November 8, 2023

Voters had the chance to impact tax policy across the country on election day, and some chose to enact common-sense reforms to raise revenue. Residents of the Buckeye state approved a ballot measure to legalize recreational marijuana which will be subject to a 10 percent excise tax. And residents of Santa Fe, New Mexico approved a 3 percent excise tax on homes sold for over $1 million. But not every state chose equitable tax policy on election day. For instance, Texas voters overwhelmingly voted in favor of cutting property taxes by backfilling local revenue with state dollars – most of it being one-time surplus revenue. Texas voters also voted to amend their constitution to prohibit any new taxes based on net worth or wealth.

Speaking of common-sense reforms: in a new brief, ITEP’s Carl Davis and Matthew Gardner encourage lawmakers to reform their corporate tax base to start from a comprehensive measure of worldwide profit. The piece illustrates how worldwide combined returns are already being filed in many states.  It also unveils new data showing that Alaska’s corporate tax functions primarily as a worldwide combined tax with almost three quarters of its revenue coming from sectors subject to mandatory worldwide combined reporting.

Major State Tax Proposals and Developments

Voters in TEXAS overwhelmingly approved an $18 billion property tax cut that will force school districts to reduce local property taxes while swapping that lost revenue with state dollars. The amendment also increased the tax exemption on homesteads and enacted a temporary appraisal cap on commercial and non-homestead residential properties (such as second homes and rental homes). While these changes are revenue neutral due to the state picking up the tab, $13 billion of the $18 billion cut is funded with one-time money. Voters also chose to constitutionally prohibit any new state taxes that would be based on net worth or wealth. -NEVA BUTKUS
A large majority (73 percent) of Santa Fe, NEW MEXICO voters approved a ballot measure that will enact a 3 percent excise tax on homes sold for more than $1 million to fund affordable housing. The new tax, often referred to as a mansion tax, is expected to raise approximately $4.5 million annually. – MARCO GUZMAN
OHIO voters approved a ballot measure that will legalize recreational marijuana along with a 10 percent tax on purchases, which is required to be used for administrative costs, addiction treatment, municipalities with dispensaries, and social equity and jobs programs that support the industry. – MILES TRINIDAD

State Roundup

CALIFORNIA tax collections continue to come in under forecasted levels, although the situation is complicated by the extension of Californians filing deadline. If state collections and spending continue with current law and the most recent forecast, then California faces a $14 billion deficit in FY25. But, if current trends continue the deficit could be far larger.
COLORADO Proposition HH was rejected by voters. The measure would have cut property taxes while allowing the state to backfill lost revenues for local governments and schools with excess TABOR funds. Another measure, Proposition II, which will allow the state to direct tax revenue collected from cigarettes, tobacco, and other nicotine products to fund preschool programs was approved by voters.
Gov. Brian Kemp of GEORGIA is extending the suspension of the state gas tax until the end of the month. It was previously set to expire this week.
IOWA lawmakers recently voted to restrict local revenue growth – costing municipalities an estimated $100 million annually in local tax revenue. Municipal leaders are now sounding the alarm that this new law could jeopardize their ability to fund public services such as mental health support and could discourage community development in rapidly growing areas of the state.
A fertilizer company seeking to build a chemical plant in LOUISIANA recently received a $3.6 million tax break from the state Commerce and Industry Board despite promising to create only 13 full-time jobs and 15 contractor positions.
As the grocery sales tax holiday ends, TENNESSEE House Rep. Aftyn Behn (D-Nashville) proposed permanently eliminating the tax and replacing the funds with changes to the corporate tax code.
WASHINGTON state’s Working Families Tax Credit has already delivered more than $108 million this year to middle- and low-income families – demonstrating that progress can be made in even the nation’s most upside-down tax code and that refundable credits can be a powerful tool for tax justice even in states that lack a broad-based state income tax.

What We’re Reading

In a new ITEP report, authors Kamolika Das, Andrew Boardman, and Galen Hendricks, provide a comprehensive look at existing local refundable EITCs. Together, the credits in Maryland’s Montgomery County, New York City, and San Francisco lift the incomes of approximately 700,000 households by more than $350 million each year in addition to federal and state tax credits. The report provides information on each locality via case studies and offers policy design recommendations for local leaders interested in pursuing an EITC.

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 Voters had the chance to impact tax policy across the country on election day, and some chose to enact common-sense reforms to raise revenue…  Read More