Senior Director of State Fiscal Research
With a new fiscal year set to begin in most states on July 1, state policymakers have raised revenue for public investments in schools and other areas that will lay a strong foundation for stronger long-term economic growth, and they’ve proposed additional revenue increases that need voter approval.
Many of the revenue increases, like New York’s millionaires’ tax extension or New Mexico’s closing of corporate tax loopholes, will also make state tax codes fairer by basing them more on taxpayers’ ability to pay — a needed change given the “upside down” tax systems of nearly all states, requiring the most from those with the least. Other revenue boosts, like the gas tax increases of three states, will disproportionately burden low-income families and communities of color, even as they raise much-needed funds for public projects.
States have made these and other revenue increases in the fiscal year that’s now ending:
Meanwhile, Illinois lawmakers have placed a proposal to modernize the state’s income tax on the 2020 ballot for voters to decide. The “Fair Tax” proposal, which includes six income tax brackets, a higher corporate tax rate, an expanded property tax credit, and a new child tax credit, would raise about $3.4 billion a year, according to Governor J.B. Pritzker’s office. And Colorado lawmakers approved legislation that lets voters decide this fall whether to ease the state’s severe constitutional limit on revenue growth — known as the “Taxpayer Bill of Rights,” or TABOR — to better invest in priorities including education and infrastructure.
Along with these new revenues gained, states including Colorado, Kansas, Missouri, Nebraska, and West Virginia preserved revenue by rejecting major tax cut proposals. And five states (California, Maine, Minnesota, New Mexico, and Ohio) enacted improvements to their earned income tax credits (EITCs), which boost the incomes of low-wage workers, while other states (Delaware, Oregon, Michigan, and Rhode Island) are still considering EITC improvements.