Personal Income Taxes

report March 30, 2012
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.…
report March 24, 2012
Idaho House Tax Plan Stacked In Favor of the Wealthy

Most Tax Cuts Flow to the Top 1%, Vast Majority of Idahoans Receive No Benefit An income tax cut recently passed by the Idaho House of Representatives, and backed by…
report February 29, 2012
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…
report February 15, 2012
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…
report February 8, 2012
“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.…
report January 11, 2012
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…
report October 4, 2011
Costs of Personal Income Tax Repeal in Kansas

Given the challenging fiscal climate facing Kansas, the proposed income tax plan should be thought of not simply as a tax cut but as a tax swap. News reports confirm…
report September 22, 2011
State Tax Codes As Poverty Fighting Tools (2011)

This report presents a comprehensive view of anti-poverty tax policy decisions made in the states in 2011 and offers recommendations every state should consider to help families rise out of…
brief September 1, 2011
Rewarding Work Through Earned Income Tax Credits

Low-wage workers often face a dual challenge as they struggle to make ends meet. In many instances, the wages they earn are insufficient to encourage additional hours of work or long-term attachment to the labor force. At the same time, most state and local tax systems impose greater responsibilities on poor families than on wealthy ones, making it even harder for low-wage workers to move above the poverty line and achieve meaningful economic security. The Earned Income Tax Credit (EITC) is designed to help low-wage workers meet both those challenges. This policy brief explains how the credit works at the federal level and what policymakers can do to build upon it at the state level.
brief September 1, 2011
State Income Taxes and Older Adults

State governments provide a wide array of tax breaks for their elderly residents. Almost every state levying an income tax now sensibly allows some form of income tax exemption or credit for its over-65 citizens that is unavailable to non-elderly taxpayers. But many states have enacted poorly-targeted, unnecessarily expensive elderly income tax breaks that make state tax systems less sustainable and less fair. This policy brief surveys approaches to elderly income tax relief and suggests options for reforming state tax breaks for seniors.
brief September 1, 2011
State Treatment of Itemized Deductions

In 2011, thirty one states and the District of Columbia allow a group of income tax breaks known as “itemized deductions.” Itemized deductions are designed to help defray a wide variety of personal expenditures that affect a taxpayer’s ability to pay taxes, including charitable contributions, extraordinary medical expenses, mortgage interest payments and state and local taxes. But, these deductions cost states billions of dollars a year while providing little or no benefit to the middle- and low-income families hit hardest by the current economic downturn. This policy brief explains itemized deductions and explores options for reforming these upside down tax breaks at the state level.
brief September 1, 2011
The Folly of State Capital Gains Tax Cuts

For over twenty years now, the federal tax system has treated income from capital gains more favorably than income from work. A significant number of state tax systems do as well, offering tax breaks for profits realized from local investments and, in some instances, from investments around the world. As states struggle to cope with short- and long-term budget deficits and to devise strategies to promote economic development in a sustainable fashion, policymakers should assess whether preserving such tax preferences is in the public interest. This policy brief explains state capital gain taxation and examines the flaws in state capital gain tax cuts.
brief September 1, 2011
Reducing the Cost of Child Care Through Income Tax Credits

Low- and middle-income working parents frequently spend a significant portion of their income on child care. As an increasing number of single parents take jobs, and as the number of two-earner families continues to rise, child care expenses are an unavoidable and increasingly unaffordable expense for these families. This policy brief looks at one way of making child care more affordable: the dependent care tax credit offered by the federal government and many states.
brief August 1, 2011
Why States That Offer the Deduction for Federal Income Taxes Paid Get it Wrong

As states continue to grapple with the impact of the most recent economic downturn, the budget revenue outlook for many states remains bleak. In this context, states must find ways to generate additional revenue without increasing the tax load on individuals and families struggling to make ends meet. For six states–Alabama, Iowa, Louisiana, Missouri, Montana, and Oregon–one straightforward approach would be to repeal the deduction for federal income taxes paid. Repealing the deduction would help these states reduce their budgetary gaps and make their tax systems less unfair. This policy brief explains how the deduction for federal income taxes works and assesses its impact on state budgets and tax fairness.
brief August 1, 2011
How State Personal Income Taxes Work

The personal income tax can be–and usually is–the fairest of the main revenue sources relied on by state and local governments. When properly structured, it ensures that wealthier taxpayers pay their fair share and provides lower tax rates on middle-income families. The personal income tax can be used to offset regressive sales, excise and property taxes. This policy brief explains the basic workings of the income tax.
brief August 1, 2011
Indexing Income Taxes for Inflation: Why It Matters

Most of us don’t need to be reminded about inflation. We experience it every day, as the price of the goods and services we buy gradually goes up over time. As the cost of living goes up, our incomes generally go up too, partially because of inflation. But many state tax systems are not designed to take account of inflation. The result is that income taxes often grow faster than incomes–even though lawmakers haven’t actually passed any laws to make this happen. Some lawmakers have responded to this “hidden tax hike” by indexing their income taxes for inflation. This policy brief explains how indexing works and evaluates its impact on tax adequacy and fairness.
brief August 1, 2011
How State Tax Changes Affect Your Federal Taxes: A Primer on the “Federal Offset”

State lawmakers frequently make claims about how proposed tax changes would affect taxpayers at different income levels. Yet these lawmakers routinely ignore one important consequence of their tax reform proposals: the effect of state tax changes on their constituents’ federal income taxes. Wealthier taxpayers can use the federal income tax to partially offset their state and local income and property taxes. This “federal offset” has important implications for how state tax changes affect people. This policy brief explains this important but often-forgotten link between state and federal taxes.
brief August 1, 2011
Income Tax Simplification: How to Achieve It

Simplicity is generally seen as a virtue in state tax systems. Simplicity makes it easier for taxpayers to understand (and to pay) their taxes, and makes it easier for tax administrators to collect taxes fairly. In recent years, state lawmakers have proposed a wide variety of income tax changes under the guise of simplification. Yet not all of these purported tax simplification measures are well-designed to achieve it–and some measures would unnecessarily reduce the fairness of the income tax. This policy brief evaluates options for making state income taxes less complicated.
report April 10, 2011
Don’t Give Up on Pease: States Can Decouple from Recent Federal Tax Cuts for Wealthy Itemizers

In 2011, thirty one states and the District of Columbia allow a group of income tax breaks known as “itemized deductions” (Figure 1). Itemized deductions are designed to help defray…
report March 31, 2011
In It for the Long Haul: Why Concerns over Personal Income Tax “Volatility” Are Overblown

The precipitous drop in state tax collections during the recent recession has prompted some observers to argue that relying on volatile state taxes is a recipe for budgetary disaster. The…
report March 24, 2011
Should Illinois Tax Retirement Income?

Earlier this month, Illinois Senate President John Cullerton suggested that limiting the state’s generous income tax break for retirement income “would just be a matter of fairness.” Senator Cullerton’s suggestion…
report March 16, 2011
ITEP’s Testimony on EITC Legislation

My testimony focuses on House Bill 581, which would create a Missouri Earned Income Tax Credit (EITC). In particular, my testimony will discuss the impact of this bill on the…
report March 10, 2011
Topsy-Turvy: State Income Tax Deductions for Federal Income Taxes Turn Tax Fairness on its Head

The budget outlook for state governments is bleak. Despite evidence that revenues are rebounding, there is a general acknowledgement that ?broad fiscal conditions remain fragile. The need for public investments—particularly…
report January 15, 2011
A Capital Idea

The budget outlook for the states is improving, but uncertain. In this context, states must find ways to generate additional revenue that create neither additional responsibilities for individuals and families…
report August 24, 2010
“Writing Off” Tax Giveaways: How States Can Help Balance Their Budgets by Reforming or Repealing Itemized Deductions

“Writing Off” Tax Giveaways examines options for reforming itemized deductions in the thirty-one states, plus DC, that offer such deductions. The study, released on August 24, 2010, focuses on five…