State & Local Roundup: Wealth Tax Proposals on the Rise

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It’s Friday, Jan. 27, and we’d like to welcome you to the weekly State and Local Roundup. This week, tax and revenue officials nationwide were abuzz about so-called millionaires taxes.

Eight states last week introduced bills or announced plans in a coordinated effort to increase taxes on the wealthy. The approaches to hiking taxes vary, but all would make the richest Americans pay more. The efforts are all in blue states—California, Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington—and their prospects are uncertain. 

In Washington state, for instance, some observers think the proposal runs afoul of the state constitution. The bill would create a state wealth tax on financial assets in excess of $250 million. The bill’s sponsors say it could generate as much as $3 billion per year and could be used to fund housing and education and decrease the tax burden on working-class people.

While that may be so, there are skeptics. One common criticism of the taxes is that wealthy people will simply move away to dodge paying them, but research on that issue is still emerging. Jared Walczak of The Tax Foundation, a conservative-leaning policy organization, wrote that the taxes “are economically destructive, their base is almost impossible to measure accurately, and they create perverse incentives and promote costly avoidance strategies. Very few taxpayers would remit wealth taxes—but many more would pay the price.”

Massachusetts, meanwhile, is moving ahead with a millionaires tax that voters approved in November. Revenue officials there testified before the state House on Tuesday about the tax, with Department of Revenue Commissioner Geoffrey Snyder estimating it could bring in between $1.4 billion and $1.7 billion in fiscal 2024. (The state’s 2023 budget is nearly $53 billion.)

The new Massachusetts law increases the state’s 5% income tax rate to 9% on annual income exceeding $1 million. The testimony is likely just the start of what is expected to be months of debate over how to divvy up the new injection of revenue across areas like roads, transit and public education. 

These efforts to raise taxes on the wealthy come as a number of other states are going in a different direction. At least 24 states are weighing cuts to personal income tax rates this session, including Arkansas, Georgia, Michigan, Minnesota, Utah and Wisconsin. Other states are considering enacting flat income taxes, eliminating income taxes, or cutting property taxes, according to the Institute on Taxation and Economic Policy.

Make sure to come back here every Friday for the week’s highlights. If you don’t already and would prefer to get it in your inbox, you can subscribe to this newsletter here. Have a great weekend.

News to Use

Trends, Common Challenges, Cool Ideas, FYIs, and Notable Events

• Hiring woes. New data shows that Boston transit’s year-long bus driver hiring campaign failed. According to The Boston Globe, the MBTA’s failure to retain and attract bus drivers is worsening racial inequity, as service cuts reduce residents’ access to jobs. Longer wait times are leading to lost wages, time away from family and missed opportunities. Across the country, San Francisco is also struggling to hire bus drivers—and firefighters, sanitation workers, public health employees and countless other crucial positions. This Wednesday, it approved a revamp of its hiring system that cuts the time it takes to hire workers by 40%. Mayor London Breed said the city had to streamline 120 years worth of regulations. Employee labor unions will need to sign off on the proposed changes.
• Pensions. Pennsylvania Gov. Josh Shapiro wants to cut back on state pension funds’ reliance on Wall Street money managers and win back the millions that go to these contractors in lucrative state fees. The move replicates one he made as chairman of the Montgomery County Board of Commissioners. Governors don’t directly control pension investments, but they do appoint some members of the pension boards.
• Violent crime falls. With mayors nationwide taking on crime in their state of city addresses, a report from the nonpartisan Council on Criminal Justice found that murder, gun assaults and most other types of violent crime fell last year in the 35 cities studied, but that robberies and motor vehicle thefts were up.
• Composting comes east. It was only a month ago that New York City suspended a popular boroughwide composting program in Queens, pausing it for the winter. Now, Mayor Eric Adams has committed to a 20-month timeline to bring composting to all five boroughs. Earlier in the week, Los Angeles quietly started collecting compost citywide. The program was a year in the making. L.A. joins San Francisco and Seattle with its mandate.
• Legislating voting and elections. With the 2024 presidential election two years away, the tug of war over voting rights is intensifying. Republicans are focused on voter ID rules and making it harder to cast mail ballots, and Democrats are seeking to expand access through automatic voter registration, according to The New York Times. Texas lawmakers have already prefiled more than 75 bills related to voting or elections. And in his state of the state address on Monday, Nevada Republican Gov. Joe Lombardo, who took office earlier this month, pitched doing away with the state’s universal vote-by-mail system.
• Public records. Arizona’s Republican lawmakers have OK’d a new rule that allows them to destroy emails after 90 days and delete text messages as quickly as they receive them. The move drew criticism from Democrats and a public records watchdog, who argue that it will leave the public in the dark on how decisions about important legislation are made. This week, the Orlando Sentinel reported that Florida Gov. Ron DeSantis has invoked executive privilege on several occasions in recent court battles to keep public records secret. There’s also debate in Washington state about whether lawmakers there are overusing “legislative privilege” to withhold documents from the public.
• Social media and free speech. The U.S. Supreme Court asked the Biden administration on Monday for its views on whether the Constitution allows Florida and Texas to prevent large social media companies from removing posts based on the views they express. The New York Times’ Adam Liptak says the practical effect of the move was to put off a decision on whether to hear two major First Amendment challenges to the states’ laws for at least several months. 
• Transit chief to transportation secretary. Maryland Gov. Wes Moore has selected the former chief of the Washington, D.C., transit agency, Paul J. Wiedefeld, to serve as Maryland’s secretary of transportation. Wiedefeld led the nation’s third-largest transit agency for six years before resigning last year.
• Atlanta protests. Georgia Gov. Brian Kemp declared a state of emergency on Thursday following violent protests in Atlanta against the construction of a police training facility and the killing by authorities of an environmental protester said to have shot a state trooper. The order, which authorizes the use of up to 1,000 National Guard troops, will last until Feb. 9, barring an extension by the governor.

Picture of the Week

After more than a decade in the making, the Seattle Convention Center is set for its grand opening this week. At more than 570,000 square feet, the $2 billion steel-and-glass building is located downtown. Many hope it will lead to a revival of the surrounding neighborhood. The project was mainly funded through King County’s lodging tax and a hotel fee in the city of Seattle. (Photo courtesy of Adam Hunter/LMN Architects.)

Government In Numbers

$521,783
The amount that the state of New Jersey spent in federal Covid relief funds to purchase eight new SUVs to transport the governor, lieutenant governor and other top administration officials, reported Politico.

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