State Tax Actions 2009

Transcription

1 Tax Actions 2009

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3 Tax Actions 2009 Special Fiscal Report By Bert Waisanen Todd Haggerty NCSL Fiscal Affairs Program William T. Pound, Executive Director 7700 East First Place Denver, Colorado (303) North Capitol Street, N.W., Suite 515 Washington, D.C (202) February 2010

4 The is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. NCSL provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system. NCSL has three objectives: To improve the quality and effectiveness of state legislatures. To promote policy innovation and communication among state legislatures. To ensure state legislatures a strong, cohesive voice in the federal system. The Conference operates from offices in Denver, Colorado, and Washington, D.C. Cover Photo: Kentucky Capitol 2010 by the. All rights reserved. ISBN

5 CONTENTS Preface and Acknowledgments... v Multi-Year Tax Changes... vi Executive Summary... vii 1. Tax Highlights in Personal Income Tax... 3 Corporate and Business Income Tax... 3 Sales and Use Taxes... 4 Health Provider and Health Industry Taxes... 4 Tobacco and Alcohol Taxes... 4 Motor Vehicle and Motor Fuel Taxes... 5 Miscellaneous Taxes... 5 Fees... 5 Other s... 5 Appendices A. Tax Changes as a Percentage of 2008 Tax Collections... 7 B. Tax Changes by Tax... 8 C. Net Changes... 9 D. Property Tax Actions in 2009 Legislative Sessions E. Tax and Changes by 2009 Legislative Sessions F. Tax and Changes by Type 2009 Legislative Sessions List of Figures and Tables Figures 1. Net Tax Changes by Year of Enactment, Net Tax Changes as a Percentage of 2008 Tax Collections... 2 Table 1. Net Tax Changes by Type of Tax... 3 iii

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7 PREFACE AND ACKNOWLEDGMENTS Tax Actions 2009 presents information about the tax and revenue changes enacted by state legislatures during the 2009 calendar year. It also contains the results of tax measures that were voted on during 2009 general elections. In addition to aggregate state tax information, the report contains detailed information on 50 states. The reported changes take effect in fiscal year (FY) For 46 states, the fiscal year begins July 1 and ends June 30. Exceptions are Alabama and Michigan, where fiscal years begin in October and end in September; Texas, September to August; and New York, April to March. This annual report is a cooperative effort of the National Association of Legislative Fiscal Offices (NALFO) and the (NCSL) Fiscal Affairs Program. Without the advice, expertise and timely assistance of legislative fiscal staff from around the country, the report would not be possible. Organizations that measure state tax and revenue changes often report different numbers, resulting in confusion about the true magnitude of state tax increases or reductions. NCSL reports tax changes as they are reported by the state legislative fiscal offices. Tax Actions 2009 is a product of an NCSL staff team. The authors would like to thank Leann Stelzer, who edited the manuscript. The authors are also greatly indebted to Mandy Rafool, who provided a substantive review and edit of the report. v

8 MULTI-YEAR TAX CHANGES Tax Actions 2009 focuses on tax changes enacted during 2009 legislative sessions as well as any voter-approved actions in 2009 affecting revenues. This methodology, however, fails to capture the effects of previously enacted multi-year tax packages that result in tax changes. In 2009, four states reported the following multi-year tax changes. Idaho continued a multi-year grocery tax credit plan, increasing it by $10 in FY 2010 for a revenue reduction of $15 million in and $31 million in FY Kansas continued a corporate tax phase-out enacted in the 2007 session for a revenue reduction of $26 million in. The tax will be eliminated in calendar year New Mexico continued to expand a hospital gross receipts tax credit enacted in the 2007 session that will phase in completely in FY The revenue reduction is $16.1 million in. Ohio continued to phase in the following tax changes from a tax reform package enacted in In December 2009, the legislature delayed the final personal income tax reduction; however, the revenue estimates for were not subject to change. The state also delayed by one year the final 4.2 percent reduction of a five-year, 21 percent personal income tax reduction. The measure is estimated to cut taxes by $411 million in over the prior year. Compared to the tax rates that were in effect prior to 2005, the reduction in revenue is nearly $2.1 billion. In addition the state completed the five-year phase-out of the corporate franchise tax for a tax reduction of $322 million in. Compared to the tax rates that were in effect prior to 2005, the reduction in revenue is $1.5 billion. The state also completed the full phase-in of the Commercial Activity Tax for a revenue increase of $232 million in. Compared to rates in effect prior to the effective date, the increase is $1.4 billion. Finally, Ohio phased out the tax on business personal property. While there is no revenue impact in, compared to rates in effect prior to enactment, the tax reduction measures $1.6 billion. vi

9 EXECUTIVE SUMMARY The recession took its toll on state revenue performance in 2009, leading numerous state legislatures to increase taxes and fees to help fill budget gaps. Actions taken by 50 states resulted in a net tax increase of $28.6 billion for fiscal year (FY) The tax increases represent 3.7 percent of prior year total tax collections, the largest increase since 1991, when the net increase was 5.4 percent of revenues. By comparison, in FY 2009 the net tax increase was 0.5 percent. Twenty-four states increased taxes by more than 1 percent, while one state cut taxes by more than 1 percent. Twenty-five states made no significant tax policy changes. This report includes tax actions taken during regular and special legislative sessions in 2009, as well as actions approved by voters, mostly affecting tax collections. Information was obtained through the National Association of Legislative Fiscal Offices. Highlights include the following: All tax categories monitored in the state tax actions report showed net increases in. The personal income tax was raised the most, increasing by $11.4 billion. Business taxes were increased by $2 billion. s increased sales tax rates and stripped exemptions, generating an additional $7.2 billion. Health industry taxes faced higher increases than in past years, in part as states sought matching federal dollars. The net increase was $2.5 billion. Tobacco taxes experienced another round of increases, as states raised tobacco taxes by $1.9 billion. Taxes on alcoholic beverages increased by $193 million. vii

10 viii Tax Actions 2009 Motor vehicle and fuel taxes increased by $1.9 billion, with much of the net increase coming from vehicle tax changes in California. Miscellaneous taxes were raised by $1.4 billion. s made property tax changes, resulting in reduced property tax relief efforts in some states. s not only increased taxes, they approved numerous non-tax revenue actions to help fund their budgets. These changes included fees and accelerations that generated $5.1 billion, bringing the combined revenue increase to $33.7 billion for, compared to $9.2 billion for FY 2009.

11 1. TAX HIGHLIGHTS IN 2009 This is the first year all major tax types showed an increase since FY One key development took place in the personal income tax category, as states relied heavily on it to raise new revenue, an event not observed in years. Many of the income tax raising states targeted higher-income earners. This was reflected by top bracket increases and/or reductions in capital gains tax breaks. Most of the rate increases are temporary. Figure 1 shows the past 20 years of net state tax changes by year. Figure 1. Net Tax Changes by Year of Enactment, Source: survey of legislative fiscal offices,

12 2 Tax Actions 2009 A few large states that were heavily affected by the recession disproportionately affected the aggregate tax and fee changes. California raised nearly $11 billion in new taxes and New York enacted $6.9 billion in tax increases. Florida approved excise tax and fee increases that represented a substantial portion of the net increases in those categories. Figure Net Tax Changes as a Percentage of 2008 Tax Collections Increase of 5% or more, n = 7 Increase of 1% to 4.9%, n = 17 No significant changes, n = 25 Decrease of 1% or more, n = 1 Source: survey of legislative fiscal offices, Two states approved moderate tax reform packages. Maine reduced personal income tax rates and broadened the sales tax base by requiring visitors, in particular, to pay more in a variety of tourism-related categories. Vermont made a small cut in its personal income tax rate but scaled back capital gains incentives for most taxpayers. Voter actions generally did not affect tax levels in 2009, except in Oregon. Voters in Maine and Washington rejected tax and expenditure limits, and Maine voters did not approve proposed vehicle tax cuts. However, Oregon voters approved the legislature's personal and corporate income tax increases in January 2010.

13 Tax Highlights in Table 1. Net Tax Changes by Type of Tax Type of Tax Dollars Percent of Total Personal Income $11, % Corporate Income $2, % Sales and Use $7, % Health Care $2, % Tobacco $1, % Alcoholic Beverage $ % Motor $1, % Miscellaneous $1, % Net Change $28, % Not included: American Samoa, District of Columbia, Guam, Northern Mariana Islands, Puerto Rico and U.S. Virgin Islands. Source:, Personal Income Tax (net increase: $11,406.1 billion) Fifteen states raised income taxes and 12 states reduced them. Tax increases by two states, California and New York, accounted for most of the net increase, representing $9.2 billion of the total amount. Delaware raised taxes on incomes above $60,000. Oregon added new top rates of 10.8 percent and 11 percent to raise $243 million. Hawaii, New Jersey, New York and Wisconsin also raised taxes on high income earners. Several states scaled back capital gains preferences, including Colorado, Rhode Island, Vermont and Wisconsin. California reduced its dependent credit. Although Maine consolidated multiple tax brackets into a single, lower 6.5 percent tax rate, the measure included a 0.35 percent surcharge on taxable income over $250,000. s also made income tax reductions. Six states (Indiana, Maryland, Minnesota, North Carolina, Oregon and Ohio) conformed to income tax-related items in federal legislation that reduced state income taxes. Maine's income tax changes resulted in a net tax cut of $30 million. California and Georgia approved homebuyer tax credits to stimulate housing purchases. Corporate and Business Income Tax (net increase: $2,014.5 billion) Twenty states raised business taxes and 10 cut them. For example, Connecticut imposed a corporate tax surcharge on firms with adjusted gross income over $100 million to raise $74 million. Delaware increased gross receipts and business franchise taxes. Oregon raised its top rate and increased its minimum tax for businesses. Nevada adjusted its modified business tax to raise $173 million.

14 4 Tax Actions 2009 Several states reduced taxes on businesses. Georgia provided new business incentives. North Dakota cut business income taxes by $5 million. Texas exempted businesses with revenues under $1 million from its net margins tax, reducing taxes by $85 million. California approved an employment credit of $3,000 for each new worker hired in 2009 or The hiring incentive is expected to reduce corporate taxes by $264 million. Sales and Use Taxes (net increase: $7,236.5 billion) Seventeen states increased general sales taxes, although only two did so with state sales tax rate increases. Six states cut sales taxes. California increased its rate temporarily by 1 percentage point. Massachusetts raised its permanent rate by 1.25 percentage points. Nevada also authorized a local sales tax increase of 0.35 percentage points for school support. Other revenue raising actions included Colorado's elimination of its vendor compensation fee to raise $68 million, Maine's expansion of its sales tax base to include entertainment and other services, and the inclusion of digital download sales by North Carolina and Vermont. Some states reduced sales taxes. Arkansas reduced its grocery tax rate by 1 percentage point to a new rate of 2 percent, cutting taxes by $41 million. Connecticut passed legislation to cut the sales tax by half a percentage point, but state revenue performance failed to engage a trigger mechanism in the measure so the provision did not take effect. Mississippi approved a $3.5 million sales tax holiday for certain clothing items. Health Provider and Health Industry Taxes (net increase: $2,535.4 billion) Twelve states increased health care taxes, and several approved hospital assessment increases. Alabama increased its hospital assessment by $200 million. Oregon assessed hospitals for $102 million. Indiana extended its Medicaid health facility quality assessment fee to raise $101 million. Iowa created a $33 million nursing facility quality assurance fee. New York approved a health insurers surcharge of $240 million. Ohio passed a $100 million increase in franchise fees for nursing facilities. Tobacco and Alcohol Taxes (net increase: tobacco $1,898.2 billion, alcohol $192.6 million) Eighteen states raised tobacco taxes. Florida approved a $1 per pack cigarette tax increase, which represented the largest revenue increase, at $946 million. Kentucky's 30 cent per pack increase generated $107 million. In addition, Arkansas, Connecticut, Delaware, Hawaii, Mississippi, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont and Wisconsin are among states that raised cigarette taxes. Maine, New York, North Carolina and Texas raised taxes on tobacco products other than cigarettes. Colorado eliminated its sales tax exemption for cigarettes.

15 Tax Highlights in Five states raised alcohol taxes. New Jersey raised taxes on liquor and wine by $22 million. Illinois raised alcohol taxes by $108 million. New York raised beer and wine taxes by $14 million. North Carolina increased taxes on beer, wine and liquor by $32 million. Oregon added a per bottle surcharge on spirits for $13 million. Two more states made alcohol sales tax changes. Kentucky added package alcohol sales to the tax base generating $52 million, and Massachusetts removed the sales tax exemption for alcoholic beverages to generate $78 million. Motor Vehicle and Motor Fuel Taxes (net increase: $1,871.2 billion) Eleven states increased fuel or vehicle taxes in For example, Vermont created a gasoline and diesel fuel assessment based on the retail price of fuel, rather than per gallon volume, which is projected to generate $14.2 million. Other states made motor fuels tax changes. Alaska restored an 8-cent per gallon fuel tax. Maine eliminated the one-cent per gallon ethanol incentive. Oregon approved a 6-cent per gallon increase that takes effect in. Oklahoma boosted penalties on late payment of fuel excise taxes. California, Nevada, New York and Oregon increased vehicle registration charges. Miscellaneous Taxes (net increase: $1,434.1 billion) Nineteen states made changes to other assorted tax policies that will affect industries or consumers. Connecticut generated $8.5 million from applying the real estate conveyance tax to foreclosure transactions, while Hawaii increased its conveyance tax on properties worth $2 million or more to raise $4 million in taxes. Delaware added sports book betting to raise $53 million. Indiana increased the taxable wage base for unemployment insurance to collect $147 million. Wisconsin established a $46 million telephone tax for police and fire protection. Nevada modified lodging and car rental taxes to raise $118 million. Fees (net increase: $3,349.6 billion) s relied on new fees and fee increases to help shore up revenues. Twenty-two states made fee changes. Colorado increased fees on motor vehicle registrations and increased other vehicle fines and charges to raise $200 million. Florida increased a range of fees by a total of $1.2 billion. New York approved a new fee on tax preparers. North Carolina increased its auto insurance surcharge by $48 million. Wisconsin increased landfill tipping fees by $23.6 million. Other s (net increase: accelerations $921.7 million, other $834.5 million) s also made non-tax policy changes to increase revenue collections. Hawaii advanced a tax filing date by 10 days. Pennsylvania accelerated $211 million into by changing its sales tax filing date. Wisconsin required certain nonresidents to withhold

16 6 Tax Actions 2009 income taxes quarterly rather than annually. Virginia approved a tax amnesty estimated to bring in nearly $40 million. Tax changes in 2009 as a percentage of 2008 tax collections are listed in appendix A. changes by tax type are in appendix B. Appendix C shows both tax and non-tax revenue changes by state. Property tax actions are discussed in appendix D. Tax changes by state are displayed in appendix E, and detailed changes by type of tax are presented in appendix F.

17 Appendices 7 Appendix A. Tax Changes as a Percentage of 2008 Tax Collections Region/ Net Tax Changes (in millions of dollars) Percent of 2008 Taxes New England Connecticut $ % Maine $ % Massachusetts $ % New Hampshire $ % Rhode Island $ % Vermont $ % Middle Atlantic Delaware $ % Maryland -$ % New Jersey $1, % New York $6, % Pennsylvania $ % Great Lakes Illinois $ % Indiana $ % Michigan $ % Ohio $ % Wisconsin $ % Plains Iowa $ % Kansas $ % Minnesota $ % Missouri -$ % Nebraska $ % North Dakota -$ % South Dakota $ % Southeast Alabama $ % Arkansas $ % Florida $1, % Georgia -$ % Kentucky $ % Louisiana -$ % Mississippi $ % North Carolina $ % South Carolina -$ % Tennessee $ % Virginia $ % West Virginia -$ % Southwest Arizona -$ % New Mexico $ % Oklahoma $ % Texas -$ % Rocky Mountain Colorado $ % Idaho $ % Montana $ % Utah -$ % Wyoming $ % Far West Alaska $ % California $10, % Hawaii $ % Nevada $ % Oregon $ % Washington $ % Total $28, % Source: survey of legislative fiscal offices, 2009, and U.S. Census Bureau, 2009.

18 8 Tax Actions 2009 Appendix B. Tax Changes by Tax (in millions of dollars) Personal Income Corporate Income Sales and Use Health Care Alcoholic Beverage Motor Fuel/Excise Miscellaneous Region/ Tobacco Total New England Connecticut $594.0 $101.6 $99.3 $2.6 $797.5 Maine -$28.3 $10.1 $42.8 $1.6 $6.7 $5.0 $37.9 Massachusetts $837.8 $25.9 $863.7 New Hampshire $5.9 $20.0 $35.2 $32.7 $93.8 Rhode Island $22.8 $0.9 $31.2 $4.4 $59.3 Vermont $13.3 $2.0 $5.9 $14.2 $33.1 $68.5 Middle Atlantic Delaware $29.3 $138.3 $16.0 $58.0 $241.6 Maryland -$25.8 $4.5 -$10.2 $12.0 -$19.5 New Jersey $1,011.0 $80.0 $26.0 $22.0 $35.0 $1,174.0 New York $4,138.0 $1,271.0 $635.6 $482.5 $10.0 $14.0 $4.6 $399.5 $6,955.2 Pennsylvania $339.7 $528.0 $116.5 $984.2 Great Lakes Illinois $65.0 $108.0 $173.0 Indiana -$42.2 $7.7 $101.0 $147.6 $214.1 Michigan $0.0 Ohio -$69.8 -$10.0 $146.7 $441.5 $26.7 $535.1 Wisconsin $293.5 $146.3 $62.3 $157.0 $165.0 $46.4 $870.5 Plains Iowa -$1.0 $18.0 $33.0 $50.0 Kansas $3.0 $10.2 $13.7 -$25.0 $1.9 Minnesota $44.1 -$15.5 $28.6 Missouri -$42.0 -$42.0 Nebraska $0.0 North Dakota -$45.0 -$5.0 -$50.0 South Dakota -$1.0 $2.7 $1.7 Southeast Alabama $200.0 $200.0 Arkansas -$43.9 $86.2 $42.3 Florida $8.0 $946.1 $333.1 $1,287.2 Georgia -$45.0 $12.3 -$45.8 -$78.5 Kentucky $51.9 $106.9 $158.8 Louisiana -$3.5 -$3.5 Mississippi -$13.8 $60.0 $114.9 $161.1 North Carolina $100.9 $1.0 $815.3 $38.3 $35.6 $991.1 South Carolina -$5.5 -$5.5 Tennessee $26.3 $13.1 $136.6 $176.0 Virginia $5.0 $5.0 West Virginia -$9.0 -$10.7 -$1.0 $8.8 -$11.9 Southwest Arizona -$9.0 -$4.4 -$13.4 New Mexico $0.0 Oklahoma $27.0 $16.4 $43.4 Texas -$85.0 $5.6 $44.5 -$34.9 Rocky Mountain Colorado $6.5 $68.3 $336.5 $31.0 $1.8 $444.1 Idaho -$10.9 -$3.1 $16.4 $2.4 Montana $0.0 Utah -$7.8 $2.4 -$5.4 Wyoming $0.0 Far West Alaska $33.9 $33.9 California $5, $363.0 $4,553.0 $1,692.0 $10,980.0 Hawaii $92.6 $46.5 $23.6 $35.5 $198.2 Nevada $211.6 $42.8 $117.9 $372.3 Oregon $232.0 $106.0 $187.0 $13.0 $38.0 $576.0 Washington $1.8 $29.0 $30.8 Total $11,406.1 $2,014.5 $7,236.5 $2,535.4 $1,898.2 $192.6 $1,871.2 $1,434.1 $28,588.5 Source: survey of legislative fiscal offices, 2009, and U.S. Census Bureau, 2009.

19 Appendices 9 Appendix C. Net Changes (in millions of dollars) Region/ Taxes Fees Accelerations Other Total New England Connecticut $797.5 $797.5 Maine $37.9 $1.1 $22.5 $61.5 Massachusetts $863.7 $863.7 New Hampshire $93.8 $52.7 $146.5 Rhode Island $59.3 $10.6 $69.9 Vermont $68.5 $1.7 $2.2 $2.6 $75.0 Middle Atlantic Delaware $241.6 $10.0 $251.6 Maryland -$19.5 $1.8 -$17.8 New Jersey $1,174.0 $1,174.0 New York $6,955.2 $596.3 $365.0 $7,916.5 Pennsylvania $984.2 $211.0 $190.0 $1,385.2 Great Lakes Illinois $173.0 $332.0 $500.0 $1,005.0 Indiana $214.1 $214.1 Michigan $0.0 Ohio $535.1 $109.6 $644.7 Wisconsin $870.5 $92.3 $38.5 $1,001.3 Plains Iowa $50.0 $18.5 $68.5 Kansas $1.9 $35.0 $36.9 Minnesota $28.6 $34.1 $35.0 $97.7 Missouri -$42.0 -$42.0 Nebraska $0.0 North Dakota -$50.0 -$50.0 South Dakota $1.7 $2.2 $3.9 Southeast Alabama $200.0 $5.7 $205.7 Arkansas $42.3 $42.3 Florida $1,287.2 $1,225.4 $2,512.6 Georgia -$78.5 -$78.5 Kentucky $158.8 $158.8 Louisiana -$3.5 $5.5 $2.0 Mississippi $161.1 $161.1 North Carolina $991.1 $51.0 $1,042.1 South Carolina -$5.5 -$5.5 Tennessee $176.0 $46.0 $222.0 Virginia $5.0 $148.0 $38.0 $191.0 West Virginia -$11.9 -$11.9 Southwest Arizona -$13.4 $2.4 -$11.0 New Mexico $58.0 $58.0 Oklahoma $43.4 $17.2 $60.6 Texas -$34.9 $69.9 $35.0 Rocky Mountain Colorado $444.1 $322.2 $766.3 Idaho $2.4 $15.3 $17.7 Montana $0.0 Utah -$5.4 $94.7 $89.5 Wyoming $0.0 Far West Alaska $33.9 $33.9 California $10,980.0 $10,980.0 Hawaii $198.2 $25.0 $6.5 $229.7 Nevada $372.3 $372.3 Oregon $576.0 $203.5 $779.5 Washington $30.8 $102.9 $4.0 $137.7 Total $28,588.5 $3,349.6 $921.7 $834.5 $33,694.5 Source: survey of legislative fiscal offices, 2009; and U.S. Census Bureau, 2009.

20 10 Tax Actions 2009 Appendix D. Property Tax Actions in 2009 Legislative Sessions In Arizona, the Legislature passed a bill to permanently repeal the state equalization tax rate, which was suspended for three years beginning in However, the governor vetoed the bill, so the tax was reinstated and is expected to generate $250 million. The Legislature also approved a property tax credit for renewable energy development (no estimate). Colorado suspended the senior citizen property tax exemption, resulting in an additional $90 million. Florida expanded property tax exemptions for low-income housing, which has no impact in but reduces property taxes by $104 million in. In addition, Florida adjusted local school millages, increasing property tax revenue by $43 million to offset tax roll losses as a result of value adjustments. Another measure lowered the burden of proof for challenges to property assessments, which is estimated to reduce property taxes by $147 million. Finally, new legislation exempted property dedicated in perpetuity for conservation purposes. There is no impact in and a $7.5 million reduction in. Georgia eliminated the state portion of property tax on inventory (no estimate). It also capped increases on all property values for three years at 0 percent (no estimate). Kansas repealed $55.3 million in local property tax relief payments (to help offset 2006 legislation that narrowed the tax base) and repealed $13.5 million in general local property tax relief payments. Maine delayed phasing down the tax rate on telecommunications personal property, which resulted in an additional $1.5 million. Another provision reduced the resident or homestead property tax exemption from $13,000 to $10,000. There is no impact in and $6.9 million in general fund savings in FY A third measure limited to 90 percent the allowable benefit from the Business Equipment Tax Reimbursement Program regarding eligible property taxes paid for business equipment. The fiscal impact is $6.6 million. Finally, the state reduced property tax and rent reimbursement benefits in 2009 and 2010 under the Residents Property Tax Program, prorating benefits to 80 percent of the previous benefit to retain $8.5 million in the general fund. In Minnesota, a provision in law known as unallotment authority was executed by the governor in One unallotment reduced the renters property tax refund from 19 percent to 15 percent of rent paid. There is no fiscal impact in, and the measure increases revenue by $50 million in. These actions are subject to pending litigation.

21 Appendices 11 Appendix D. Property Tax Actions in 2009 Legislative Sessions (continued) Other unallotments reduced the market value credit to non-local government aid cities and towns. Local government aid to cities and program aid to counties also was reduced. The total cost savings to the general fund are $99 million in and $197 million in FY New York eliminated its STAR property tax rebate checks program, generating $1.6 billion. North Carolina expanded its property tax exclusion for disabled military veterans, for a negligible impact in and a $30 million tax reduction in. The General Assembly also enacted a builders inventory tax deferral for three years on new construction only. This reduces taxes by $30 million in and by $10 million in FY The state also approved a property tax exclusion for disabled veterans that excludes $45,000 of home value from the tax base. North Dakota approved property tax relief with an average reduction of 18 percent. There was no reduction to political subdivisions, and the cost to the state is $147.5 million per year. South Carolina exempted 100 percent of the value of a newly constructed, detached single family home until the home is sold, occupied or a certificate of occupancy is issued. This reduces tax collections by $1.5 million. In addition, the state enacted a statute specifying that manufacturing property that has been dormant for at least one year is not subject to the property tax. The revenue loss is $1.6 million. Texas authorized an exemption for totally disabled veterans equal to 100 percent of the appraised value of the veteran's residence. There is no impact in and a cost of $11.4 million in related to K-12 school funding. Vermont increased the statewide homestead education tax to raise $8.4 million and increased the nonresidential homestead education tax to raise $21.7 million in. West Virginia excluded taxpayers who pay the alternative minimum tax (AMT) from its property tax deferment provision and senior citizens property tax credit. No revenue estimate. Wisconsin extended county and municipal levy limits for two years, reducing taxes by $24 million in and by $51 million in.

22 12 Tax Actions 2009 Appendix E. Tax and Changes by 2009 Legislative Sessions This appendix shows by state the tax and revenue changes that took place in 2009 regular and special legislative sessions and in the November general election that will affect state revenues in (for most states July 1, 2009, to June 30, 2010) and (for most states July 1, 2010, to June 30, 2011). Tax changes by major tax category appear in appendix F. Tax for each state reports the revenue effect of tax actions for the fiscal year. Total reports the total amount of state revenue change. It combines revenue derived from tax actions with other revenue changes such as fee increases, accelerated and decelerated revenue collections, and other one-time changes. Non-tax revenue changes are denoted by *, and are included in revenue totals. Changes effective in a certain fiscal year as a result of legislation passed and reported in an earlier year are noted by ** and are not reflected in the totals. Recurring changes made for state policy reasons are not reflected in the totals. This appendix does not include changes in unemployment compensation. The following abbreviations are used: AGI = Adjusted Gross Income HMO= Health Maintenance Organization ARRA = American Recovery and Reinvestment Act IRC = Internal Code B&O = Business and Occupation LLC = Limited Liability Corporation CAT = Commercial Activity Tax LLP = Limited Liability Partnership CCRC = Continuing Care Retirement Communities R&D = Research and Development CPI = Consumer Price Index REIT = Real Estate Investment Trust EITC = Earned Income Tax Credits SSTP = Streamlined Sales Tax Project GRF = General Fund TY = Tax Year Key: **Not included in aggregate figures Appendix E. Tax and Changes by 2009 Legislative Sessions Alabama Establishes a hospital tax. $200.0 $200.0 Tax = $200.0 $200.0 Raises the Department of Public Health vital statistics fees. $1.2 $1.8 Increases fees on wages paid by construction companies. $2.0 $2.0 Adjusts the current fees for registration of investment professionals and for registration of securities. $2.5 $2.5 Non-Tax = $5.7 $6.3 Total= $205.7 $206.3 Alaska Allows the temporary repeal of the motor fuel tax to expire. $33.9 $40.6 Tax = $33.9 $40.6 Total= $33.9 $40.6 Arizona Conforms personal income taxes to the 2008 Federal Acts. -$4.0 -$0.9 Eliminates the requirement for a taxpayer to establish a baseline year to qualify for the existing tax credit for cash contributions made to charitable organizations. -$5.0 -$5.9

23 Appendices 13 Appendix E. Tax and Changes by 2009 Legislative Sessions Arizona, Conforms corporate income taxes to the 2008 Federal Acts. -$4.4 -$0.1 Continued Creates a renewable energy companies credit against income and property taxes for qualifying renewable energy companies that build headquarters or manufacturing facilities in the state from TY 2010 to TY Adds insurance providers to the existing corporate income tax credit for contributions made to school tuition organizations. Legislature passed a bill to permanently repeal the state equalization tax rate, which was eliminated for three years in The governor vetoed the bill, so the tax is reinstated. Increases probation surcharge fees from $10 to $20 (non-general fund revenue is part of the Judicial Collection Enhancement Fund). $0.0 $0.0 $0.0 $0.0 $250.0** $260.0** Tax = -$13.4 -$6.9 $1.4 $3.0 Increases adult intensive probation service fee from $50 to $75. $1.0 $3.2 Tuition increases by the Board of Regents (not enacted by Legislature). $134.0** $134.0** Non-Tax = $2.4 $6.2 Total= -$11.0 -$0.7 Arkansas Reduces sales tax rate on food and groceries to 6 percent. -$41.0 $0.0 Removes storage and mini-warehouses from sales tax base. $0.0 $0.0 Reduces sales tax rate on utilities of manufacturers. -$2.9 $0.0 Increases the tax on cigarettes. $71.0 $0.0 Raises the tax on all other tobacco products. $15.2 $0.0 Tax = $42.3 $0.0 Total= $42.3 $0.0 California Increases the sales tax by 1 cent. $4,553.0 $0.0 Colorado Increases vehicle license fees by 0.5 percent. $1,692.0 $0.0 Raises the personal income tax rate by 0.25 percent. $3,658.0 $0.0 Creates corporate income tax credits. -$363.0 $0.0 Reduces the dependent credit against the income tax. $1,440.0 $0.0 Provides corporate tax credits for companies creating jobs in Colorado. Tax = $10,980.0 $0.0 Total= $10,980.0 $0.0 -$2.9 -$8.6

24 14 Tax Actions 2009 Appendix E. Tax and Changes by 2009 Legislative Sessions Colorado, Continued Connecticut Reduces the interest paid on overpayments associated with corporate tax returns. Eliminates the corporate subtractions for Colorado source capital gains. $2.3 $2.3 $7.1 $15.8 Imposes a penalty for late filing of sales tax returns. $0.1 $1.2 Eliminates the vendor fee for retailers collecting sales tax. $68.2 $71.3 Eliminates the sales tax exemption for cigarettes. $31.0 $32.0 Changes the eligibility mix for incentives for "green vehicles." $1.8 $5.2 Authorizes the collection of provider fees from hospitals in order to obtain federal financial participation for the state's medical assistance programs. $336.5 $389.8 Suspends the senior citizen property tax exemption. $90.4** $0.0 Increases fees, fines and surcharges on motor vehicle registrations and other motor vehicle fees. Allows higher education institutions to raise tuition (each institution can raise fees and set rates individually). Increases the state income tax from 5 percent to 6.5 percent on taxable income over $1 million for joint filers, $800,000 for heads of households, and $500,000 for singles and persons married filing separately. Reduces the sales and use tax from 6 percent to 5.5 percent (not triggered). Tax = $444.1 $509.0 $200.0 $250.0 $122.2 $122.2 Non-Tax = $322.2 $372.2 Total= $766.3 $881.2 $594.0 $ $129.5** -$268.0** Increases the cigarette tax from $2to $3 per pack. $99.3 $117.6 Adopts corporation tax surcharge of 10 percent in FY 2009 through for businesses with over $100 million in adjusted federal gross income. Eliminates the deduction against the corporation tax for federal domestic production. $74.1 $41.1 $27.5 $27.5 Reforms the film tax credit to emphasize state-based operations. $0.0 $10.0 Applies real estate conveyance tax to foreclosure transactions. $8.5 $16.2 Starting with deaths occurring and gifts made on or after Jan. 1, 2010, increases the exemption from $2 million to $3.5 million the threshold for the value of an estate or gift valued at $3.5 million to $10.1 million by 25 percent; and eliminates the tax "cliff." -$5.9 -$70.3 Tax = $797.5 $542.1

25 Appendices 15 Appendix E. Tax and Changes by 2009 Legislative Sessions Connecticut, Continued Total= $797.5 $542.1 Delaware Reinstates the estate tax. $5.0 $25.0 Florida Adds sports book betting at racinos. $53.0 $0.0 Raises the tobacco tax by 45 cents. $16.0 $21.0 Increases the tax on crude oil lightering (transfer tax). $1.0 $1.2 Increases the personal income tax rate by 1 percent on incomes over $60,000. $28.3 $73.2 Imposes a tax on lottery winnings. $1.0 $2.5 Increases the gross receipts tax. $5.6 $15.2 Raises the franchise tax. $124.6 $103.6 Increases the public utilities tax. $7.1 $9.2 Tax = $241.6 $250.9 Implements a tax amnesty program. $10.0 $0.0 Implements the New Markets Development Tax Credit program. The bill creates state tax credits for corporate income tax and premium insurance tax for private investments through a Qualified Community Development Entity (CDE) for businesses within low-income communities. It is modeled after the federal new markets program managed by the U.S. Treasury Department. The cap on the Florida tax credits is $97.5 million over seven years, and the tax credits can be carried forward for up to five years. The credits can be claimed beginning in the program's third year, which is FY The program expires Dec. 31, Levies a surcharge on tobacco products: a $1 surcharge in addition to the existing tax of $.339 tax per pack of cigarettes, plus 60 percent of manufacturer's price surcharge on other tobacco products in addition to existing 25 percent tax. Imposes a quality assessment upon privately operated intermediate care facilities for the developmentally disabled. Non- Total= $10.0 $0.0 Total= $251.6 $250.9 $0.0 $0.0 $946.1 $998.9 $8.0 $12.1 Expands ad valorem exemptions for low-income housing. $0.0** -$1.8** Adjusts local school millages to offset tax roll losses as a result of value adjustments. $43.6** $43.6** Lowers the burden of proof in challenges to property assessments. -$147.8** -$280.2** Provides an ad valorem exemption for property dedicated in perpetuity for conservation purposes. $0.0** -$17.5**

26 16 Tax Actions 2009 Appendix E. Tax and Changes by 2009 Legislative Sessions Florida, Continued Georgia Clarifies the laws governing state and local taxes from timeshare transactions and from transient stays at timeshare resorts. The bill provides that the tourist development tax, the tourist impact tax, the transient rentals tax and the convention development tax are applicable to transient stays at timeshare resorts. Increases the unemployment compensation tax by increasing the wages cap and the recoupment period. Provides for taxation of documents that transfer real property between related entities. Provides a 35 percent increase in vehicle licenses and various other fee increases. $1.1 $1.1 $304.3 $545.1 $27.7 $27.7 Tax = $1,287.2 $1,584.9 $797.8 $1,003.9 Increases sheriff s civil process service fees. $42.0 $42.0 Revises fees and redirects revenues. Most additional revenue comes from increases in graduated fees for foreclosures and civil circuit filings. $194.8 $194.8 Repeals the shoreline saltwater fishing exemption. $0.0 $0.0 Increases various permit fees. $3.2 $7.4 Increases community college tuition (local boards may vary tuition from 10 percent below to 15 percent above legislative tuition). Increases state university system tuition (for, each university may increase tuition up to an additional 7 percent above legislative tuition). $49.6 $49.6 $108.4 $108.4 Imposes a state university system excess hours surcharge. $7.6 $7.6 Creates a fee for taxpayer noncompliance. $6.2 $9.3 Provides for various Department of Agriculture fees. $6.5 $4.7 Provides for various mortgage regulatory fees. $5.0 $6.5 Provides a fee to fund a statewide seaport access eligibility reporting system. Provides an income tax credit for a single family residence purchased between June 1 and Nov. 30, Changes business enterprise tax credits (R&D, port activity, headquarters changed to quality jobs, etc.). Changes the mega projects tax credit to expand eligible industries (additional payroll requirement that can be used instead of the capital investment requirement). $4.3 $0.0 Non-Tax = $1,225.4 $1,434.2 Total= $2,512.6 $3, $45.0 -$45.0 $0.0 $0.0 -$1.0 -$1.0

27 Appendices 17 Appendix E. Tax and Changes by 2009 Legislative Sessions Georgia, Closes the loophole relating to captive real estate investment trusts. $15.8 $15.8 Continued Extends through 2011 the income tax credit for employers providing teleworking. Changes the 2009 sales tax holiday for school supplies and energy and water efficient products. Changes the sales tax exemptions for construction of a civil rights museum, symphony hall, and for renovation/expansion of the zoo. Adjusts the sales tax exemption extension for aircraft maintenance and repair. -$2.5 -$2.5 -$13.2 $0.0 -$0.9 -$0.9 -$7.0 -$7.0 Extends the sales and use tax exemption on jet fuel. -$24.4 -$24.4 Adjusts the sales and use tax exemption for airplane flight simulation training devices. -$0.3 -$0.7 Eliminates the state portion of the property tax on inventory. $0.0** -$2.1** Caps the increase on all property values for three years at 0 percent. $0.0** $0.0** Tax = -$78.5 -$65.7 Total= -$78.5 -$65.7 Hawaii Provides mandatory personal income tax rebates (constitutional). -$1.0 $0.0 Conforms state tax exemptions to federal phase-out provisions under IRC 151 (d)(3). $10.5 $10.5 Imposes state income tax on rollovers. $3.5 $3.5 Creates new income tax brackets and rates. $48.3 $48.3 Suspends the capital goods excise tax credit. $34.3 $0.0 Conforms the IRC. -$3.0 -$3.0 Increases the standard deduction and personal exemption amounts. $0.0 $0.0** Limits certain high-tech tax credits to 80 percent of value with no carry over for two years. $15.0 $15.0 Limits the investment credit to 1:1. $31.5 $54.0 Increases the tax on non-cigarette products. $1.1 $2.1 Increases the cigarette tax (multi-year). $22.5 $24.2 Raises the conveyance tax increase on properties worth $2 million and greater. $4.0 $4.0 Increases the transient accommodations tax (hotel room tax). $28.8 $60.1 Reduces interest rates for overpayment of taxes. $2.7 $2.7 Tax = $198.2 $221.4 Advances the general excise tax filing date by 10 days. $25.0 $0.0

28 18 Tax Actions 2009 Appendix E. Tax and Changes by 2009 Legislative Sessions Hawaii, Creates tax preparer penalties and enforcement changes. $6.5 $6.5 Continued Non-Tax $31.5 $6.5 Idaho Illinois Indiana Conforms the state income tax deduction on the real estate property tax to the IRS. Total= $229.7 $ $2.0 $0.0 Conforms the state income tax with ARRA. -$8.9 $0.0 Continues the 2008 Multi-year Grocery Tax Credit increase. -$15.5** -$31.0** Conforms corporate income taxes with ARRA. -$3.1 $1.0 Repeals the gasohol exemption. $16.4 $16.4 Tax = $2.4 $17.4 Increases fees within the Department of Motor Vehicles. $5.4 $13.1 Increases the fee on trip permits. $0.9 $1.0 Raises the fee on shipper plates. $5.0 $5.0 Increases fees on non-resident fishing and hunting licenses and tags. $2.5 $2.5 Institutes a fee for invasive species boat stickers. $1.5 $1.5 Adds sweetened tea, coffee, candy, grooming and hygiene products to the sales tax base. Non-Tax = $15.3 $23.1 Total= $17.7 $40.5 $65.0 $0.0 Increases the volume taxes on wine, spirits and beer. $108.0 $0.0 Tax = $173.0 $0.0 Allows video gaming terminals. $350.0 $0.0 Allows private management of the state lottery. $150.0 $0.0 Increases vehicle title fees, registration fees and license fees. $332.0 $0.0 Adopts the Federal AGI in effect on Feb. 17, 2009, as the computational starting point for the Indiana individual income tax. Creates a school scholarship tax credit for contributions to scholarship granting organizations. The total amount of the tax credits that may be awarded in any state fiscal year is $2.5 million. Reduces the fiscal year cap on the media production tax credit for approved credits from $5 million to $2.5 million per year. Non-Tax = $832.0 $0.0 Total= $1,005.0 $0.0 -$34.5 -$7.9 $0.0 -$2.5 $2.5 $2.5

29 Appendices 19 Appendix E. Tax and Changes by 2009 Legislative Sessions Indiana, Continued Extends the sunset date on the Hoosier business investment tax credit from Dec. 31, 2011, to Dec. 31, Potential revenue loss due to extension will occur in FY 2012 to FY Makes the coal gasification technology investment tax credit refundable if the taxpayer making investment in coal gasification plant sells substitute natural gas by contract to the state for re-sale to a retail seller. Potential revenue loss due to refundability will likely occur after ($6.25 million) and could occur annually for 20 years. Expands the Indianapolis professional sports development area to include four specified hotels in downtown Indianapolis, resulting in up to $8 million annually in state personal income and state sales tax revenue generated at the hotels. Increases the state personal income tax and state sales tax capture limit for other professional sports development areas and allows them to include hotels. Clarifies existing law for intermediary pass-through income on the treatment of income paid from an Indiana pass-through entity to a pass-through entity domiciled in another state. Changes the withholding on racino winnings. Requires horse racetracks to withhold and remit income tax on slot machine winnings exceeding certain thresholds. Mitigates indeterminable loss. Indeterminable loss. $0.0 $0.0 $0.0 $0.0 -$8.0 -$8.0 -$2.2 -$2.2 Mitigates indeterminable loss. Indeterminable loss. Extends the Medicaid health facility quality assessment fee. $101.0 $99.9 Exempts sales of property that is part of a national, regional or local headend or similar facility furnishing video services, satellite television or radio services, or Internet access services (typically cable and satellite services). Exempts sales of equipment and devices used to monitor blood glucose level. Exempts sales of aircraft (acquired after June 30, 2008) if the gross lease revenue derived from leasing or rental of the aircraft is equal to or greater than the book value of the aircraft, or 7.5 percent of the greater of the book value of the aircraft or the net acquisition price of the aircraft. Allows expiration of the exemption for sales of energy acquired through the LIHEAP program. Exemption expired July 1, Repeals the exemption for the sale of tangible personal property for direct use in a qualified media production (media production expenditures). Changes the unemployment insurance tax. Increases the taxable wage base from $7,000 to $9,500 and implements a new rate schedule. Indeterminable loss. Indeterminable loss. Indeterminable loss. Indeterminable loss. Indeterminable loss. Indeterminable loss. $6.7 $7.4 $1.0 $1.0 $147.6 $319.3 Tax = $214.1 $409.5

30 20 Tax Actions 2009 Appendix E. Tax and Changes by 2009 Legislative Sessions Indiana, Continued Total= $214.1 $409.5 Iowa Provides historic preservation tax credits. $0.0 -$24.0 Kansas Provides wind energy component tax credits against the state income tax. -$1.0 -$2.0 Provides housing tax credits. $0.0 -$1.5 Changes loss carry-back provisions. $18.0 $27.0 Creates a nursing facility quality assurance fee (requires federal approval before implementation). $33.0 $33.0 Tax = $50.0 $32.5 Increases filing and docketing fees. $16.7 $16.7 Raises hunting and license fees. $1.8 $1.8 Tightens the individual income tax statute of limitations to clarify the three-year limit. Non-Tax = $18.5 $18.5 Total= $68.5 $51.0 $3.0 $3.0 Suspends the film production income tax credit for two years. $1.0 $1.0 Reduces various income tax credits by 10 percent for two years. $9.2 $8.8 Continues corporation tax phase-out enacted in $26.0** -$37.0** Reduces the statute of limitations for sales and use tax refunds from three years to one year. Repeals $55.3 million in local property tax relief payments (to help offset narrowing of tax base from 2006 legislation). $13.7 $8.8 $55.3** $0.0 Repeals $13.5 million in general local property tax relief payments. $13.5** $0.0 Phases out the estate tax. -$25.0 -$47.0 Establishes a new settlement authority for secretary of revenue regarding certain disputed cases (ability to waive a portion of back taxes, penalty and interest for more timely settlements). Tax = $1.9 -$25.4 $35.0 -$15.0 Non- Total $35.0 -$15.0 Total= $36.9 -$40.4 Kentucky Increases tax on cigarettes and other tobacco products. $106.9 $0.0 Eliminates prior sales tax exemption for packaged alcoholic beverages. $51.9 $0.0

31 Appendices 21 Appendix E. Tax and Changes by 2009 Legislative Sessions Kentucky, Continued Freezes the lowest value for average wholesale prices at $1.786 per gallon (the language preserves existing revenues by not allowing a statutory reduction in the average wholesale price). $0.0 $0.0 Tax = $158.8 $0.0 Total= $158.8 $0.0 Louisiana Increases the film investor tax credit. $0.0 -$10.0 Maine Exempts capital gains from sales of non-traded businesses. $0.0 -$1.0 Establishes tax credits for port investments and tonnage shipped via Louisiana ports. -$3.5 -$4.3 Extends and modifies the R&D tax credit. $0.0 -$11.6 Extends the tax credit for sound recording investments. $0.0 -$3.0 Creates a tax credit for expenditures on green projects. $0.0 -$5.0 Provides a tax credit for increased efficiency or capacity investments. $0.0 $0.0 Extends the tax exemption for non-public school purchases. -$1.1 -$1.1 Decreases the sales tax on modular homes and increases the sales tax on other manufactured homes. $1.1 $2.5 Exempts purchases of wood products and logging industries (sales). $0.0 $1.5 Tax = -$3.5 -$32.0 Creates a 2 percent 911 fee on prepaid wireless phones. $2.9 $4.2 Establishes a $65 one-time fee for probation and parole processing. $2.6 $1.0 Flattens the personal income tax rate and imposes a surtax on higher incomes. Eliminates the net operating loss deduction against the personal income tax for three years. Eliminates the net operating loss deduction against the corporate income tax for three years. Changes the apportionment formula on sales delivered outside the state. Expands the sales tax base, including tax increases on meals and auto rentals. Also increases the tax on candy and makes other modifications. Non-Tax = $5.5 $5.2 Total= $2.0 -$26.8 -$30.3 -$78.4 $2.0 $1.5 $8.0 $6.0 $2.1 $1.9 $42.8 $86.7 Changes the tax on smokeless tobacco from price to weight. $1.6 $1.8 Eliminates the e-10 ethanol benefit of 1 cent per gallon. $6.7 $6.5

32 22 Tax Actions 2009 Appendix E. Tax and Changes by 2009 Legislative Sessions Maine, Continued Maryland Modifies annual fuel excise tax indexing to prevent a rate reduction when the CPI change is negative. $0.0 $2.5 Changes the insurance carrier assessment. $2.0 $0.0 Continues the current estate tax law. $1.7 $29.6 Increases the E-911 surcharge from the current level of $0.30 per month per line or number for prepaid wireless per 30-day increment to $0.37. Delays the phase-down in the tax rate on telecommunications personal property. Reduces the resident or homestead property tax exemption from $13,000 to $10,000 Reduces property tax and rent reimbursement benefits in 2009 and 2010 under the Residents Property Tax Program, prorating benefits up to 80 percent of previous benefits. Limits the allowable benefit to 90 percent of eligible property taxes paid for business equipment under the Business Equipment Tax Reimbursement Program. Increases fees for certain hunting, fishing, archery and combination licenses. $1.3 $4.0 $1.5** $1.5** $0.0** $13.8** $8.5** $8.9** $6.6** $6.0** Tax = $37.9 $62.1 $1.1 $1.5 Increases revenue from additional enforcement initiative. $17.2 $16.2 Waives 90 percent of sales tax penalties. $2.5 $0.0 Adopts other sales tax enforcement initiatives. $2.8 $3.4 Conforms state personal income taxes to the federal deduction provided in ARRA for certain unemployment compensation. Conforms personal income taxes to the temporary increase in the earned income credit provided in ARRA. Conforms state sales taxes to the federal deduction provided in ARRA for sales/excise taxes paid on vehicle purchases. Reduces the allowable amount of Maryland mined coal that can be claimed as a tax credit. Decouples from the provisions in ARRA related to cancellation of debt income. Sunsets extension on the admission and amusement tax on electronic gaming machines. Non-Tax = $23.6 $21.1 Total= $61.5 $83.2 -$15.5 $0.0 -$10.3 -$10.0 -$10.2 $0.0 $4.5 $4.5 $0.0 $0.0 $7.0 $7.0 Establishes tax compliance measures for the Workplace Fraud Act. $5.0 $5.0