State Rundown 3/22: Springtime Tax Debates Blossom Nationwide

This week in state tax news saw major changes debated in Hawaii and West Virginia and proposed in North Carolina, a harmful flat tax proposal in Georgia, new ideas for ignoring revenue shortfalls in Mississippi and Nebraska, an unexpected corporate tax proposal from the governor of Louisiana, gas tax bills advance in South Carolina and Tennessee, and property tax troubles in Missouri, Nevada, and New Jersey.

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• The North Carolina Senate has released its preferred tax plan, a billion dollar so-called “middle-class” tax cut featuring a drop in the state’s personal and corporate income tax rates and other reductions.  An ITEP analysis found the top 20 percent of North Carolinians would receive nearly half of the personal income tax cuts under the proposal despite lawmakers claiming the cuts are targeted to low- and middle-income taxpayers.  The Senate’s proposal would come on top of years of tax cuts in the Tarheel state that have already reduced revenues by more than $2 billion annually.
• Louisiana‘s Gov. Bel Edwards is out with a surprising proposal in advance of the state’s legislative session–scrap the state’s corporate and franchise taxes and adopt instead a Gross Receipts Tax (like in Ohio). This proposal comes from left field, a very different direction from reforms suggested by many groups, including the governor’s own Task Force on Structural Changes in Budget & Tax Policy. More details are expected to be released next week.
• Legislators in West Virginia are taking up an extreme constitutional amendment resolution, Senate Joint Resolution 8, this week that would, among other things, repeal the state’s personal property tax, alter the real property tax, apply limitations to the personal income tax, and limit excise, sales and use, and corporate net income taxes. Under the resolution, three-fifths majority vote in each house would be needed to reinstate any repealed tax.
• Sources in Georgia report that the latest change to a harmful regressive income tax cut bill there creates a larger nonrefundable credit to deliver more help to low- and middle-income residents and those without children who were overlooked in the original bill. But the heart of the bill remains a flat 5.4 percent income tax that slashes taxes on the wealthy while raising them for many lower-income people and reducing revenue for education and other priorities by hundreds of millions.
• After crossover, Hawaii legislators are still considering over a dozen tax change bills. Proposals include establishing a state earned income tax credit, reinstating high income tax brackets that were repealed in 2015, and changes to low-income credits. Lawmakers are also weighing possible tax increases to fund the state highway system, including a tax based on car value and fuel tax increases.
• Nebraska lawmakers dead set on massive income tax cuts are trying to get creative to get them passed despite the state’s billion-dollar shortfall and general focus on property taxes. The latest idea floated is to repackage an existing property tax credit and then phase in the income tax cuts in future years using an arbitrary “trigger” mechanism.
• Mississippi‘s shortfall in its Medicaid budget is still $89 million with just a few months to go in the fiscal year and a key legislative deadline coming up this weekend. Lawmakers are now considering simply not paying health providers for several weeks to push the problem off until next year.
• Tennessee legislators have reverted back to Gov. Haslam’s original regressive tax shift plan, which is now advancing through committees in both houses, after failing to replace it with a raid of the general fund for infrastructure needs.
• A bill to raise South Carolina‘s gas taxes and vehicle fees to shore up that state’s infrastructure needs is likely to pass the legislature soon, but could be vetoed by Gov. McMaster.
• New Jersey‘s property tax cap may be revised this year because it is hamstringing local budgets to such an extent that they cannot qualify for state and federal matching funds for local services like public safety needs.
• Efforts to reform Nevada‘s property tax cap that has been undermining local budgets have shifted from various band-aid fixes to a likely study committee to seek solutions over the summer.
• The Missouri House advanced a bill mentioned in this space last week to eliminate a property tax circuit breaker that helps low-income seniors remain in their homes.
• Alabama is seeking to modernize its tax structure to include streaming services like Netflix, Hulu, and music services.
• In an effort to make money managers pay their fair share, Rhode Island legislators have introduced legislation to tax carried interest income the same as earned income.
• In Texas, a bill to limit the increase of local government budgets has passed the Senate and is expected to receive support of the House. Senate Bill 2 would limit county and local government budget increases to 5 percent annually as a way to limit property tax increases. Any increase above 5 percent would trigger an automatic vote.
• Seventy percent of New Jerseyans polled were in favor of raising taxes on the state’s wealthiest residents to restore pension funds the legislature has failed to make adequate contributions to for years.

What We’re Reading…  

• Route Fifty recently published three articles on the impacts of President Trump’s budget proposal for cities and states, including the loss of funding for community development and environmental protection efforts, erosion of emergency preparedness and responsiveness, and major cuts to federal agencies that primarily help low-income urban areas.
  
• The Rockefeller Institute‘s latest report documents job losses in state and local government, showing that employment in this sector remains below pre-recession levels despite growing populations and caseloads, forcing public servants to attempt to do much more with much less.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.