The tax conference committee wrapped up their work on Monday night, the last day of the legislative session. The bill includes elements similar to what was in HF 885, the legislature’s previous tax bill that was vetoed by the Governor:
- A new fourth income tax bracket on taxable income over $250,000 for married couples, as in HF 885. This raises $516 million in FY 2010-11.
- A surtax on income earned from charging interest over 15 percent, also as in HF 885. This raises $216 million.
- $286 million raised from alcohol taxes, slightly more than in HF 885.
- $14 million net raised from additional tax compliance.
The bill also includes two tax cuts:
- $75 million in FY 2010-11 by allowing businesses to get a sales tax exemption at the time they make the purchase (currently they must pay the tax and then apply for the refund).
- $5 million in FY 2012 for Angel Investor Credits for high tech businesses.
The bill also includes the K-12 education shift that the House proposed. The spreadsheet passed out in the tax conference committee indicates the net impact of all bill provisions would be to close the $2.7 billion gap remaining for the FY 2010-11 biennium.
The House and Senate passed the bill in the final hour of the legislative session and it is probably a safe assumption that the Governor will veto this bill, leaving the state’s budget unbalanced for the FY 2010-11 biennium. The Governor has indicated that he will balance the budget through his unallotment authority, although he does have the option to bring the legislature back into special session to try to reach a negotiated agreement. As we have previously reported, the Governor had indicated to the legislature that he primarily plans to cut aids to local governments, other tax credits (such as the Renters’ Credit and Political Contribution Refund), human services and higher education.