Tax & Budgets
Progressive Cities Could Indicate Future of State Taxation
August 13, 2020 | Ryan Maness
Coming into the legislative season, we thought that taxation of services would be a central issue before state legislatures this year, and we were right. Governors and legislators alike have called for expanding the tax base, either by eliminating existing exemptions, enumerating specific services to be taxed or broadly taxing all sales - whether tangible personal property or services.
Given the significant economic, tax policy and political hurdles to expanding the sale tax base, the most serious proposals come from governor's offices. Here are the big ones that we are following:
Beyond these governor-led taxation of services measures, legislator have have also introduced a few noteworthy proposals to tax services. A West Virginia bill would eliminate the state's current sales, personal income, and corporate income taxes and replace them with a “general consumption tax” that would include almost no exemptions or exclusions. A series of Nebraska bills would by turns expand the sales tax to include several new service categories, including repair, personal care, and professional services. Finally the so-called grand budget bargain proposed by the Illinois Senate has called for taxing laundry, storage services, and amusement admissions.
These kinds of bills have not found particular legislative success in the past, but given the sheer number of proposals on deck this year, it's certainly possible that this is the year that breaks the mold.