Tax and Budget

CSG Midwest
The majority of Midwestern states determine farm property taxes through a system that assesses the land based on “use value” — how much income it can generate from agricultural production. One of the few exceptions is Nebraska, where a percentage of the land’s actual market value (currently set at 75 percent in statute) is used to determine what a farmer or rancher will pay in taxes. 
With the value of agricultural land rising rapidly in recent years (see table), Nebraska’s agricultural producers have faced big increases in their tax bills, and over the past two years alone, the state’s legislators have intervened by putting more than $400 million into a Property Tax Credit Relief Fund, which for 2016 will provide $89.57 per $100,000 of property valuation. Beginning in tax year 2017, LB 958 provides $20 million in additional funding for property tax relief. 
This legislative year, Sen. Lydia Brasch hopes she and other Nebraska legislators are able to find a more permanent solution. 
CSG Midwest
Indiana, Wisconsin, North Dakota and Iowa have made the top-10 list in a recent U.S. News & World Report study that explores how well state governments are being administered across the country. Four metrics were used to evaluate all 50 states: fiscal stability, government digitalization, budget transparency and state integrity.

A state trial court judge in South Dakota has ruled that a South Dakota law requiring remote sellers to collect sales tax is unconstitutional. This ruling was expected for precisely the reason the judge stated—a lower court must follow Supreme Court precedent.   

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. The South Dakota law directly contradicts this precedent.

CSG Midwest
Seven years ago, Kansas lawmakers adopted new incentives for individuals to move to the state and make one of its 77 rural counties their new home. The Rural Opportunity Zones program offers a mix of income tax waivers (for up to five years) and student-loan repayments of $15,000. But as much as he supports the idea, Kansas Rep. Troy Waymaster says another part of the economic challenges for rural areas must somehow be met. 
“The problem is when there is no job for them to take, [people] probably are not going to move [to the rural counties],” he notes. “This is the other half of the equation: how you get jobs to move back.” 
This year, he introduced the Ad Astra Rural Jobs Act (HB 2168), which would provide tax credits to investors who help businesses expand, locate or relocate in Kansas’ rural areas, many of which are struggling due to trends in their two dominant industries: agriculture and oil. In both sectors, commodity prices are low.
CSG Midwest
Indiana Sen. Jean Leising knows it’s going to be another tough year for beef and hog producers, and 2016’s record national yields for corn and soybeans indicate that farm profitability will decline for the third straight year.  But she says a statutory revision made by the state legislature last year might at least help ease the pain for agricultural producers when it comes to paying their property taxes. 
CSG Midwest
Tax policy quickly emerged as a high-priority issue this year in many of the Midwest’s states, with a mix of proposed tax hikes and cuts making their way into governors’ State of the State addresses and proposed budgets, as well as some of the first bills introduced in legislatures.
CSG Midwest
In 2015, lawmakers in North Dakota passed legislation (SB 2057) requiring the legislature to undertake an evaluation of 21 of the state’s tax incentive programs at least once every six years. According to Pew’s Business Incentives Initiative, North Dakota is one of 21 states (four in the Midwest; see map at right) that have passed laws since 2012 requiring regular evaluations of tax incentive programs offered by the state.
CSG Midwest
Two state legislatures in the Midwest took actions this past year to encourage private investments in affordable housing. In late 2016, Illinois Gov. Bruce Rauner signed a law (SB 2921) extending a tax-incentive program that has been in place since 2011. It provides a 50-cent tax credit for every dollar donated to a not-for-profit group that is working to create or preserve housing for low-income residents. Since its inception, Illinois officials say, the tax credit has leveraged more than $370 million in private investment and helped create or preserve over 18,000 affordable housing units.
Nebraska’s LB 884 was signed into law in April 2016.

In the coming months, legislators in almost every state will be grappling with writing a new budget. According to the National Association of State Budget Officers (NASBO), 47 states will enact a new budget for fiscal year 2018, while the three remaining states (Kentucky, Virginia and Wyoming) have previously enacted budgets that cover both fiscal years 2017 and 2018. Among those 47 states, most – 30 – will pass an annual budget, while 17 will authorize a two-year (biennial) budget that will cover both fiscal year 2018 and 2019. Note that for 46 states, fiscal year 2018 will begin on July 1, 2017. Alabama (Oct. 1), Michigan (Oct. 1), New York (Apr. 1) and Texas (Sept. 1) are the exceptions.  Most state legislatures adopt their new budgets in the spring.  

According to the National Association of State Budget Officers’ Fall 2016 Fiscal Survey of the States, most states are seeing weaker revenue conditions from 2016 carrying into fiscal 2017. At the time of data collection, 24 states reported general fund revenues for fiscal 2017 were coming in below forecast, while 16 states were on target and four states were above forecast. 

Check out our ongoing coverage of state budgets in 2017 HERE.

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