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Tax Law

State Net Capitol Journal – June 15, 2015; California Considering Prop 13 Reform

Budget & Taxes

CA Considering Prop 13 Reform

A bill introduced last week in California would overhaul Proposition 13 -- the landmark property tax limit initiative approved by the state’s voters in 1978 -- to allow regular reassessments of commercial and industrial properties. Currently such properties are only reassessed when there’s a change of ownership, so the bill (SCA 3) would ensure they are taxed at closer to their current market value.

Despite the fact that residential and agricultural property would not be impacted by SCA 5 and that supporters say the measure would generate $9 billion for schools and local governments, it faces an uphill battle for passage. First, it would require a two-thirds vote in both chambers of the state Legislature, meaning it would need at least a few votes from tax-averse Republicans. The bill’s authors, Sens. Loni Hancock (D) and Holly Mitchell (D), hope to achieve that through “member-by-member conversations,” according to Hancock.

“That is the only way that we’re going to do it,” she added.

Another Prop. 13-reform measure, which would have limited the ability of businesses to divide up property ownership to minimize tax exposure when a building changed hands, failed in the Legislature less than a year ago.

“It dealt with some very specific abuses,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association, named after the activist behind Prop. 13. He added that SCA 5 goes “way, way beyond that,” and his group would fight it.

If Hancock and Mitchell manage to get their bill through the Legislature, it would still have to be approved by voters in November 2016, setting up an expensive battle between unions that want more government funding and businesses that would be most impacted by SCA 5. And the state’s voters are already on the fence about the idea, with a recent Public Policy Institute of California poll showing 50 percent of those likely to vote support it, down from 60 percent three years ago. (LOS ANGELES TIMES, SACRAMENTO BEE, LEXISNEXIS STATE NET)

OR Test Driving 'Prius Tax'

The popularity of hybrid, electric and alternative-fuel vehicles may be good for the environment but not for states that rely on gas taxes to fund the maintenance and construction of their roads and bridges. Oregon, however, is about to launch a program that will tax drivers based on how many miles they travel rather than on how much gas they use.

The “OReGO” mileage tax program will only apply to 5,000 drivers and be entirely voluntary to start. Beginning next month qualifying residents will be able to enroll in the program and select one of three devices that will track their mileage. They’ll then be charged 1.5 cents for each mile they drive on the state’s public roads, with any gas taxes they pay at the pump being deducted so they’re not double-taxed.

The program is likely to be closely watched across the country, with Congress having failed to raise the federal gas tax for 22 years and a number of other states also considering mileage-tax proposals. In fact, California is planning to launch its own pilot program by next year.

One of the things interested observers will be watching for is how well Oregon handles one of the key concerns about mileage taxes: privacy, with many people a little leery about allowing the government to monitor every mile they drive. Oregon’s plan is to use private companies to manage the program, reporting only partial data to the state.

“All the interaction is between you and the vendor,” said Tom Fuller, spokesman for Oregon’s transportation department.

Participants will also be able to track their mileage with a simple odometer instead of a GPS device, but they’ll have to submit paperwork for any mileage they log out of state.

Still, the program faces unfavorable odds in the state. Fifty-six percent of respondents to a Mason-Dixon poll said they opposed the idea, while only 32 percent said they supported it. (ATLANTIC, OREGONIAN [PORTLAND])

Some States Still Struggling Years Into Economic Recovery

The nation’s economy is in its sixth consecutive year of recovery from the Great Recession. But many states are still dealing with major budget problems. Kansas is facing a $400 million budget gap, Louisiana is grappling with a $1.6 billion shortfall and Illinois is struggling with a $3 billion hole.

Many of the problems are of the states’ own making. Neglect of pension obligations is central to the fiscal troubles in Illinois, as well as New Jersey and Pennsylvania, while Republican-backed tax cuts are driving the budget woes in states like Kansas, Louisiana and Wisconsin.

“A lot of governors have cut their taxes with the hopes that that would bring increased economic activity and they could postpone painful decisions about spending reductions,” said Tracy Gordon, a senior fellow at the Washington, D.C.-based Urban-Brookings Tax Policy Center. “But those increases in economic activity haven’t come to pass.”

States haven’t been helped by the fact that the economic recovery has been slower than expected.

“This is very different from past recovery periods, where you had fairly robust revenue growth at the state level,” said National Association of State Budget Officers Executive Director Scott D. Pattison. “We’re not seeing enough revenue growth to solve some of the problems that we’re seeing.” (NEW YORK TIMES, LEXISNEXIS STATE NET)

Budget Gaps Forcing Longer Sessions In Some States

For 45 states, the fiscal year begins on July l, by which they’re required to have a budget in place. But disagreements about how to close budget holes or expand Medicaid have already forced special sessions in Alaska, Florida, Illinois and Washington, and raised concerns about meeting the June 30 budget deadline in a number of other states.

Gabriel Petek, a credit analyst at Standard & Poor’s Ratings Services, who describes late budgets as “summer cliffhangers no one wants to see,” said in a recent report that he expected most states to pass budgets before the deadline. But he added that a few states “continue to grapple with large projected budget gaps or still have major policy issues to resolve.”

“This doesn’t necessarily mean these states won’t have budgets in hand by the start of the new fiscal year. But the significance of what remains unresolved does raise the specter that in at least a few of them, budget adoption could be late.” (ASSOCIATED PRESS)

Budgets In Brief - June 15 2015

CA Proposes SB 789: Drought-inspired legislation proposed in CALIFORNIA would authorize local water authorities to seek voter approval to impose 300 percent taxes on the bills of excessive water users. The bill (SB 789) needs a two-thirds majority in both legislative chambers to pass (SAN FRANCISCO CHRONICLE). * KS Declines $423 million Tax Bill: The KANSAS House declined last Monday to even consider a $423 million tax bill passed by the Senate the night before. House members said they opposed provisions in the bill imposing a cap on local property taxes and putting a four-year sunset on a host of tax exemptions and credits in current law, among other things (LAWRENCE JOURNAL-WORLD). * ME House rejects Constitutional Amendment: On a party-line vote, MAINE’S Democrat-controlled House rejected Gov. Paul LePage’s (R) proposed constitutional amendment to eliminate the state’s income tax (PORTLAND PRESS HERALD). * TX Budget to Include Film and TV Incentive: The two-year budget passed by the TEXAS Legislature last week includes only $32 million in incentives for film, TV and video game production, nearly half of the $63 million allocated in the current two-year budget (AUSTIN AMERICAN-STATESMAN).

- Compiled by KOREY CLARK

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