By Savannah Gilmore
NCSL has released its annual State Tax Actions report featuring enactments that took place this past year.
The report highlights changes that result in an impact of $1 million or more. Information is collected through surveys extended to the National Association of Legislative Fiscal Offices (NALFO).
The latest report contains new graphics, including five-year snapshots of data State Tax Actions has gathered on net changes in each tax category. The appendices also feature state-by-state details about tax and revenue changes impacting fiscal years 2019 and 2020.
Overall, net revenue changes were minimal, and the largest tax change was a net increase in sales and use taxes of $847.1 million. All tax categories saw tax increases, except for personal income taxes and health care-related taxes. Alcoholic beverage taxes experienced no changes.
In addition to aggregate state tax information, the report contains detailed information on the 50 states and the District of Columbia.
Last year, just over half the states took legislative action in response to the 2017 federal tax reform law. Numerous others also responded to the major U.S. Supreme Court cases that unfolded. Despite a unique amount of federal action affecting state tax landscapes, states continued phasing in their own reforms and made new changes that altered their own tax codes.
More than a few states, including Georgia, Idaho, Iowa, Kentucky, Missouri and Vermont, lowered personal income tax rates. Other than Vermont, the same states also lowered corporate income tax rates, in addition to Indiana, New Hampshire and Utah. A handful of states made changes relating to apportionment for corporate income taxes.
A few states enacted changes to tobacco taxes, and all resulted in an increase in revenues for fiscal year 2019. Similarly, three states enacted an increase to their motor fuel tax rates resulting in an increase in revenues for the current fiscal year.
Several states also made tax changes to the growing sharing economy. Arizona, Hawaii, New Jersey and Oregon made changes to taxes that apply to transient accommodations. In terms of ride-sharing, Indiana imposed an 8 percent sales tax on rides and New Jersey imposed a 50-cent surcharge for prearranged rides.
Additionally, Massachusetts enacted a new payroll tax to fund paid family and medical leave. The tax rate is 0.63 percent and is split between the employee and employer. Employers will be able to withhold up to 40 percent of an employee’s wages for medical leave and up to 100 percent for family leave. Businesses with less than 25 employees will not be required to contribute to the employer portion. This tax change is estimated to increase revenues from $750 million to $800 million in fiscal year 2020.
In addition to tax changes, states approved nontax revenue changes, including fee increases or decreases, revenue accelerations or decelerations, and tax compliance initiatives for a net increase of $867.3 million. This resulted in a combined total revenue increase of about $2.2 billion.
View the State Tax Actions 2018 report for further detail on state action that took place this past year. You can also find more information on state revenues and tax policy, including resources and databases on NCSL’s State Revenues and Tax Policy webpage.
Savannah Gilmore is a policy associate in NCSL's Fiscal Affairs Program.