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State of the States: Special Session Edition

4 min readBy: Joseph Bishop-Henchman

Summer may be upon us but we’re still working with the states in session. Here’s a quick list of the studies, testimonies, and updates we’ve put out in the last two weeks:

  • Alabama Lawmakers Still Haven’t Reached a Budget Agreement: Alabama’s legislative session ended last Thursday, but lawmakers have yet to come to an agreement on how to close the upcoming fiscal year budget gap. Here we provide an overview of the three major revenue plan proposals.
  • Colorado Will Face Vote on TABOR Refunds from Marijuana Taxes: Voters will decide in May whether to let the state keep $58 million in marijuana taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenue collected in 2014. To comply with the state’s TABOR law, if the initiative does not pass, the marijuana tax rate will be reduced until all the money collected is refunded, including one day of zero tax on marijuana (September 16, 2015).
  • Connecticut Governor Agrees to Pull Back Business Tax Increase & Connecticut Legislature Sends Corporate Tax Hike to Governor: Legislators sent the Governor a massive $2 billion tax increase, mostly on businesses. However, Governor Malloy announced he has heard the concerns from major employers in the state and will urge legislators to revise the plan and repeal some key elements.
  • Illinois Budget Impasse Sends Lawmakers into Overtime Session & Illinois Governor Suspends New Film Tax Credits, Makes Other Spending Cuts: At the end of May, Democratic legislators approved a $36 billion spending plan, $3 billion more than available revenues. They also rejected or refused to consider Governor Rauner’s recommended structural reforms in workers’ compensation, civil lawsuit damage awards, municipal collective bargaining, public works contracting, and local property taxes. For his part, Rauner has said he will not consider tax increases until some of those structural areas are addressed. Rauner issued administrative orders to cut $400 million in spending wherever he can, including grounding the state planes that ferry Democratic leadership between Chicago and Springfield. Special session began this week, and state employees will start going without pay on July 15 if it’s not resolved by then.
  • Kansas Approves Tax Increase Package, Likely Will Be Back for More: The Kansas Senate just voted 21-19 to concur in the House tax plan (SB 270/HB 2109), sending it to Governor Brownback who has said he will sign it. The plan has eight major components but overall does little to address the problems underlying Kansas’s tax and budgetary instability.
  • Louisiana Budget Deal Reached: The nonpartisan Public Affairs Research Council of Louisiana (PAR) called the budget a “real piece of work,” describing the SAVE program as a “Rube Goldberg budgetary contraption.”
  • Nevada Approves New Tax on Business Gross Receipts: On May 31, the Nevada Legislature approved the Nevada Revenue Plan, a package of tax changes championed by Governor Brian Sandoval (R) which includes $1.4 billion in new and extended taxes over the biennium. The Nevada Revenue Plan increases the corporation annual business fee, expands the payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. , raises the cigarette tax, and creates a new Commerce Tax on the gross receipts of businesses with at least $4 million in revenue in Nevada.
  • New Hampshire Considering Cuts to Corporate Tax Rate: The New Hampshire Legislature is considering two bills, SB 1 and SB 2, to cut the state’s Business Profits Tax and the Business Enterprise Tax.
  • Pennsylvania Income and Sales Tax Increases in Context: Governor Wolf’s budget advances some creditable structural reforms, like broadening the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. base, reducing reliance on the corporate net income tax, and finally eliminating the franchise tax. However, it also increases the sales tax rate, hikes the personal income tax, and imposes a severance tax for the first time, while providing property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. offsets that may not work as well as desired.
  • Texas Legislature Passes $2.56 Billion Tax Cut Package: The bill reduces the business franchise tax from 1 percent to 0.75 for most businesses. Retailers and wholesalers will also see their rate cut from 0.5 percent to 0.375 percent.
  • Washington State Capital Gains Tax Proposal Raises Volatility Concerns: Governor Inslee’s proposed 5 percent capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. would introduce significant instability to Washington’s tax system.

We’ll continue to provide updates as the debates in the states continue. Also, be sure to take a look at our latest chart book, Illinois Illustrated: A Visual Guide to Taxes and the Economy.