So, Can States Cut Taxes or Not?

Link: https://www.governing.com/finance/So-Can-States-Cut-Taxes-or-Not.html

Excerpt:

Most observers believe that the Treasury will interpret the law narrowly. Rather than seeking to claw back funds from any states passing tax cuts or credits, the feds are considered likely to challenge only those states that clearly use federal dollars to pay for them. “Nothing in the act prevents states from enacting a broad variety of tax cuts,” Treasury Secretary Janet Yellen wrote in a response to the AGs. “It simply provides that funding received under the act may not be used to offset a reduction in net tax revenue resulting from certain changes in state law.”

But the fact that the law blocks federal money from being used even indirectly to pay for tax cuts has state officials not just worried but angry. “Democrats in Washington and in the White House are not going to tell me, or the Georgia General Assembly, that we can’t cut taxes for hard-working Georgians,” Gov. Brian Kemp complained at a news conference last month.

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That prohibition lasts as long as the stimulus dollars are spent, which will be into 2024. And there are limits, Walczak notes, on where and how states can spend federal aid. They can use the money to address pandemic and health needs, for example. While those are clearly ongoing, much of the cost of vaccine supply and distribution has been underwritten by the feds. Other costs in these areas have already been addressed by last year’s federal CARES Act, which some states struggled to spend.

Author(s): Alan Greenblatt

Publication Date: 7 April 2021

Publication Site: Governing

Will States Resist Fresh Billions for Medicaid Expansion?

Link: https://www.governing.com/now/Will-States-Be-Able-to-Resist-Billions-for-Medicaid-Expansion.html

Excerpt:

As part of the most recent federal stimulus, states that haven’t expanded Medicaid under the Affordable Care Act can receive additional matching funds. Rather than paying 10 percent of the cost for new recipients, they’d only have to pay 5 percent over the next two years. Additional subsidies mean they would actually cost themselves money by refusing to expand. Florida, for instance, would come out ahead by $1.25 billion, even after paying its share of expanded coverage. Still, Gov. Ron DeSantis and legislative leaders remain opposed.

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It’s true that the 95 percent match rate will only last for two years. But plenty of states have put in place triggers that would end their expansion programs if the federal share ever dipped below 90 percent, notes Trish Riley, executive director of the National Academy for State Health Policy.

Author(s): Alan Greenblatt

Publication Date: 31 March 2021

Publication Site: Governing

The Supreme Court Decision That Saved States Billions

Link: https://www.governing.com/finance/The-Supreme-Court-Decision-That-Saved-States-Billions.html

Excerpt:

The 2018 Supreme Court decision, in South Dakota v. Wayfair, overturned prior decisions that had made it impossible for states to collect sales taxes from remote sellers. They certainly tried in different ways, but were shot down by various courts. It was the long-sought Wayfair decision, as it’s known, that opened the door for states to collect taxes on most online sales.

“Prior to the Wayfair decision, although some ecommerce sellers were going down the path of starting to collect sales tax on their sales, online sales was still a potential avenue to avoid the sales tax,” says Chuck Maniace, vice president of regulatory analysis at Sovos, a tax compliance firm.

Wayfair allows states to demand that businesses without a physical presence collect and remit taxes, assuming they make at least $100,000 worth of in-state sales. Following the decision, large states such as California and Texas have set the threshold higher, at $500,000. States differ in terms of how many in-state transactions can take place before a seller has to collect taxes (generally, about 200).

Author(s): ALAN GREENBLATT

Publication Date: 22 January 2021

Publication Site: Governing