State Rundown 4/30: Tax Cuts Stall, Tax Increases Advance

A proposed constitutional amendment that would implement a flat income tax has stalled in the Alabama Senate. A vote on the measure, titled the “The Simplified Flat Tax Act of 2015,” was postponed by a Senate budget committee after sponsor Sen. Bill Hightower asked for more time to work on the measure. The bill would implement a flat income tax and eliminate some exemptions, credits and deductions. Opponents of the bill, including the advocacy group Alabama Arise, note that the changes would reduce revenue for the Education Trust Fund by hundreds of millions of dollars, and that some of the credits and deductions eliminated would impact retirees and working families. Kimble Forrister, executive director of Alabama Arise, cited ITEP data showing the bill would benefit mainly the wealthy while hurting the poorest Alabamans. He told the committee that “Alabama can’t move forward as long as we have an outdated, upside down tax system.” Sen. Hightower wants to make the bill revenue neutral and prevent any tax hikes for low-income Alabamans.

A committee in the Connecticut General Assembly passed a bill that would raise revenues in the state. Members on the Finance Revenue and Bonding Committee voted to approve a tax package that increases personal income tax rates for the wealthy and broadens the sales tax base. The top marginal income tax rate would increase to 6.99 percent for individuals making $500,000 or more and joint filers making $1 million or more. The measure also creates a new supplemental tax on capital gains income of 2 percent for the same group. The state sales tax rate would be reduced from 6.35 to 5.35 percent, while the base would expand to include more services, including engineering, veterinary services, laundries and dry cleaners, golf courses, and accountants. The measure is expected to raise $1.7 billion over the next two fiscal years, and would reverse many of the deep cuts proposed in Gov. Dannel Malloy’s budget. The bill incorporates some of the progressive tax changes proposed by Connecticut Voices for Children, which incorporated ITEP analysis into their report.

Efforts to repeal the Hall Income Tax have failed again in Tennessee after the legislature failed to act on two repeal measures before the close of session. The Hall Tax is a 6 percent tax on income from stocks, bonds and dividends that is the state’s only tax on personal income. A significant portion of the revenues raised by the tax supports county and municipal governments. Opponents of the Hall tax won a small victory, however, as they succeeded in increasing the exemption allowed for citizens over the age of 55.

A measure to raise the sales tax in Iowa advanced out of a Senate subcommittee on Monday, while a parallel bill is being discussed in the House. Senate Bill 1272 would increase the sales tax by three-eighths of one percent to generate new revenue for natural resources and outdoor education – as much as $150 million annually, according to its sponsors. The bill has wide support, including “representatives of conservation, environmental, farm and outdoor recreation groups.”

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