State Rundown 12/22: Looking Ahead to 2016

As the year comes to a close, several tax bills are already being debated in states across the country. ITEP is closely following those proposals because they will likely dominate state headlines in 2016. In the new year we will write more about state tax policy trends for 2016, but in the meantime, here are some of the big state tax policy developments happening now:

There are bright signs on the horizon in Alaska. Gov. Bill Walker recently proposed a progressive income tax to address the state’s budget implosion, brought on by declining oil and gas revenues. Alaska has not had a personal income tax since 1980, when massive oil deposits were discovered on state land. Walker’s proposal would set the state income tax at six percent of what Alaskans pay in federal income taxes. The governor would also raise the state’s gasoline tax, which has not increased in 45 years. To learn more, check out this post on the Tax Justice Blog.

Florida Gov. Rick Scott will continue to push his $1 billion hodge-podge of tax cuts, though even legislators from his side of the aisle balk at the price. The package includes sales tax holidays for back-to-school shopping and hurricane preparedness and a tax break for college students’ textbooks. But those measures are mere leaves for the massive corporate tax cuts at the core of the proposal: corporate income tax cuts worth $770 million annually and a sales tax break on commercial rents that will cost $339 million over the biennium. House Speaker Steve Crisafulli says the governor’s plan may not be possible in its entirety. The state will post a one-time surplus of $635 million next year, but much of that money will go to support public education. Furthermore, a one-time cash infusion won’t pay for tax cuts that recur year after year.

Louisiana Gov.-elect John Bel Edwards will push to double the state’s EITC as part of his plan to reduce poverty in the state. As we outlined in a previous blog post, the move by Edwards is one of a number of encouraging signs for tax justice advocates. The governor-elect also appointed a moderate Republican, former Lt. Gov. Jay Dardenne, to be the state’s budget chief. Dardenne could have the skills to get a revenue-raising tax reform through the legislature since he was able to do so in the early 2000s. Louisiana faces a $1 billion deficit next fiscal year.

Mississippi lawmakers are set to push for tax cuts again next year after a failed attempt to pare back and even eliminate the personal income and corporate franchise taxes in 2015. While the Mississippi Economic Council for Transportation is calling on lawmakers to raise close to $400 million through the gas tax to pay for a long list of transportation infrastructure projects, Gov. Phil Bryant has said “any tax increase must be offset by corresponding tax cuts.”  Given the nature of the tax cuts proposed last year, such a plan would likely result in a significant tax reduction for the state’s wealthiest residents and a hike on low- and moderate-income working families.

Virginia Gov. Terry McAuliffe’s budget proposal unveiled this month includes corporate and personal income tax cuts.  The governor wants to cut the state’s corporate income tax rate from 6 percent to 5.75 percent. The proposal would cost $64 million in state revenues. McAuliffe claims that these changes are necessary to compete with neighboring North Carolina, which has repeatedly slashed its corporate tax rate in recent years. But an analysis by The Commonwealth Institute says these claims are false. They point out that two-thirds of Virginia corporations pay no income tax despite record profits, and that the governor’s proposed tax break would help a few large companies while providing no benefits for small businesses and families. They also note that recent history does not provide much reason to be optimistic about the Governor’s plan: a 2009 tax break for manufacturers, for example, failed to spur job growth in that sector. The governor also wants to cut the personal income tax through slightly increasing the size of the personal and dependent exemptions.  Such a proposal will only cut taxes by a little more than $20 million a year and ITEP found that more than a quarter of taxpayers, primarily low- and moderate-income working families, will see no benefit from the proposal.