State Rundown 2/2: Groundhog Day on Tax Cuts


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Maine Gov. Paul LePage plans to borrow from the Sam Brownback playbook, announcing his intention to eliminate his state’s income tax in three steps (we saw how that worked out for Kansas) at tomorrow’s state of the state address. The governor’s current budget proposal would reduce the current top income tax rate from 7.95 to 5.75 percent, and would also slash corporate tax rates and eliminate the state’s estate tax altogether. The governor proposes to pay for these tax cuts by broadening the sales tax base and increasing sales tax rates and reducing state aid for municipalities. Eliminating the state income tax would result in the loss of half of the state’s $3 billion in annual revenue, necessitating deep cuts or major tax shifts to more recessive revenue sources. 

Ohio Gov. John Kasich’s budget proposal would lower income tax rates, eliminate the income tax for about one million business owners and increase the personal exemption allowed for Ohioans making under $80,000 a year. The plan would wipe out income taxes for 98 percent of business owners who report their profits as personal income, as businesses with annual gross receipts of less than $2 million would be eligible. Taken as a whole, the governor’s plan is a revenue loser despite several proposed regressive tax increases. The governor proposes increasing the state sales tax, increasing the state’s cigarette tax, increasing the tax on business activity, broadening the sales tax base and increasing the severance tax. Republicans and Democrats in the legislature are both likely to oppose the governor’s proposal as a tax shift, though for different reasons: Republicans want to reduce overall revenue, while Democrats oppose the governor’s plan on fairness grounds.

The budget proposed by the Texas Senate includes over $4 billion in tax cuts, with $3 billion going to school property tax relief and the other $1 billion going to tax breaks for businesses via a cut in the franchise tax. Lt. Gov. Dan Patrick, who presides over the Senate and is the rare example of a powerful lieutenant governor, used the Senate’s proposal to make good on his campaign pledges to cut taxes. Opponents of the Senate plan point out that, with oil prices declining, the state’s current surplus should be invested in needed services or saved for rainier days. "Just because this session they have a $7.5 billion cash balance and a projected increase in revenue doesn't mean that two years from now they won't be scraping for money just to keep up the current level of services," argued Dick Lavine of the Center for Public Policy Priorities. State lawmakers have still not fully restored $5.4 billion in education spending cuts enacted in 2011, and more than 600 school districts have sued the state over inadequate funding.

 

States Starting Session This Week:
Nevada
Oklahoma
Oregon

State of the State Addresses This Week:
Oklahoma Gov. Mary Fallin (read here)
Maine Gov. Paul LePage (Tuesday)
Wisconsin Gov. Scott Walker (Tuesday)
Illinois Gov. Bruce Rauner (Wednesday)

Governor’s Budgets Released This Week:
Ohio Gov. John Kasich (Monday)
Oklahoma Gov. Mary Fallin (Monday)

 

 

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