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BPAA Biweekly State Policy Updates - March, 8

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TAX UPDATE

  • Illinois Would Collect $3.4 Billion Under Graduated Tax Plan: Wealthy Illinois residents would see their tax bills jump three percentage points under a progressive income tax framework released by Gov. J.B. Pritzker (D) March 7. And corporations would pay nearly a percentage point more in income taxes under Pritzker’s proposed “fair tax plan.” For the first time since taking office in January, Pritzker laid out his plan for solving the state’s fiscal crisis through a strategy junking its constitutionally protected flat income tax and replacing it with a graduated system. The resulting fair tax structure would generate $3.4 billion annually, permitting the state to fill a $3.2 billion budget deficit and eventually pay down its $15 billion backlog of unpaid bills. Pritzker, a billionaire heir to the Hyatt Hotels fortune, said Illinois needs a flexible tax structure that compels high-income taxpayers to contribute more, while providing relief to low- and middle-income taxpayers. Pritzker said 97.3 percent of Illinois residents would pay the same or less in taxes under his plan, while a few ultra-wealthy residents would pay more.
    • Illinois’ five-decades old flat system currently taxes individuals at 4.95 percent and corporations at 7 percent. 
  • 7.95 Percent Top Rate
    • Pritzker’s plan proposes a top rate of 7.95 percent for taxpayers earning more than $1 million.
    • The rate drops to 7.85 percent for individuals earning between $500,001 and $1 million.
    • It drops to 7.75 percent for individuals earning between $250,001 and $500,000.
  • Taxpayers earning $100,000 or less would see a tax reduction.
    • Incomes up to $10,000 would be taxed at a new 4.75 percent rate.
    • Incomes between $10,001 and $100,000 would be taxed at 4.90 percent.
    • Incomes between $100,001 and $250,000 would continue to be taxed at the current 4.95 percent rate.
  • On the corporate rate, the current 7 percent rate would be bumped to 7.95 percent.
    • Pritzker’s plan provides tax relief to homeowners and working families. The governor proposed a 20 percent increase in the property tax credit and a new $100 per child tax credit.
  • New Jersey Gov. Phil Murphy focused on what he calls “tax fairness”, spending restraint, and education investments in his budget address Tuesday. Murphy proposes to raise $447 million by extending the state’s mega-millionaires’ tax to income over $1 million as originally planned, save $800 million by reconfiguring public employee health benefits, and raise further revenue by legalizing and taxing cannabis and raising taxes and fees on guns and ammunition. Governor Phil Murphy proposed raising taxes on income over $1m to 10.75% from 8.97%.
  • New Mexico House adopts tax changes: The state House late Friday adopted legislation that would reshape New Mexico’s tax system and raise about $356 million a year in new state revenue for public schools, government operations and roads. The 134-page proposal would increase personal income taxes on some New Mexicans — especially high earners — and raise taxes on cigarettes and car sales. It would impose new taxes on some hospitals, online retailers and e-cigarettes. Tax breaks are also built into the proposal — including bigger tax credits for low- and middle-income families and new deductions for children and dependents. In a three-hour debate, Republicans assailed the proposal as an unprecedented tax increase and “money grab” by the state government. Read more at Eastern New Mexico News.
  • Massive bill that included a tax on services implodes at the Utah State Legislature: A massive tax reform bill in the Utah State Legislature is not moving forward. At a news conference Thursday, Governor Gary Herbert and legislative leaders announced the bill would be yanked, and have more study and public input before it is implemented. "For a number of reasons, this session we’re not going to be moving forward with pursuing the passage of House Bill 441," House Speaker Brad Wilson, R-Kaysville, said. The bill faced intense public pushback over the past couple of days. On Thursday, small business owners showed up on Capitol Hill to corner lawmakers and express their fears or displeasure. Read more at Fox 13 Now.
  • Michigan Gov. Gretchen Whitmer’s budget proposal is taking a lot of heat for two of the tax ideas included—nearly tripling the state’s fuel taxes by raising the rates 45 cents per gallon and levying an income tax on pass-through entities with incomes over $50,000 in order to fund more retirement tax relief for seniors.
  • Bloomberg Government reports - Wisconsin Governor Proposes $1 Billion in Tax Relief: Wisconsin’s freshman Gov. Tony Evers is pushing a bevy of tax code changes in a proposed two-year budget, including $1 billion in relief for low- and middle-income taxpayers, paid for with cuts to a credit primarily benefiting millionaires. Evers’ (D) 2019-21 Biennial Budget proposal, presented to the Legislature Feb. 28, also features an 8-cent-per-gallon bump in the gas tax, revisions to tax policies permitting big box retailers to slash their property tax obligations, and a plan to force online marketplace facilitators such as Amazon.com Inc. and Etsy Inc. to collect sales taxes on items sold by third parties on their platforms.
    • Evers proposed a new Family and Individual Reinvestment (FAIR) credit, that would provide a 10 percent refundable tax credit for single filers earning less than $80,000 and married-joint filers earning less than $125,000. The credit would phase out as incomes rise beyond those levels. The administration estimated the FAIR credit would provide $421.5 million in total relief in fiscal year 2020 and $412 million in FY 2021.
    • Working families would see additional relief through an expansion of the state Earned Income Tax Credit. The credit modification would provide $26.4 million in targeted relief to low- and moderate-income families in FY 2020 and $26.7 million in relief in FY 2021.
    • Evers would cover a portion of the cost of the tax cuts through an overhaul of the Manufacturing and Agriculture Credit (MAC), which offsets taxes for individuals and businesses deriving income from manufacturing or agricultural property located in Wisconsin. The administration portrayed the MAC as a giveaway to wealthy taxpayers, generating few manufacturing jobs and costing the state $300 million annually.
  • Bloomberg Tax - Ohio House Passes Gas Tax Hike, Electric Vehicle Fee: The Republican-controlled Ohio House passed a pared-back version of a gas tax hike Gov. Mike DeWine has said the state needs to prevent deterioration of its highways and bridges. DeWine (R) sought an 18-cent increase, which would have raised about $2.5 billion for state and local construction projects over two years. Instead, the House on March 7 passed a 10-cent increase for gasoline and a 20-cent increase for diesel.
    • The package (S.B. 62) would also impose an additional $200 registration fee for electric vehicles and a $100 registration fee for hybrids. Those vehicles already have a $34.50 registration fee under Ohio law. Combined, the bill raises about $870 million annually for state projects and another $100 million for public transit, according to Rep. Scott Oelslager (R).

LABOR AND MINIMUM WAGE

  • Connecticut Lawmakers Considering $15 Minimum Hourly Wage: Hartford, Conn. (AP) -- Connecticut lawmakers are considering whether to increase the state's $10.10 an hour minimum wage to $15 per hour. The Labor Committee heard testimony Thursday on legislation increasing the minimum hourly wage to $15 by 2023 or by 2024, which Democratic Gov. Ned Lamont has proposed. Each proposal seeks future increases based on national indexes. Lawmakers last voted to increase the state's minimum wage to $10.10 an hour five years ago. The wage was gradually increased to $10.10 by 2017. Democratic Sen. Julie Kushner of Danbury says at the time it was the highest in the nation, but now Connecticut lags behind its neighboring states. Business owners are balking at the idea. George Frantzis, co-owner of Quassy Amusement and Waterpark in Middlebury says each 25-cent increase costs him $26,000.
  • Missouri voters overwhelmingly supported minimum wage increases. Now a legislator wants to change things: A Republican state senator is poised to try to undo a part of Missouri’s new minimum wage increase. Sen. Mike Cunningham, R-Rogersville, could introduce as early as Thursday language that would create a new minimum wage rate for workers under the age of 18, as well as freeze the minimum wage received by workers in jobs who receive tips. Prior to joining the Legislature, Cunningham owned and managed Cunningham’s Fresh Foods, a supermarket in Marshfield. He said the increase called for in a measure passed by state voters in November would have forced him to jettison his young workers if he still owned the supermarket. Read more at the STL Today.
  • Bloomberg Government reports - Pennsylvania GOP Lawmaker Opens Door to Minimum Wage Deal: A top Republican lawmaker is opening the door to raising Pennsylvania's minimum wage, but he also insisted Monday that Democrats lower their sights from a proposal by Gov. Tom Wolf that would give the state among the nation's highest. Senate Majority Leader Jake Corman, R-Centre, would not define what he views as a reasonable increase, saying he is trying not to stake out a number that he "can't negotiate from." But he also suggested there is enough built-in Republican support in the Senate for a modest increase to bring a bill to the floor if Republicans and Democrats can agree on a figure. "I don't think it's a matter of vote collecting," Corman said. "It's a matter of arriving on a number that both the governor and the Senate Democrats can agree off of that we can too as well."
    • Wolf, a Democrat, has sought a minimum wage increase every year he has been governor, but gained little traction in the Republican-controlled Legislature. In January, Wolf issued a new proposal to raise Pennsylvania's hourly minimum to $12 this year, making it one of the highest in the nation, with annual 50-cent increases to bring it to $15 an hour in 2025. The value of a $15 minimum wage in 2025 would be about $13 in today's money, assuming an annual inflation rate of 2 percent.

ALCOHOL

  • California could adopt strictest drunken driving limit in nation, taking a cue from Utah: California Assemblywoman Autumn Burke, D-Marina Del Rey, and Assemblyman Heath Flora, R-Ripon, have introduced a bill that would nearly halve the maximum allowed blood alcohol content for driving, from .08 to .05. Assembly Bill 1713 is in line with a 2013 National Transportation Safety Board recommendation. That report concluded “that BAC levels higher than .05 are viewed by respected traffic safety and public health organizations around the world as posing unacceptable risk for driving, and more than 100 countries have already established per se BAC limits at or below .05.” Read more at the Sacramento Bee.
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