State Rundown 5/28: Deals Made, Dreams Fade

Efforts to tie property taxes to household income face long odds in New York. Back in January, Gov. Andrew Cuomo proposed a $1.7 billion property tax circuit breaker for New York homeowners and renters meant to offset the cost of property taxes with an income tax credit. The measure enjoyed support in the state Assembly, but has since stalled in the conservative state Senate where lawmakers would prefer a broader property tax rebate not tied to income. The Senate plan, however, would provide less targeted relief and would only apply to homeowners. Supporters of Cuomo’s proposal say a property tax circuit breaker would help keep people in their homes in a state with some of the highest property taxes in the nation, while critics say the plan is a giveaway to suburban districts that doesn’t address the root cause of New York’s high taxes. ITEP has long advocated property tax circuit breakers as a way to fight poverty and make tax systems fairer – for more, check out this report.

A number of tax policy developments have come out of Alabama as the state nears the end of the legislative session. State Sen. Bill Hightower, who initially proposed replacing Alabama’s personal income tax with a flat tax version, scaled back his ambitions to a resolution that calls for a new taskforce to study the issue. Hightower’s initial proposal received pushback from groups who argued that a flax tax would increase the contributions of poor. A recent op/ed in The Huntsville Times notes that Alabama is among the few states that ask families below the poverty line to pay income taxes, noting that “the social and economic cost of taxing the poor might actually be higher than the dollar value of the revenues the state is collecting from them.” Meanwhile, Hightower also sponsored a successful bill that would require annual reports on the effectiveness of various tax credits, deductions and special rates, earning praise for going after ineffective tax loopholes that are used mainly by the wealthy.

Texas legislators reached a deal on transportation legislation that could send more revenue to road and bridge construction but reduce funding available for crucial investments in education and human services. House and Senate negotiators agreed on a proposed constitutional amendment that would divert $2.5 billion in sales tax revenue to roads if approved by voters. Sales tax revenue must exceed $28 billion for the measure to take effect, and the law will be on the books for 15 years. The deal also diverts 35 percent of any vehicle sales tax revenue over $5 billion to road construction, a measure that is expected to deliver an additional $250 million in new road money.