SESSION RECAP: State Budget and Tax Outlook

Public budgets are moral documents that reflect our values and priorities through decisions on how to tax residents and businesses and spend these collective resources. These decisions impact what families have to spend on basic needs and invest in their future, define the size of the government and its role in the national economy, and affect the lives of all Americans. EOF hosts an Annual Budget and Tax Briefing to explore why federal and state budget and tax work matters to national, state, and local philanthropy.

See a summary of the third plenary session from our 2023 Budget and Tax Briefing below.

This session explored recent trends, key battles and opportunities, and what’s at stake and in play in 2023. Panelists also shared lessons learned from recent revenue campaign wins in Massachusetts and New Mexico.

Michael Cassidy
Director, Policy Reform and Advocacy
The Annie E. Casey Foundation

Jeron Mariani
Senior Program Director
State Revenue Alliance

Miles Tokunow
Deputy Director
OLÉ

Framing:

State budgets have experienced both important gains and losses over the past several years. There have been calls in Congress to rescind American Rescue Plan funds that have not yet been spent, and there are significant tax cuts occurring at the state level under both Republican and Democratic leadership. However, states—such as Massachusetts and New Mexico—have also experienced significant wins in securing funding for essential services.

 

Recap:

In the past several years, states have implemented numerous tax cuts as part of broader regressive efforts to roll back increased support for low-income Americans during the pandemic. States across the country are considering personal income tax cuts or elimination, flat tax structures, and staggered tax structures.

However, some states have also achieved meaningful progress toward sustaining or even increasing support for their lower-income residents. New Mexico became the first state in the country to ensure a constitutional right to childcare, which is funded through the Land Grant Permanent Fund. This ballot measure won with an astonishing 70% in favor. Advocates have been working toward this victory for more than a decade, and during that time they focused on building a mass movement and experimenting with different messaging and tactics. A key part of their strategy was centering the voices of those most affected by low childcare funding: parents and early educators.

Activists in Massachusetts succeeded in passing the Fair Share Amendment, which ended the flat tax rate in the state that had existed for over 100 years. This amendment constitutionally dedicates the new revenue to education and transportation. This campaign centered on a theory of change with three key points: accepting that there is not an existing base of revenue voters and that advocates must work to educate and cultivate voters around the issue; we need to go early and frame the messaging — being response is not enough; and that this work is expensive and it takes resources to win. It was also important to develop meaningful relationships with communities beyond just the vote, to let them know that the advocates are invested in their ongoing well-being.

These state budget wins and losses demonstrate how important it is that grassroots organizations are able to employ both offensive and defensive tactics. It’s essential that funders offer support during budget surplus and budget cut years so that advocacy organizations can build the momentum needed to counter bad policies and effect positive change.

Related Resources:

• New Mexico Taps Land Grant Permanent Fund for Early Care and Education, By Nicole Hsu, New America, Jan. 6, 2023.
• Massachusetts Fair Share Amendment Campaign Website