Here, we highlight five states that could potentially make big tax policy changes this year: New York, Maryland, Illinois, Nebraska, and Louisiana.
Both New York and Maryland are facing significant budget shortfalls that lawmakers will need to address. Whether or not lawmakers choose to plug the gaps with increased taxes remains to be seen. Similarly, Illinois lawmakers are weighing several new taxes, include taxing real estate transfers, services, and high-income households.
On the flip side, Nebraska lawmakers are pushing for tax reductions in the form of property tax reform. They’re also hinted at pursuing income tax reductions by expanding the sales tax to services. Louisiana may go in a similar direction given the recent flip to a Republican trifecta after the 2023 elections.
With the legislative sessions underway in most states, we’re taking a look at five states that could pursue major tax policy changes this session.
States to Watch in 2024
Lawmakers in Albany are facing a $4.3 billion budget shortfall, which is one of the most challenging state revenue situations in the country. Governor Kathy Hochul (D) has repeatedly said that she is not in favor of raising taxes to fill in this hole. However, her legislative counterparts are potentially interested in a more fiscally aggressive approach that could include a data tax proposal similar to the one introduced last year (SB 2012) by Sen. Liz Krueger (D).
This disagreement will almost certainly play out in the state budget process over the next two and a half months. In years past, former-Governor Andrew Cuomo (D) was able to keep tight control of what was and wasn’t included in the budget, but this control has ebbed since Governor Hochul came into office. The situation is further intensified by the acrimony between the governor and her Democratic colleagues, as fights ranging from late vetoes to housing have driven a wedge within the party.
For a primer on how New York’s state budget process works, check out our recent article here.
State fiscal analysts project that Maryland is facing a $1.1 billion budget deficit for the current year and it could grow to $3 billion by 2028. This gap is at least partially attributable to the fact that the state has not been able to fully fund its multi-billion dollar education reform package as one of its pay-fors, the digital advertising tax, has been challenged in both state and federal court. While lawmakers agree that this issue will need to be resolved, leaders are advocating for a number of different approaches.
Governor Wes Moore’s (D) newly released budget does not include any new tax increases and Senate leaders have said that they are not in favor of taking significant revenue action this year. However, some progressive lawmakers and groups, including the Fair Funding Coalition, have indicated that they want to push for business tax increases this year. While the full contours of such a plan haven’t been finalized, it’s likely that mandatory combined reporting (HB 46) will be part of the conversation, even if it doesn’t have the support to pass.
Current fiscal estimates project that Illinois' budget position is not in crisis for now, but the leadership of the state’s largest city may be gearing up to ask the state for help filling its own budget hole.
Property tax reform has been a consistent theme in Nebraska politics in the last few years — it has essentially become a “must-pass” piece of annual legislation. This is why it was particularly notable that Governor Jim Pillen (R) announced earlier this month that he was not only seeking a historic 40 percent property tax reduction but is also calling for fundamental reforms to the state’s tax code.
The governor did not announce many specifics for what these reforms could look like, but a number of conservative lawmakers have already introduced bills increasing the sales tax rate or expanding its base. For example, senators have proposed expanding the sales tax base to include advertising services (LB 1354 & LB 1310), accounting services (LB 1308), and legal services (LB 1345), as well as increasing the sales tax rate to 6.5 percent (LB 1315).
A tax swap that traded property tax reductions for sales tax expansion would not just be a fundamental reorganization of Nebraska’s tax code, it could also be an example that other Republican-controlled states might follow moving forward, particularly as many red states remain focused on reducing or eliminating the individual income tax.
Governor Jeff Landry’s (R) victory last fall gave Republicans a trifecta over Louisiana’s government for the first time since 2016. Our research indicates that when a party regains full control after a prolonged period of divided government they often pursue a more aggressive policy slate in their first year back in power. There are a number of policy options that the state GOP could pursue, but tax reform seems likely to be in the mix.
Louisiana’s legislature won’t begin their regular session until March 11 and we won’t get a sense of the Republican policy agenda until closer to the start date, but recent legislative action provides some clues. In 2022, the legislature convened a committee to discuss ways of eliminating the personal income tax. These plans were shelved in 2023, but legislative interest in abolishing the income tax remains.
Track and Influence State Tax Policy
Tax policy can be one of the most challenging areas for government affairs executives. MultiState’s team understands the issues, knows the key players, and helps you effectively navigate and engage. We offer a customized, strategic solution to help you develop and execute a proactive multistate tax legislative agenda. Learn more about our Tax Policy Practice.