Tax Reform Friday: Governors Square Off Against Legislatures in Tax Veto Confrontations

As states continue to work to address the effects of federal tax reform at the state level, disagreements about policy have become knock-down, drag-out political fights. This has been especially true in states where the legislature and governorship are controlled by different parties. In several states, legislatures have passed budget and tax acts, only to find them vetoed by governors who favor a different policy agenda.

Earlier this week on June 12 the North Carolina House of Representatives joined the state’s Senate in voting to override Gov. Roy Cooper (D)’s veto of the state’s budget act, S.B. 99, as Andrew Ballard reports in the Daily Tax Report: State (subscription required). Cooper vetoed the budget on June 6, releasing a statement in which he denounced the bill, stating that he would “not sign [his] name to a budget that protects corporations and the wealthy at the expense of schools and students.” The bill lowers tax rates for both the corporate and individual income taxes, among other provisions.

Vermont has also been a staging ground for a pitched battle between the legislative and executive branches. As reported by Aaron Nicodemus in Daily Tax Report: State (subscription required), Gov. Phil Scott (R) vetoed bills in May that were designed to respond to federal tax reform. With a special session for the legislature reconvened to deal with these issues, Scott once again stated he will not support the proposed built in increases to the state’s education tax rates for future years. Yesterday, June 14, according to April McCullum in the Burlington Free Press, Scott vetoed the second budget bill, making a state government shutdown possible if an agreement is not reached by July 1.

Minnesota has also seen a clash over its response to the federal overhaul of the tax code. As reported by Bloomberg Tax’s Michael Bologna, on May 23, Gov. Mark Dayton (DLF) vetoed the legislature’s response to tax reform, stating that the bill failed to provide support for the state’s struggling school districts. With the state’s regular legislative session ended and the governor refusing to call a special session, Minnesota’s response to federal tax reform remains in limbo.

As states continue to rework their taxation structures and approaches in response to federal tax reform, further confrontations between governors and legislatures of different parties seem likely to result.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: How should states bridge the gap between legislators and governors over tax policy?

For more information on the impact of Pub. L. No. 115-97, examine Bloomberg Tax’s Tax Reform Roadmap, showing detailed comparisons between pre-reform law and impending changes, with pertinent cites attached.

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