State Senate Passes Updated Revenue Package

Earlier today, members of the State Senate approved a package of needed revenue enhancements to help ease the recession's impact on our state budget.  The latest Senate revenue proposal would generate about $800 million in new resources to help maintain vital supports for working families like child care support, worker retraining programs, health care, K-12 and higher education, along with other basic services.

The current Senate package largely builds from proposals introduced earlier this year.  Elements of the Senate's approach include: eliminating or restricting wasteful tax exemptions, preferences, and loopholes; applying a temporary B&O tax surcharge on certain business services while permanently doubling the small business tax credit; temporarily increasing the state sales tax rate; and implementing the Working Families Tax Rebate (WFTR) -- a rebate program based on the Federal EITC.

The revenue package passed today also incorporates these elements, however it varies from earlier Senate proposals in several respects:

• Smaller temporary sales tax Increase:  Earlier versions of the Senate revenue package include a 0.3 percentage point increase in the state sale tax.  The latest version would increase the sales tax by 0.2 percentage points to 6.7 from 6.5 percent.  If enacted, this increase will be in place for three years, ending on June 30, 2013.
• Fewer businesses subject to the B&O tax surcharge:  Under previous Senate revenue proposals, a temporary 0.25 percent surcharge would have been levied on every business that is currently subject to the 1.5 percent "Service & Other Activities" B&O tax rate.  The latest version would exempt public and nonprofit hospitals, research and development firms, and real estate agents from the surcharge.
• Delayed implementation of the Working Families Tax Rebate (WFTR): In the previous Senate revenue package, eligible families would have started receiving WFTR rebates in 2011.  Under the current version, implementation of the WFTR would be delayed until 2012.  In that year eligible families would receive a rebate amounting to five percent of the federal EITC, with a minimum rebate of $25.  In subsequent years, families would receive rebates equal to 10 percent of the EITC, and the minimum rebate would be $50.  For more information about the WFTR, click here.

The schmudget post "Comparison of Revenue Proposals" provides a side-by-side comparison of the previous Senate revenue proposal, the current House proposal, and the Governor's revenue proposal.