State Tax Cut Trends

March 16

A special session could be called soon in ARIZONA, as Republican lawmakers aim to override a voter-led veto referendum that is blocking the almost $2 billion income tax cut plan they passed in 2021 from going into effect. The goal would be to repeal the plan from last year and replace it with a new tax cut bill, effectively nullifying the need for voters to approve or reject the tax cut. The calls for a special session have picked up after a Superior Court judge struck down Proposition 208, a ballot measure that would have increased taxes on the wealthy and used the revenue to fund education.

Major State Tax Proposals and Developments

All eyes in GEORGIA seem to be on a proposed gas tax suspension bill, but a more permanent issue is the House’s recently approved flat 5.25 percent income tax bill that would eliminate most itemized deductions, raise the amount of income exempt from taxation, and cost over $1 billion annually. It is still unclear how the House and Senate will reconcile their tax cut plans.

The MISSISSIPPI Senate passed their amended version of the House proposal to reduce the income tax. Compared to the Senate’s last version, the plan would reduce the top income tax rate to 4.6 percent and include a 6-month suspension of the gas tax. The updated House plan still eliminates the state’s income tax, although implementing a slower phaseout via exemptions. The plan also includes a reduction in the state’s tax on groceries but much more slowly by just 0.25 percent a year, hitting 4 percent in 2034. The House plan no longer includes cutting car tag fees or increasing the sales tax.

Both plans are far more costly than their respective previous iterations and are heavily tilted towards the top. House and Senate leaders are expected to hold final negotiations later this month.

Senators in SOUTH CAROLINA have unanimously passed a $2 billion tax cut bill that would reduce the state’s top income tax rate from 7 to 5.7 percent and would cut the state’s manufacturing property tax from 9 to 6 percent. The bill also includes $100 minimum rebate checks for tax filers. The House unanimously passed a similar plan that did not include rebate checks.

LOUISIANA Gov. John Bel Edwards announced that his budget will include teacher pay raises, higher education faculty pay raises, money for early childhood education and pay raises for law enforcement and first responders in his State of the State address.

 

State Tax Roundup

The ALABAMA Senate approved a bill that would eliminate the state’s business privilege tax, the minimum tax levied on some corporations and business trusts, at a cost of $23 million per year. The legislature is also likely to pass tax breaks for retirees who rely on defined contribution plans and a standard deduction increase. Five bills have been introduced to cut the grocery tax but these proposals have not yet advanced.

FLORIDA lawmakers passed a budget that included two new tax holidays this year – the Skilled Worker Tools sales tax holiday and a month-long gas tax holiday in October. A corporate tax break bill that would have cost the state $3.5 billion over the next few years did not ultimately pass.

Advocates in ILLINOIS are pushing for an expansion to the state earned income tax credit and the creation of a state child tax credit.

The KANSAS House Tax committee advanced a bill that would reduce the state’s general sales tax to 6.3 percent and sales tax on groceries to 3.5 percent. Kansas currently has a sales tax of 6.5 percent; groceries are taxed at the full rate.

A state senator in LOUISIANA is hoping to make temporary reforms to the state’s Industrial Tax Exemption Program permanent. Before Gov. John Bel Edwards took office, an unelected state board could rubber stamp local property tax exemptions for manufacturers without approval from the municipalities losing the revenue.

MARYLAND Gov. Larry Hogan and legislative leaders announced a month-long gas tax suspension, costing the state nearly $94 million.

MICHIGAN Republicans have sent their $2.5 billion tax cut plan to Gov. Gretchen Whitmer who plans to veto the bill. The plan cuts the state’s flat income tax rate from 4.25 to 3.9 percent and adds a large additional exemption for retirement income.

Sales and gaming tax initiatives to improve education funding will not appear on NEVADA ballots this November after all, following a judge’s decision on the matter. The measures were originally created by the Clark County Education Association, which attempted to withdraw them after reaching a deal to raise some of the intended revenue legislatively, but there was disagreement over whether the Secretary of State could actually legally remove them from the ballot.

NEW HAMPSHIRE Gov. Chris Sununu has proposed temporarily suspending the gas tax as well as the rooms and meals tax.

A NEW JERSEY bill would cut the gas tax by half if the average price of a gallon of unleaded regular reaches $4.51 and completely suspend it if it tops $5.50.

NEW YORK lawmakers are seeking EITC improvements to bring the state in line with best practices recently enacted in other states to extend the credit to more workers without children and workers without Social Security numbers.

The House Majority Floor Leader Jon Echols in OKLAHOMA proposed a bill that would create a 100% tax credit for parents’ donations to their child’s schoolteacher of up to $1,000. The bill would set up an anonymous system where parents could write off their donations. The credit would be capped at $5 million annually. The bill passed the House. 

OREGON cannabis revenues continue to come in strong and the state is considering expanding cities’ ability to raise local rates.

Some PENNSYLVANIA lawmakers have also introduced legislation to cut the gas tax, using federal funds to replace lost revenue.

TENNESSEE Democratic lawmakers also proposed suspending the gas tax for 90 days.

VIRGINIA lawmakers ended their regular legislative session without passing their two-year budget and numerous other bills. The House and Senate have not come to an agreement on tax cuts so Gov. Glenn Youngkin is expected to call a special session.

VIRGINIA Gov. Glenn Youngkin also announced plans to introduce emergency legislation to suspend state gas taxes for three months but a similar proposal was rejected by legislators earlier this year.

WASHINGTON’s legislative session has ended without major tax action. The state’s new payroll tax for long-term care was delayed a year earlier in the session, a film tax subsidy was increased, and lawmakers rejected a sales tax holiday proposal in the final week.

The WEST VIRGINIA General Assembly passed a state budget without the House’s proposed 10 percent income tax cut. However, part of the state surplus may be used for future tax cuts. Lawmakers advanced a proposal to eliminate the soda tax. 

 

 

 

 

Ashmore Consulting is your trusted resource for tax credits, incentives & strategic location services. Reach out today to speak to a trusted advisor.

 

 

 

 

 

 

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ashmore Consulting LLC to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact Ashmore Consulting LLC or other tax professional prior to taking any action based upon this information. Ashmore Consulting LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.