State Net Capitol Journal – March 10, 2014; 2013 (Sort Of) 'Year Of Tax Reform'

Budget & Taxes

2013 (SORT OF) 'YEAR OF TAX REFORM': Early last year many predicted 2013 would be "the year of tax reform" in the states, due to the unusually high number of tax measures that had been proposed, a number of which included major reforms. But according to the results of a survey by the National Conference of State Legislatures (NCSL), the year was a more modest one for tax reform than expected.

"State Tax Actions 2013" indicates that although tax reforms were enacted in 13 states last year, many other tax measures failed or were substantially scaled down. Collectively, revenue actions last year resulted in a net tax reduction of less than $1 billion, representing about 0.1 percent of state tax collections in 2012. By comparison, revenue actions in 2012 resulted in a net tax increase of $4.1 billion, representing 0.5 percent of prior-year collections. And while seven states — Alaska, Arizona, Iowa, Maine, North Dakota, Ohio and Wisconsin — reported net tax reductions of more than 1 percent, another seven — Georgia, Massachusetts, Minnesota, Oregon, Vermont, Virginia and Wyoming — reported net tax increases of more than 1 percent. Thirty-six others reported no significant net change.

"The results of our survey are a bit misleading because even though the net tax change was relatively modest, tax reform was still a predominant theme in state legislatures in 2013," said Mandy Rafool, fiscal affairs program principal at NCSL. "The robust discussions in the states that enacted and proposed major tax changes shows there is an appetite for reform." (NATIONAL CONFERENCE OF STATE LEGISLATURES)

NEW HEPATITIS C DRUGS COME WITH BUDGET-BUSTING PRICE TAG: Until recently, the only truly effective cure for hepatitis C, a serious infection of the liver that afflicts 3.2 million to 5.2 million Americans and kills more of them each year than HIV/AIDS, according to the U.S. Centers for Disease Control and Prevention, has been a liver transplant. Nearly a year of interferon injections has also been an option. But the side effects of that method of treatment include anemia and depression, and the cure rate is only about 45 percent for the most common strain of hepatitis C, genotype 1.

But two new drugs were approved for the treatment of hepatitis C last year. The drugs — simeprevir, marketed as Olysio by Janssen Therapeutics, and sofosbuvir, sold as Sovaldi by Gilead Sciences — taken in pill form, have only mild side effects and cure rates as high as 95 percent.

The price of the drugs, however, is sticker-shock-inducing: A 12-week course of treatment runs between $84,000 and $168,000, which works out to $1,000 to $2,000 a pill.

With hepatitis C about twice as prevalent among Medicaid beneficiaries as the general population, much of that expense could fall on states and the federal government, which jointly fund Medicaid. A preliminary study by the Institute for Clinical & Economic Review estimated that in California alone, the cost of treating just half of those with chronic hepatitis C would increase Medicaid spending by $18 billion.

"If you do back-of-the envelope calculations, it's clear budgets couldn't take on the potential of every eligible patient," said ICER President Steven Pearson.

What's more, Matt Salo, executive director of the National Association of State Medicaid Directors, said the new hepatitis C medications could be part of a new wave of expensive "specialty" drugs that will create major dilemmas for the public health care system.

"I don't know that public policy has yet come up with how we are going to deal with this," he said. "If a cure comes out for lupus and it costs $300,000 a year, at what point do we say, 'We can't do this for everybody?' Those are big policy questions we're going to have to start to grapple with." (STATELINE.ORG)

BUDGETS IN BRIEF: Last Tuesday, one day after failing to pass a bill extending a tax break for film productions in the state by three votes, the OKLAHOMA House reversed course and approved the measure (HB 2580) on a 65-28 vote, easily exceeding the 51 votes needed for passage. With the Senate also having approved a bill extending the tax break, it's likely one of them will make it to Gov. Mary Fallin (R), who reportedly favors the idea (NEWSOK.COM [OKLAHOMA CITY], STATE NET). • Also in OKLAHOMA, the Senate approved a bill (SB 1246) that would cut the state's top income tax rate from 5.25 percent to 5 percent, once certified projections for general revenues return to where they were when the Legislature approved a tax cut last year. The bill also contains a provision that would make an additional cut in the top income tax rate to 4.85 percent when state revenue growth is sufficient to offset the hit from the additional cut (NEWSOK.COM [OKLAHOMA CITY], STATE NET).* Leaders of IOWA's divided Legislature agreed on a $6.97 billion budget for the 2015 fiscal year, which begins on July 1. That figure represents a 7.4 percent spending increase over the current fiscal year (DES MOINES REGISTER). • DELAWARE Gov. Jack Markell (D) has proposed adding an additional $45 to homeowners' property tax bills to fund the cleanup of the state's polluted waterways (WDEL 1150AM RADIO). • The NEW HAMPSHIRE Senate Ways and Means Committee endorsed a bill that would increase the state's 18-cents-per-gallon gas tax, which hasn't been changed in over 20 years, by 4.2-cents. Sen. Jim Rausch (R), chief sponsor of the bill (SB 367), is optimistic it will clear the full House and Senate, now that a provision that would have triggered automatic increases tied to the consumer price index has been removed from the bill (UNION LEADER [MANCHESTER], STATE NET). • The closure of national parks during last year's federal government shutdown reduced the number of visits to the parks by 8 million and cost local communities over $400 million in economic activity, according to the National Park Service (WASHINGTON TIMES). • The INDIANA House voted to exempt Olympic medals and prize money from state income taxes. If approved, the tax break would be retroactively effective Jan. 1, making it available for Nick Goepper, the 19-year-old Indiana resident who won a bronze medal in slopestyle skiing at last month's Winter Olympics (INDIANAPOLIS STAR).

- Compiled by KOREY CLARK

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