Corporate Tax Law

Spring has began or has it? – ITEP

April 22, 2021

.ITEP employees

Just as a recent cold snap reminded us that spring has not fully begun, this week’s news has been full of reminders that the state finance debates are not quite closed either. Legislators in Louisiana and MontanaFor example, have driven but not completed major tax changes; Leader Washington won almost two great victories for tax justice; Legislators in Nebraska have approved their budget, but have more to discuss than they have the time or money for; and many states are simultaneously celebrating the recently approved federal fiscal aid, waiting for guidance on how to and not to use it.

Important government tax proposals and developments

  • The ARIZONA The Supreme Court will decide whether Proposal 208 – which added a 3.5 percent surcharge for wealthy taxpayers – is constitutional after Republicans in lawmakers and a group of corporations challenged the voter-approved initiative. Opponents argue that the way the measure bypasses the state’s school spending limit is not legal, while proponents argue that lawmakers can either increase the spending limit or the funds can remain in an account until they can be spent. – MARCO GUZMAN
  • The LOUISIANA The Senate passed a bill that would eliminate federal tax withholding (FITD) on state income tax returns, but would also lower the highest income tax rates for individuals (6 to 5 percent) and corporations (8 to 6 percent). The House Ways & Means Committee approved another proposal that would also remove the FITD and set a flat tax rate of 4 percent for incomes over $ 12,500 for individuals and $ 25,000 for joint applicants. Any bill would have to get electoral approval in a nationwide referendum before it becomes law. – KAMOLIKA DAS
  • Although no votes have been cast at the time of writing, WASHINGTON Legislators are expected to approve an excise tax on extraordinary capital gains today. This – especially when combined with the Working Families Credit that we reported on last week – will mark a major victory for tax justice in the state with the most regressive tax law in the country, where low-income families are currently paying almost an effective tax rate 6 times the tax rate paid by high-income households and the tax for black, Hispanic and Indigenous households is 7 to 11 percent higher than for white households. – DYLAN GRUNDMAN O’NEILL

Status summary

  • The ALABAMA The legislature passed a law that exempts airports from sales and usage taxation.
  • ARIZONA Governor Doug Ducey has signed a bill to bring state taxation into line with federal law. In the meantime, legislators continue to urge that their income tax be converted to a flat rate of 2.5 percent.
  • CALIFORNIA Legislators are unlikely to pass a state wealth tax, but it would only affect the richest households and could raise billions on public services and investments.
  • Something DELAWARE Thanks to a legal dispute over fair and appropriate school funding, residents will have their homes re-valued for property tax purposes for the first time in almost 50 years.
  • FLORIDA Governor Ron DeSantis signed the bill mentioned last week that would use the income from taxing online sales to gradually lower the commercial rental tax from 5.5 percent to 2 percent. At the same time, the proposed state budget includes significant cuts in Medicaid.
  • After some back and forth, a tax on vape and e-liquids will be added INDIANA‘s new state budget. The tax is 25 percent for wholesale items such as vaping pods and 15 percent for retail items such as refillable products.
  • The LOUISIANA House passed laws legalizing smokable medical marijuana and subjecting sales to state sales tax of 4.45 percent.
  • An official from MAINE Governor Janet Mill’s administration testified against a proposal that would fill loopholes that would allow companies to hide profits in offshore tax havens. The proposal would (reasonably) require multinational corporations with domestic sales to claim profits in the US when filing their taxes in Maine.
  • Two tax reduction calculations are in the MONTANA Parliament. The bills lower the highest income tax rate and have staggered deadlines to avoid penalties due to federal Covid relief regulations.
  • NEBRASKA Lawmakers sent their biennial budget bills to Governor Pete Ricketts, who can still veto the bills or individual line items. Attention will be drawn alongside tax policy and other proposals, including possible tax cuts on social security income, military retirement and large corporations. Difficult decisions remain as the cost of remaining bills, which have been given special priority status by legislative committees, already exceeds the cost that the legislature has left in the budget for new legislation.
  • The NEW HAMPSHIRE House passed a two-year budget designed to reduce net income by $ 157.7 million in fiscal years 2022 and 2023 due to a one-time tax cut from the SWEPT (Statewide Education Property Tax), room and meal tax, corporate tax rates, and business tax. However, it is unclear whether the American Rescue Plan Act will prevent these cuts.
  • An invoice was filed in the NORTH CAROLINA Senate cuts the state’s flat-rate individual income tax rate from 5.26 to 4.99 percent, increases the standard deduction, and changes some corporate tax calculations.
  • A tax return containing a number of changes – including a sales tax exemption for menstrual products, a corporate tax restructuring, a sales tax on cloud-based software and services, and tax exemptions for military pensions – has been passed VERMONT House is likely to face an uphill battle in the Senate.
  • VIRGINIA Governor Ralph Northam is expected to sign a bill legalizing recreational cannabis. Retail cannabis sales are taxed at 21 percent nationwide, and local authorities could levy an additional sales tax of up to 3 percent. However, retail sales won’t begin until January 2024.
  • A new deal between the state WISCONSIN and Foxconn has cut the amount of taxpayer subsidies the company is entitled to to $ 80 million – from nearly $ 3 billion offered under the original deal.

What we read

  • Route Fifty reports that the US Supreme Court dismissed Ohio Attorney General Dave Yost’s lawsuit seeking to lift the US bailout’s restriction to states using state aid for tax cuts. States are still waiting for more detailed guidance from the Treasury Department on compliance with the restriction.
  • The US Senate held a hearing entitled “The Tax Code and Racial, Ethnic and Gender Disparities,” which included statements from four experts, including Dorothy A. Brown.
  • Pew breaks down the state revenue data across all 50 states and shows how much comes from taxes, fees, federal funds, and so on.
  • ITEP released a new report this week (with data from 50 states) that brings additional key data to the debate about lifting the $ 10,000 cap on state and local tax deductions (SALT). The report notes that the lifting of the SALT cap without other reforms would exacerbate economic disparities and exacerbate the racial inequalities that have been built into the federal tax system.

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