State Rundown 8/10: Avoiding a Race to the Bottom

This week’s Rundown features a troubling multi-state trend that would help shield the country’s wealthiest taxpayers from paying state income taxes, a message from voters about the Kansas tax cut experiment, and potential special sessions in Minnesota and Alabama. Also, be sure to check out the What We’re Reading section.  Thanks for reading the Rundown! 

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• A New York Times report shows the troubling race to the bottom between a number of states including Alaska, Delaware, Nevada, New Hampshire, Ohio, South Dakota, Tennessee, and Wyoming – to attract trust funds controlled by the wealthiest Americans. States are doing so not only by slashing  taxes on such funds, but also by putting up barriers to protect the elite from child-support claims, divorce settlements, and the attempts of other states and the federal government to collect taxes owed.

• Tennessee officials are attempting to create marketplace fairness between online retailers and brick-and-mortar stores via a rule change that would require out-of-state sellers to collect state and local sales taxes. But opponents to the rule worry that other states will follow suit and level the playing field in their states as well – let’s hope they’re right! 

• Alabama Gov. Bentley has released his proposal for a constitutional amendment creating the state’s first lottery. The amendment would create a lottery commission but would not authorize casino gaming or affect “traditional bingo.” The legislature convenes Monday for a special session focused primarily on the lottery proposal, and lawmakers may also discuss the state’s outdated gas tax. 

• Recent primary elections point to a changing landscape for fiscal policy in Kansas in January 2017, as 14 supporters of Gov. Brownback’s failed tax policy lost their races. Whether those seats ultimately are filled by more moderate Republicans or Democrats, the new lawmakers are not likely to be advocates of the governor’s tax cuts, which presents an opportunity for the state to reverse course.
• Minnesota may have another chance to pass critical tax and public works funding bills during a special session  if the governor and legislative leaders can reach a deal regarding metro transit. State leaders resume talks this Friday.  

• Missouri voters will decide on two different cigarette tax increases in November after both measures were approved for the ballot this week. One is a 60-cent-per-pack increase that would raise more than $300 million, primarily for early childhood education. The other is a 23-cent increase that would raise $95-$103 million for transportation infrastructure funding.

• After reiterating her commitment to her no-tax pledge in the face of looming revenue shortfalls last week, New Mexico Gov. Martinez has now ordered state executive branch agencies to cut 5 percent out of their budgets and implement the cuts immediately.

What We’re Reading…    

• A Center for American Progress study found that an EITC expansion for workers without children would save billions each year by reducing crime and improving public safety.  
• Governing magazine summarizes state efforts to tax online streaming services such ase Netflix and Hulu and looks at Kalamazoo, Michigan’s turn to private donations for needed revenue. 
• Jared Bernstein in the Washington Post debunks the faulty correlation between the size of government and economic growth. 

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 Kelly Davis at kelly@itep.org. Click here to sign up to receive the Rundown via email.