingly on the poor. Haslam has repeatedly rebuffed calls from conservative groups to push for repeal, arguing that the $300 million in revenue gained from the tax each year would be difficult to replace. His stance could be complicated, however, by his push to have Tennessee accept Medicaid expansion under his Insure Tennessee plan. Expansion could bring $1.14 billion in new spending and 15,000 jobs to Tennessee, but is a lightning rod among conservatives who oppose the Affordable Care Act. The governor could decide that he lacks the political capital to fight for Insure Tennessee and the Hall Tax at the same time.
States Starting Session This Week:
Arkansas
Arizona
Colorado
Delaware
Georgia
Idaho
Illinois
Iowa
Kansas
Maryland
Minnesota
North Carolina
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wyoming
State of the State Addresses This Week:
Arizona Gov. Doug Ducey (watch here)
Idaho Gov. Butch Otter (watch here)
Indiana Gov. Mike Pence (Tuesday)
Iowa Gov. Terry Branstad (Tuesday)
New Jersey Gov. Chris Christie (Tuesday)
South Dakota Gov. Dennis Daugaard (Tuesday)
Washington Gov. Jay Inslee (Tuesday)
Wisconsin Gov. Scott Walker (Tuesday)
Georgia Gov. Nathan Deal (Wednesday)
West Virginia Gov. Earl Ray Tomblin (Wednesday)
Wyoming Gov. Matt Mead (Wednesday)
Colorado Gov. John Hickenlooper (Thursday)
Kansas Gov. Sam Brownback (Thursday)
Nevada Gov. Brian Sandoval (Thursday)
Vermont Gov. Peter Shumlin (Thursday)
Governor’s Budgets Released This Week:
Idaho Gov. Butch Otter (Monday)
West Virginia Gov. Earl Ray Tomblin (Wednesday)
Nebraska Gov. Pete Ricketts (Thursday)
Nevada Gov. Brian Sandoval (Thursday)
Rhode Island Gov. Gina Raimondo (Thursday)
Vermont Gov. Peter Shumlin (Thursday)
Arizona Gov. Doug Ducey (Friday)