2012

Previewing Tax Reform in the States: National Trends and State-specific Prospects for 2013

Following an election that left half the states with veto-proof legislative majorities, 39 states with one-party rule and more than a dozen with governors who put tax reform high on their agendas, 2013 promises to be a big year for changes to state tax laws.

Tax Principles: Building Blocks of A Sound Tax System

The fundamental purpose of taxation is to raise the revenue necessary to fund public services. While there are many ways to achieve this goal, a widely agreed-upon set of principles should be used to evaluate tax systems. This policy brief provides a basic overview of five commonly cited principles of sound tax policy: equity, adequacy, simplicity, exportability, and neutrality.

Five Steps Toward a Better Tax Expenditure Debate

Almost without exception, state lawmakers do not closely scrutinize special tax credits, exemptions, and other "tax expenditures" on a regular basis. A recent report by the Pew Center on the States found, for example, that half the states have done nothing even remotely rigorous in the last five years to determine if even a single one of their economic development tax incentives is working.

State Tax Codes As Poverty Fighting Tools

The tax systems of virtually every state are pushing poor families deeper into poverty. But state tax systems also have the potential to play a role in fighting poverty. The four low-income tax credits discussed in this report are among the most cost-effective anti-poverty strategies available to lawmakers: the Earned Income Tax Credit, property tax circuit breakers, targeted low-income tax credits, and child-related tax credits. This report identifies the states in which each of these credits is offered, and provides specific recommendations tailored to policymakers in each state as they work to combat poverty.

Most of Indiana Tax Rate Cut Would Flow to Upper-Income Taxpayers

Alternative Could Provide Larger Tax Cuts for Most Hoosiers Indiana gubernatorial candidate, and current U.S. Representative, Mike Pence recently unveiled his plan to cut the state’s flat personal income tax rate from 3.4 percent to 3.06 percent, should he be...

Corporate Income Tax Apportionment and the "Single Sales Factor"

One of the thorniest problems in administering state corporate income taxes is how to distribute the profits of multi-state corporations among the states in which they operate. Ultimately, each corporation's profits should be taxed in their entirety, but some corporations pay no tax at all on a portion of their profits. This problem has emerged, in part, due to recent state efforts to manipulate the "apportionment rules" that distribute such profits. This policy brief explains how apportionment rules work and assesses the effectiveness of special apportionment rules such as "single sales factor" as economic development tools.

State Estate and Inheritance Taxes

For much of the last century, estate and inheritance taxes have played an important role in helping states to adequately fund public services in a way that exempts middle- and low income taxpayers.

Four Tax Ideas for Jobs-Focused Governors

As the nation's governors gather in Williamsburg, Virginia this week, their focus is on their Chairman's initiative, Growing State Economies. Too often, however, a governor's knee-jerk response to a lagging economy is to start cutting taxes, even though state tax cuts offer a demonstrably low economic bang-for-the-buck, for a number of reasons.

The Progressive Income Tax: An Essential Element of Fair and Sustainable State Tax Systems

A few vocal critics have pointed to state personal income taxes as the source of a variety of fiscal and economic problems- arguing that it has enabled wasteful spending, fueled the volatility of revenue collections, or even stifled job-creation. Accordingly, some of these critics have called for the outright repeal of the income tax, while others have suggested making it significantly less progressive. Such proposals, if acted upon, would make it all but impossible for state tax systems to produce revenue in a fair and sustainable fashion.

Sales Tax Holidays: A Boondoggle

Sales taxes are among the most important--and most unfair--taxes levied by state governments. Sales taxes accounted for a third of state taxes in 2011, but sales taxes are regressive, falling far more heavily on low- and middle- income taxpayers than on the wealthy. In recent years, lawmakers thinking they might lessen the impact of these taxes have enacted "sales tax holidays" that provide temporary sales tax breaks for purchases of clothing, computers, and other items. This policy brief looks at sales tax holidays as a tax reduction device.

Tax Bill Signed by Governor Brownback Makes Kansas an Outlier

Kansas Governor Sam Brownback recently signed into law Senate Substitute for HB 2117, a tax bill that dramatically changes the Kansas income tax structure. The legislation will cut taxes by over $760 million a year but will actually increase taxes...

Latest Kansas Tax Bill Carries $680 Million Price Tag and Raises Taxes on Those Least Able to Pay

A joint House-Senate conference committ ee is poised to approve a revised version of the tax bill recently sent to the Governor by the House of Representatives. An Institute on Taxation and Economic Policy (ITEP) analysis of the agreed-upon tax...

Three Strategies for Making Enacted Kansas Tax Plan Less Unfair and Less Costly

Yesterday, the Kansas House of Representatives passed, and sent to Governor Sam Brownback, a tax plan, Senate Substitute for House Bill 2117, that had been previously ratified by the state Senate. A number of lawmakers in both houses have expressed...

Kansas Tax Bill Would Cost $600 Million a Year While Hiking Taxes on Low-Income Families

Kansas legislators are set to vote on a tax bill recently approved by a joint House-Senate conference committee. An ITEP analysis of the agreed-upon tax bill shows that it would reduce state tax collections by close to $600 million a...

How Federal Tax Reform Can Help or Hurt State and Local Governments

Federal tax reform can affect state and local taxes in several ways. The federal government can create, repeal or change tax expenditures in a way that is passed on to the states because virtually every state has tax rules linked...

Regarding Proposals to Increase Taxes on Upper-Income Rhode Islanders

My testimony focuses in general on the slate of bills in front of the committee today that would raise taxes on wealthy Rhode Islanders. These bills present Rhode Island policymakers sensible revenue-raising options that could be used to either prevent...

Repealing Estate Tax Will Not Create An Economic Boom

Since Tennessee Governor Bill Haslam proposed reducing the state’s estate tax in February, Tennessee lawmakers have shown increasing interest in this idea. Recently, a House subcommittee one-upped the governor by approving a bill that would gradually repeal the tax outright....

Tax Plans Put Kansas on Road Away from Fair & Adequate Tax Reform

Both the House and Senate have recently passed bills, loosely modeled on the Governor’s plan, that would reduce income tax rates, but their plans are different in very important ways. This ITEP report assesses the impact of the House and...

Idaho House Tax Plan Stacked In Favor of the Wealthy

Most Tax Cuts Flow to the Top 1%, Vast Majority of Idahoans Receive No BenefitAn income tax cut recently passed by the Idaho House of Representatives, and backed by Governor Butch Otter, would reduce state revenues by over $35 million...

Alaska Senate State Affairs Committee Regarding SB 29, The Alaska Tax Break Transparency Act

My testimony today deals with Senate Bill 29, which would take an important first step toward achieving these goals by requiring regular scrutiny of Alaska “tax expenditures”—that is, the various tax credits, deductions, exemptions, and other breaks that reduce Alaska...

Testimony on Reinstating Maryland's "Millionaires' Tax"

SB 249 would permanently reinstate the “millionaires’ tax” that expired at the end of 2010. This testimony emphasizes that the “millionaires’ tax” makes Maryland’s tax system at least somewhat less unfair than it otherwise would be; that reinstating the tax...

Arthur Laffer Regression Analysis is Fundamentally Flawed, Offers No Support for Economic Growth Claims

A November 2011 report from the Oklahoma Council for Public Affairs (OCPA) in partnership with Arduin, Laffer & Moore, a consulting group headed by Arthur Laffer, explains the method that Laffer has been using to make the case that tax...

"High Rate" Income Tax States Are Outperforming No-Tax States

Don’t Be Fooled by Junk Economics With the economy lagging, lawmakers seeking to reduce or eliminate state personal income taxes are touting their proposals as tools for boosting economic growth. Of particular note are the governors of Kansas and Oklahoma,...

Kansas Governor Tax Proposal: Wealthy Kansans Pay Less, Poor and Middle-Income Kansans Pay More

Kansas Governor Sam Brownback unveiled his long anticipated tax plan last week. Sweeping changes to reduce the state’s reliance on its progressive personal income tax are at the core of the proposal. The plan cuts income tax rates, eliminates a...