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This month in tax policy news: Corporate profits soar while corporate tax collections plummet. Also inside: A look at regressive state tax policies and progressive remedies and the continued unpackaging of the Tax Cuts and Jobs Act. It's ITEP's March 2019 Monthly Digest.
The Trump Tax Law Further Tilted an Already Uneven Playing Field
March 27, 2019 • By Jessica Schieder
Proponents sold the Tax Cuts and Jobs Act (TCJA) as a way to spur new investment, increase workers’ paychecks, and reverse the off-shoring of jobs. Testimony presented during a House Ways and Means hearing held today reflected on how—more than a year after the law’s passage—each of those pitches ring hollow.
State Rundown 3/27: Spring Bringing Smart State Tax Policy So Far
March 27, 2019 • By ITEP Staff
Though a long winter and a rough start to spring weather have wreaked havoc in much of the country, lawmakers are off to a good start in the world of state fiscal policy so far. In the last week, a progressive revenue package was passed in the nick of time in NEW MEXICO, a service-sapping tax cut was vetoed in KANSAS, and a regressive and unsustainable tax shift was soundly defeated in NORTH DAKOTA. Meanwhile, gas tax updates are on the table in MAINE, MINNESOTA, and OHIO. And exemptions for feminine hygiene products and diapers were enacted in VIRGINIA and introduced in MISSOURI.
Data released Friday by the U.S. Treasury Department should give great pause to all who care about the federal government’s ability to raise revenue in a fair, sustainable way. In the wake of the 2017 corporate tax overhaul, corporate tax collections have fallen at a rate never seen during a period of economic growth.
A 2019 ITEP analysis found that Black and Latinx households are overrepresented in the lowest-income quintiles; while they represent about 22 percent of overall tax returns, they account for 30 percent of the poorest quintile of taxpayers.
Rep. Doggett and Sen. Whitehouse Reintroduce Bill to End Offshore Tax Avoidance
March 15, 2019 • By Lorena Roque
On Thursday, Representative Lloyd Doggett and Senator Sheldon Whitehouse announced that they are reintroducing the “No Tax Breaks for Outsourcing Act.” Our international corporate tax rules have been a mess for a long time, and Tax Cuts and Jobs Act (TCJA) failed to resolve the problems. The old rules and the new rules under TCJA both tax offshore corporate profits more lightly than domestic corporate profits, but in different ways. The No Tax Breaks for Outsourcing Act would create rules that tax domestic profits and foreign profits in the same way.
More than three billion dollars could be raised under a major progressive tax plan proposed by Illinois Gov. J.B. Pritzker this week, the point being to simultaneously improve the state’s upside-down tax code and address its notorious budget gap issues. One state, Utah, may already be looking at a special session to revisit the sales tax reform debate that ended this week without resolution, in contrast to Alabama and Arkansas, where leaders finally resolved years-long debates over gas taxes and infrastructure funding. And lawmakers in four states – California, Florida, Minnesota, and North Carolina – introduced legislation to expand or…
North Dakota Senate Should Put the Freeze on House Tax-Cut Plan
March 11, 2019 • By Dylan Grundman O'Neill
Lawmakers in Bismarck were treated last weekend to the largest single day of snowfall the city has ever seen. As state senators begin weighing a bill recently passed by the House that would replace the state's income taxes with oil revenue, they might want to reflect on how similar oil revenue is to the snow: although both are in extreme abundance right now, both are volatile and unpredictable and will melt away sooner than later. Lawmakers should also consider how eliminating the state's income taxes might warm the hearts of wealthier North Dakotans but would leave most North Dakota families…
State Rundown 3/6: March Tax Debates Contain Sanity Amid Usual Madness
March 6, 2019 • By ITEP Staff
State policymakers around the nation this week served up a handful of harmful and upside-down tax proposals, but these were refreshingly outnumbered by sound tax and budget policy proposals in several other states. NEW JERSEY Gov. Phil Murphy made tax fairness an explicit priority in his budget address, the NEW MEXICO House passed progressive reforms to improve the state’s schools and tax code, states such as VERMONT are looking to raise funds from legalized cannabis and put it to good use, and many states, including ALABAMA, ARKANSAS, OHIO, and WISCONSIN, are seriously considering much-needed gas tax updates to improve their…
The nation is currently engaging in serious discourse about how to expand economic opportunity and remedy income inequality via the federal tax code. State tax systems are also important and have a dismal effect on the growing economic divide. In a new report, Fairness Matters: A Chart Book on Who Pays State and Local Taxes, we further parse our Who Pays? data.
State Rundown 2/27: Temperatures and Tax Fights Continue to Polarize
February 27, 2019 • By ITEP Staff
As another polar vortex heads for large swaths of the country, state tax debates this week were highly polarized in another way. Lawmakers and advocates in MICHIGAN, OHIO, OREGON, UTAH, and elsewhere fought to enact or improve state Earned Income Tax Credits to give a boost to low- and middle-income working families. But the opposite extreme was heavily represented as well, as others pushed for regressive tax cuts for wealthy individuals and corporations, including in KANSAS, NEBRASKA, NORTH DAKOTA, OHIO, UTAH, and WEST VIRGINIA. Even our “What We’re Reading” section has informative reading on how education funding policy continues to…
State tax policy can be a contentious topic, but one issue on which lawmakers largely agree is that higher gas tax rates are necessary to keep our nation’s infrastructure operating safely and efficiently. Lawmakers in 27 states have approved gas tax increases since 2013.
State Rundown 2/20: February and Regressive Tax Cuts, The “Meanest Moons of Winter”
February 20, 2019 • By ITEP Staff
Tom Robbins called February “the meanest moon of winter, all the more cruel because it will masquerade as spring, occasionally for hours at a time, only to rip off its mask with a sadistic laugh and spit icicles into every gullible face, behavior that grows quickly old.” Observers of state fiscal debates might think he was writing about similarly tiresome regressive tax cut proposals, which recently succeeded in Arkansas and advanced in North Dakota despite improved public understanding of the upside-down nature state tax systems, ineffectiveness of supply-side trickle-down tax cuts, and importance of investing in education. But like February…
Happy Valentine’s Day to all lovers of quality research, sound fiscal policy, and progressive tax reforms! This week, some leaders in ARKANSAS displayed their infatuation with the rich by advancing regressive tax cuts, but others in the state are trying to show some love to low- and middle-income families instead. WISCONSIN lawmakers are devoted to tax reductions for the middle class but have not yet decided how to express those feelings. NEBRASKA legislators are playing the field, flirting with several very different property tax and school funding proposals. And VIRGINIA’s legislators and governor just decided to settle for a flawed…
The Tax Cuts and Jobs Act (TCJA), enacted by President Trump and Congressional Republicans at the end of 2017, has caused quite a bit of confusion, and a recent “Fact Checker” column by the Washington Post’s Glenn Kessler does not help. TCJA created real problems that can't be resolved without real tax reform. To begin that process fact checkers, lawmakers, and everyone else need to be clear about what TCJA did, and did not, do to our tax system.
Fear, Not Facts: Netflix Misleads Media Reporting on Corporate Tax Avoidance
February 13, 2019 • By Matthew Gardner
In an age when even the most incontrovertible facts are routinely dismissed as “fake news,” reporting on corporate taxes can be a daunting challenge for members of the media. ITEP’s recent analysis of the income tax disclosures made by Netflix in its annual financial report last week provide an excellent reminder of this.
On Monday a group of Senators and Representatives from the Northeast announced their latest proposal to repeal the cap on deductions for state and local taxes (SALT), this time offsetting the costs by restoring the top personal income tax rate to 39.6 percent. This is an improvement over previous proposals to repeal the cap on SALT deductions without offsetting the costs at all. But the new approach does not improve our tax system overall. Instead, it trades one tax cut for the rich (a lower top income tax rate) for another (repeal of the cap on SALT deductions).
Amazon in Its Prime: Doubles Profits, Pays $0 in Federal Income Taxes
February 13, 2019 • By Matthew Gardner
Amazon, the ubiquitous purveyor of two-day delivery of just about everything, nearly doubled its profits to $11.2 billion in 2018 from $5.6 billion the previous year and, once again, didn’t pay a single cent of federal income taxes.
A Tale of Two States: How State Tax Systems Perpetuate Income Inequality
February 11, 2019 • By ITEP Staff
To explain how state tax systems make income inequality worse, we compared tax systems in New Jersey and Texas which, before taxes, have similar levels of income inequality. This comparison provides an example of how policymakers’ decisions affect the economic wellbeing of their constituents.
This year is full of opportunity for state policymakers and advocates seeking to improve upside-down tax systems and generate needed funding for shared priorities. In a series of blog posts, ITEP staff summarize key trends we are watching in statehouses this year, with special attention to the many efforts underway to reduce racial and economic inequities and better prepare state budgets for the next recession and reduced federal investments. Along the way, we’ll also draw attention to some of the more destructive policy ideas to watch for in 2019.
Trends We’re Watching in 2019: Attempting to Double Down on Failed Trickle-Down Regressive Tax Cuts
February 7, 2019 • By Lisa Christensen Gee
It’s always troubling for those concerned with adequate and fair public finance systems when states prioritize tax cuts at the cost of divesting in important public priorities and exacerbating underlying tax inequalities. But it’s even more nerve-racking when it happens on the eve of what many consider to be an inevitable economic downturn.
Trends We’re Watching in 2019: Cannabis Tax Implementation and Reform
February 7, 2019 • By Carl Davis
Few areas of state tax policy have evolved as rapidly as cannabis taxation over the last few years. The first legal, taxable sale of recreational cannabis in modern U.S. history did not occur until 2014. Now, just five years later, a new ITEP report estimates that recreational cannabis is generating more than $1 billion annually in excise tax revenues and $300 million more in general sales tax dollars.
Trends We’re Watching in 2019: Consumption Taxes: the Good, Bad and the Ugly
February 7, 2019 • By ITEP Staff
Consumption taxes are a significant source of state and local revenue, and we expect that lawmakers will continue to adjust state consumption tax levies to adapt to budget needs and a changing economy.
Trends We’re Watching in 2019: Addressing Lingering Federal Conformity Questions and Opportunities
February 7, 2019 • By Dylan Grundman O'Neill
In our last update on state responses to the federal tax cut (Tax Cuts and Jobs Act, or TCJA), we noted that several states were waiting until 2019 to make their final decisions, giving them additional time to (hopefully) respond in ways that improve their fiscal situations and upside-down tax codes. The TCJA is affecting the 2018 federal taxes people are filing now, in some cases adding urgency and/or confusion to these debates.
Trends We’re Watching in 2019: Raising Revenue and Spending Surpluses to Prioritize Critical Public Investments
February 7, 2019 • By Lisa Christensen Gee
A second notable trend in 2019 is states raising revenue to address longstanding needs and states allocating their surpluses to invest in critical public priorities such as early childhood programs, education and other human services.
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