State House, Senate differ on tax, spending priorities
Majority State Senate Democrats unveiled their two-year, operating budget tax-and-spending plan Friday, March 30, just hours before the state House of Representatives passed its operating budget bill on a party-line vote, 56-38.
House Budget Proposal
As NFIB previously reported, the House Democrats’ 2019-21 operating budget would boost state spending by $2.3 billion, to more than $52 billion, nearly 20 percent higher than the current biennium. It relies on a package of new and increased taxes to do so. NFIB has prepared summaries of the three House tax bills, available here:
NFIB testified in opposition last week to the B&O surcharge on business-to-business service transactions. The other House tax proposals will be heard in the House Finance Committee April 4. The committee is expected to approve the bills the following day.
It is unlikely the full House of Representatives will vote on any of the tax bills until a deal is struck with the State Senate. Instead, whatever revenue enhancements may be necessary to pay for an agreed upon budget will probably be approved through a separate bill.
Senate Budget Proposal
Senate Democrats took a slightly different approach. Their 2019-21 operating budget includes $1.6 billion in added spending, with a slimmer tax plan to finance the increase. Like the House, the Senate plan would also close some so-called tax loopholes, and implement a graduated real estate excise tax, but with different thresholds and rates than the House blueprint. Senate Democrat budget-writers would increase the premium tax from 2 percent to 2.52 percent for auto and property/casualty insurance plans to pay for wildfire control and related costs. The House did not include a premium tax hike.
The capital gains plans are substantially different between the two chambers. Senate Democrats would assess a lower rate of 8.9 percent on gains of $250,000 or more. The plan would raise nearly $800 million, but, unlike the House, the new revenue would not be used to balance the operating budget. Instead, Senate Democrats would use capital gains proceeds to fund a Working Families Tax Credit, provide tax relief to small businesses, reduce property taxes on senior citizens, and eliminate sales taxes on feminine hygiene products, diapers, medical and mobility equipment, and over-the-counter medications.
Details are not yet available. Several title-only bills were introduced April 1. We will provide additional information about the specific Senate tax proposals once bill language is posted.
