February 25, 2022 12:35pm
House files state tax modernization bill
Earlier today, House Appropriations and Revenue Chair Jason Petrie filed House Bill 8, which would lower the state’s 5% income tax incrementally over a period of years until it is eliminated. The first decrease would reduce the income tax rate an entire percentage point to 4% on January 1, 2023.
The bill requires the state to meet additional revenue targets before additional rate reductions can occur. The thresholds are based primarily on organic increases in state revenues together with an expansion of the base of items subject to sales tax. Lawmakers used conservative revenue forecasts based on the work of the Consensus Forecasting Group (CFG) and available sales tax data to predict future state revenues.
Provisions of HB 8 aimed at broadening the tax base to include extending the sales tax or a user fee to the following services as well as others listed in the bill:
- Non-Primary Residential Electric (primary residences would remain exempt)
- Taxi cabs, car rentals, or transportation services like Uber and Lyft
- Temporary Rental Services (AirBnB, VRBO)
- Advertising, Marketing, and Graphic Design Services
- Residential and Nonresidential Security Systems
- Bodyguard and Self-Protection Services
- Process Servers
- Valet and Parking Services
- Pleasure Watercraft Docking
- Entertainment Venues and Event Space Rentals
- Legislative and Executive Branch Lobbying
- Cosmetic Surgery Procedures (non-medically necessary)
- Personal Financial Planning
- Private Mail Services
- Road and Travel Services
- Executive Employee Recruitment Services
- Unsolicited Telemarketing Services
- Public Opinion Research
The measure also implements a battery reclamation fee on electric and hybrid motor vehicles and a tax on the use of fee-for-service charging stations. Revenue raised through these mechanisms would be earmarked for the state road fund and general fund.
HB 8 includes no reduction in the corporate income tax or the limited liability entity tax (LLET), nor does it include a rumored expansion of the sales tax to traditionally non-taxed items like groceries and medication.
GLI advocacy staff is reviewing the proposal and will provide more details and analysis.