For state budgets, every dollar counts. But this is perhaps even more so the case at a time when state economies are still recovering from the Great Recession. That’s why New Mexico State Auditor Tim Keller decided to take a closer look at state accounts when he was elected in 2014. In February, the New Mexico Office of the State Auditor released the second annual Fund Balance Report, which focuses on unspent funds in state government accounts that don’t automatically revert to the state’s general fund. In New Mexico, Keller took a look at unspent funds across all state agencies that didn’t automatically revert back to the general fund. And the results, he said, were somewhat surprising. “The dollars were much higher than anyone expected.”

States may reap some revenue rewards following the rollout of new rules by the U.S. Treasury Department related to corporate income taxes. On April 4, 2016, the U.S. Treasury Department announced the issuance of new regulations that are intended to make it more difficult for companies to pursue corporate inversions—the practice used by companies to reincorporate overseas in order to reduce their tax burden on income earned abroad—and to reduce subsequent profits for tax purposes through a tactic called earnings stripping. Earnings stripping is a technique employed by companies after a corporate inversion to minimize U.S. tax obligations by transferring debt to a foreign parent company and declaring the interest on the debt as a deduction.

In 2016, 45 states plus the District of Columbia have sales taxes in place and five states do not. Tax rates in 2016 remained relatively unchanged from 2015, but have been creeping slowly upward over the past decade.

As of Feb. 2, 2016, scholarship tax credits were available in 18 states. Scholarship tax credit programs are used to provide a form of school choice, allowing individuals or corporations to receive a tax credit on state taxes for donations made to grant private school scholarships. Scholarship tax credit programs are also known as tuition tax credits and education tax credits. Some states provide parents the opportunity to deduct all or a portion of their child’s private school tuition from their state taxes. Others provide corporations the ability to donate to an approved non-profit scholarship funding organization and apply for a tax credit for the donation.

Federal spending plays a significant role in state budgets and economies. In recent years, the percentage of state revenues coming from Washington, D.C., to the states has fluctuated, largely due to the end of American Recovery and Reinvestment Act—or stimulus—dollars and the implementation of the Affordable Care Act.

The Tenth Circuit held that a Colorado law requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue is constitutional.

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 use tax. To improve tax collection, in 2010 the Colorado legislature began requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue. The Direct Marketing Association sued Colorado in federal court claiming the law was unconstitutional under Quill

CSG Midwest
Governors in two Midwestern states are asking legislators to consider using a new source for funding transportation projects — state budget reserves.
In Nebraska, Gov. Pete Ricketts has proposed creation of a transportation infrastructure bank to accelerate the completion of highway repairs, fix county bridges, and fund projects that help new or expanding businesses. Under LB 960, up to $150 million in cash reserves would be transferred to the infrastructure bank. According to theAmerican Association of State Highway and Transportation Officials, Nebraska is one of four Midwestern states (along with Iowa, North Dakota and South Dakota) that relies entirely on a “pay as you go” model for transportation funding (no bonding).

On Dec. 19, 2014, President Obama signed into law the Stephen Beck Jr. Achieving a Better Life Experience, or ABLE, Act, that allows persons with disabilities to save for their futures through tax-advantaged savings accounts. The act gives qualified Americans with disabilities the chance to save money and meet the added expenses of living with a disability without jeopardizing their eligibility for important supports such as Supplemental Security Income, or SSI, and Medicaid.

The New York Times says that the oil industry is in its “deepest downturn since the 1990s, if not earlier”. The price of a barrel of oil has plummeted, falling more 70 percent since mid-2014, and gas prices at the pump have followed – falling from $2.21 one year ago to $1.70 today (AAA). Unfortunately, a drop in energy prices means a headache for several states that rely heavily on severance taxes for revenue.

A majority of states (35) impose at least one form of severance tax, which is a tax on natural resource extraction. While overall severance taxes don’t make up a large percentage of total state taxes collected – 2.1 percent in 2014 – they have very different impacts across the states. For example, in 2014 severance taxes collected ranged from 72 percent of total tax revenue in Alaska and 54 percent of revenue in North Dakota to less than 1 percent in 18 states. In seven states, severance taxes make up 10 percent or more of total tax collections. 

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