House and Senate keep income tax relief alive
Today, both the House and Senate amended income tax proposals, keeping them alive as the session continues.
In the House of Representatives, the House Ways & Means Committee amended Senate Bill 3164 to include an income tax phase-out without a sales tax offset.
In exchange for not including an offset in sales tax, the amount of the initial income tax cut had to be reduced, the grocery tax phase-down had to be slowed and the car tag credit had to be removed.
Here are the details of the proposal:
– Income tax exemptions would be increased to $25,000 for single workers and $50,000 for married filers. This is down from the original House proposal that increased the exemptions to $40,000 and $80,000, respectively, in year one.
– The full phase-out would be implemented based on a fiscal rule concerning revenue and spending.
– There is no sales tax increase. The original plan included a 1.5 percent increase.
– The grocery tax would be reduced to 4 percent at a quarter of a point per year.
– There is no car tag reduction.
The modified plan moves $500 million in capital expenditure reserves into a budget stabilization fund to ensure the plan in initial years doesn’t disrupt the state budget.
Early calculations of the plan indicate a roughly $700 million cut in the first full year in effect (FY 24).
The Senate Finance Committee modified House Bill 531, the House income tax repeal plan, to:
– Begin a four-year drawdown of the top marginal income tax rate from 5 percent to 4.6 percent.
– It then eliminates the 4 percent tax bracket, which is the first $5,000 of taxable income, over the next four years.
– Reduce the grocery tax to 5 percent.
– Places a 6-month moratorium on gas taxes.
After clearing committees, each bill now goes to the floor of the respective chamber. At that point, the other chamber could concur with the changes or, as is more likely, invite conference.
We spoke about the original proposals in detail.