Tax and Budget

The president's federal budget was released May 23 and the analysis of winners and losers began practically before the ink was dry, although almost all of Washington seemed to agree the budget was dead on arrival. Cuts to the Medicaid and Children's Health Insurance Program, or CHIP, alone total $616 billion over the next ten years. The budget also envisions saving $250 billion from partly repealing and replacing the 2010 health care law. Taken together, these Medicaid cuts are nearly half the nondefense discretionary funding cuts. To further understand just how important federal Medicaid funds are to states, CSG looked at 2017 federal funding flowing to the states. According to Federal Funds Information for the States, or FFIS, data, the federal Medicaid funding for 2017 is more than 50 percent of all federal grant funds flowing to states in all but four states.

CSG Midwest
A quarter-century has passed since a U.S. Supreme Court decision limited the ability of states to collect taxes from the remote sales of out-of-state retailers. Legislators wanting to secure that taxing authority — which they say is critical to maintaining state revenue bases and helping brick-and-mortar businesses — believe a reversal of Quill Corp. v. North Dakota may finally be on the horizon.
“I do believe Quill will get overturned; it’s just a matter of time,” North Dakota Sen. Dwight Cook says. And one of the U.S. states most reliant on the sales tax as a revenue source, South Dakota, might bring the case that “kills Quill.”
A year ago, South Dakota lawmakers passed a bill requiring most retailers without a physical presence in the state to remit the state’s sales tax. SB 106 applies to sellers with 200 or more annual transactions in South Dakota or whose gross revenue from sales in the state exceed $100,000. This year, Indiana (HB 1129) and North Dakota (SB 2298) passed “economic nexus” laws of their own.

How much states spend on children’s health, education, income supports and social services differs greatly according to a just-released Urban Institute report, titled Unequal Playing Field.

The top spending state – Vermont – charted per child expenditures of $13,430, three times as much as Utah’s per child spending of $4,594. The national average was $7,923. Spending in each state was  adjusted for the state cost of living.

By Brian Sigritz and Kathryn Vesey White
In December, the National Association of State Budget Officers, or NASBO, released the latest edition of its semiannual Fiscal Survey of States. According to data collected from state budget offices, fiscal 2017 is expected to mark the seventh consecutive annual increase in both general fund spending and revenue.

By Katherine Barrett and Richard Greene
With newspapers and scholarly reports full of discussion about states and their shortages—or surpluses—of tax revenues, it would be easy to focus exclusively on the dollars brought in through sales taxes, income taxes and so on. That kind of analysis misses out on the revenue elephant in the room, though: the money that comes from the federal government.

CSG Midwest
At least 20 states, including five in the Midwest (see map), have enacted taxes on the “streaming” of media, such as music, movies or TV shows.
CSG Midwest
As some leading lawmakers in Washington, D.C., explore potential changes to the federal tax code, one idea in particular — the creation of a border adjustment tax — is likely to get more and more attention from many Midwest-based firms.
CSG Midwest
Since its inception in the 1970s, the federal Earned Income Tax Credit (EITC) has enjoyed wide bipartisan support. Designed to encourage and reward work, a low-wage worker’s EITC grows with each additional dollar of earnings until his or her wages reach a maximum value — an incentive for people to leave welfare for work and for low-wage employees to increase their work hours.
And the EITC is refundable: If the amount of the credit exceeds what the worker owes, he or she gets a refund.
“For conservatives, the EITC is pro-work, it is pro-personal responsibility. Liberals like that too, but also it is directed toward low-income people, so you get that mix,” says Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities. “Plus, it works. There is very rigorous research to show that it encourages more work.”
According to the IRS, the 42-year-old Earned Income Tax Credit is one of the nation’s largest anti-poverty programs. In tax year 2015, for example:
  • More than 27 million filers received about $67 billion in earned income tax credits. 
  • Four of five people eligible for the EITC claimed it.
  • The EITC and the separate Child Tax Credit lifted an estimated 9.4 million people out of poverty, including 5 million children. 
In the 11-state Midwest, more than 4.6 million federal EITC claims for tax year 2015 provided almost $11.2 billion in credits. The average refund was $2,343. (The maximum federal credit in 2016 ranged from $506 for a childless individual to $6,269 for a family with three or more children.)

President Trump has proposed several options for tax reform, including significant changes to personal income taxes. According to recent analysis by the...

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. 

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