State Rundown 5/4: Road Money and Budget Gaps

A complex Michigan ballot initiative that would increase various taxes to fund roads, public transit, K-12 education and local governments is a sound idea that, unfortunately, is unpopular among the state’s voters. The measure, Proposal 1, would increase the sales tax from 6 to 7 percent for education, and increase the gas tax and vehicle registration taxes to fund transportation. The measure also includes a provision to improve the EITC. An analysis of the plan estimates it would raise about $1.8 billion annually. The bottom fifth of Michigan taxpayers would receive an average tax cut of $24, while earners in the state’s top bracket would pay an average of $497 to $697 more. Given that Michiganders spend more than $686 a year on vehicle repairs thanks to atrocious roads, the measure is a comparative bargain for most.

The South Carolina Senate Finance Committee passed a road funding bill that would raise $800 million a year by increasing the gas tax and driver’s license and vehicle registration fees. It would also tie the gas tax to inflation and increase the sales tax cap on cars.  Passed earlier, a House plan would raise $400 million by increasing the gas tax and sales tax cap on cars (by smaller amounts than the Senate bill) and introducing a new gas excise tax at the wholesale level. Neither measure includes the immense income tax cuts that Gov. Nikki Haley insisted be included with any bill that raises the state gas tax. For more on the gas tax debate in South Carolina, check out this guest blog post from John Ruoff on the Tax Justice Blog.

Despite the plethora of bad press the state has received for attempting to balance the budget on the backs of low-income people while maintaining ill-advised tax cuts for the wealthy and businesses, Kansas lawmakers continue to propose regressive tax plans to plug the state’s deficit. Sen. Les Donovan, who chairs the Senate Assessment and Taxation Committee, suggested that the committee would consider a measure to increase excise taxes on cigarettes and liquor as well as a bill that would weaken the state’s EITC by reducing the credit and making it non-refundable. The committee will also review a host of small tax exemptions to phase out. Kansas faces an $800 million deficit, $400 million of which must be closed with spending cuts or tax increases.

Over the past decade, West Virginia lawmakers have phased out and eliminated the state’s Business Franchise Tax and reduced the corporate income tax rate from 9 to 6.5 percent. The tax cuts failed to deliver the promised job growth, instead blowing a hole in the state budget; business tax collections next year will be lower than they were in 1990.  Meanwhile, public university students in West Virginia could soon see big tuition increases thanks to shrinking state funding. West Virginia University is considering a 10 percent tuition hike on top of the 29 percent increase over the past five years, while West Virginia State University recently announced a 7 percent hike.

A California Senate committee approved a bill that creates a refundable earned income tax credit (EITC) for low-income and working families. The state EITC would equal 30 percent of the federal EITC for eligible individuals with children.