State Rundown 6/10: Ballots and Budgets

Thanks for reading the State Rundown! Here’s a sneak peek: Oregon officials approve ballot initiative to increase corporate taxes. Rhode Island legislative committee approves state budget. Local officials in Delaware worry about state shifting costs, need to raise property taxes. Minnesota special session looks less likely.

— Meg Wiehe, ITEP State Policy Director, @megwiehe

Voters in Oregon will have the final say on a proposal to increase taxes on corporations this fall after state elections officials certified that Initiative Petition 28 (IP-28) has enough support to appear on the ballot. IP-28 would increase the state’s corporate minimum tax for businesses with annual Oregon sales over $25 million. Under current law, corporations pay the greater of a minimum tax on sales ($150 to $100,000) or a tax on income (6.6 percent on income up to $1 million and 7.6 percent on income above $1 million). IP-28 would eliminate the $100,000 cap on the corporate minimum tax and apply a 2.5 percent rate to sales above $25 million.  If passed IP-28 would generate $3 billion in new revenue earmarked specifically to education, health care and services for senior citizens. Gov. Kate Brown released a plan this week that outlines her vision for how the money should be spent if IP-28 is approved. The governor would spend more on vocational and technical education, expand the state’s Earned Income Tax Credit, and reform business taxes by creating new deductions and closing existing loopholes.

A Rhode Island House committee approved a state budget this week. The House Finance Committee approved the $9 billion measure in the wee hours of Wednesday morning, rejecting Gov. Gina Raimondo’s proposed cigarette tax increase but embraced her recommendation to increase the state’s earned income tax credit from 12.5 to 15 percent of the federal.  The budget also included a $15,000 exemption on retirement income for taxpayers who have reached full Social Security retirement age and have less than $100,000 of income.

County officials in Delaware worry that the state could shift costs to them due to a revenue shortfall. State legislators want county governments to assume more responsibility for public services in the face of lower-than-expected tax revenue. Lawmakers have $75 million less than anticipated when Gov. Jack Markell released his budget in January. While the revenue outlook is not as dire as that faced by other states – Delaware will spend $200 million more this year than last year – most of the new revenue will be eaten up by automatic cost increases (school enrollment, state employee health insurance, and other categories). A panel of state and county officials is studying which state services counties could absorb. Local officials could be forced to increase property taxes.

Talk of a special session in Minnesota to tackle tax reform and public works funding was dead on arrival in St. Paul this week. Gov. Mark Dayton and legislative leaders were unable to reach a deal on holding a special session following Dayton’s pocket veto of a tax package that would have reduced state revenues by $100 million. The bill included tax breaks for farmers, working families, businesses, college graduates and professional sport stadiums. Amazingly, the revenue reduction came down to a wording error in the bill’s language (“or” instead of “and” in a crucial clause) due to the rushed nature of the bill’s passage at session’s end. Dayton refused to sign the bill and initially said the measure could be taken up again in special session. Legislative leaders balked, wary that the governor would use the session to win passage of a larger package of public works spending. The impasse makes the prospect of a state EITC expansion this year – a measure included in the bill vetoed by the governor –  far less likely.

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