Carl Davis

blog May 17, 2017
Investors and Corporations Would Profit from a Federal Private School Voucher Tax Credit

A new report by the Institute on Taxation and Economic Policy (ITEP) and AASA, the School Superintendents Association, details how tax subsidies that funnel money toward private schools are being…
report May 17, 2017
Public Loss Private Gain: How School Voucher Tax Shelters Undermine Public Education

One of the most important functions of government is to maintain a high-quality public education system. In many states, however, this objective is being undermined by tax policies that redirect public dollars for K-12 education toward private schools.
blog May 10, 2017
Gas Taxes Increases Continue to Advance in the States

This post was updated July 12, 2017 to reflect recent gas tax increases in Oregon and West Virginia.
As expected, 2017 has brought a flurry of action relating to state gasoline taxes. As of this writing, eight states (California, Indiana, Montana, Oregon, South Carolina, Tennessee, Utah, and West Virginia) have enacted gas tax increases this year, bringing the total number of states that have raised or reformed their gas taxes to 26 since 2013.
blog April 25, 2017
Income Tax Offers Best Bang for the Buck in Alaska

Earlier this month the Alaska House of Representatives voted 22-17 in favor of implementing a personal income tax for the first time in over 35 years. Gov. Bill Walker praised…
report April 24, 2017
Comparing the Distributional Impact of Revenue Options in Alaska

Alaska is facing a significant budget gap because of a sharp decline in the oil tax and royalty revenue that has traditionally been relied upon to fund government. This report examines five approaches for replacing some of the oil revenue that is no longer available: enacting a broad personal income tax, state sales tax, payroll tax, investment income tax, or cutting the Permanent Fund Dividend (PFD). Any of the options examined in this report could make a meaningful contribution toward closing Alaska’s budget gap. To allow for comparisons across options, this report examines policy changes designed to generate $500 million annually. This amount would be insufficient to close Alaska’s $3 billion budget gap, but any of these options could be modified to raise additional revenue, or could be incorporated into a larger package of changes designed to close the gap.
blog March 29, 2017
Seeking the Right Balance in Alaska

It’s been a little over a year since Alaska Gov. Bill Walker proposed implementing a state personal income tax for the first time in 35 years, and the idea is now…
blog March 29, 2017
The April Fool’s Joke Is on Consumers: April 1 Marks Record-Breaking Procrastination on Federal Gas Tax Policy

It’s only appropriate that April 1 will mark a new milestone in foolish federal transportation infrastructure policy. On Saturday, the nation’s federal gasoline tax rate will have been stuck at…
report March 28, 2017
Assessing the Distributional Consequences of Alaska’s House Bill 115 (Version L)

This report contains ITEP’s analysis of the distributional and revenue consequences of the revised version of House Bill 115 (Version L) as proposed on March 23, 2017. This proposal would reduce Alaska’s Permanent Fund Dividend (PFD) payout and implement a personal income tax based on a modified version of Federal Adjusted Gross Income, with rates ranging from 0 to 7 percent. The analysis was produced using ITEP’s Microsimulation Tax Model.
blog March 23, 2017
Taxing the Gig Economy

Our ever-changing economy demands that lawmakers update our tax laws to keep pace. Take, for example, the growth of online sales. As recently as six years ago, Amazon, the nation’s…
blog March 21, 2017
Amazon Will Collect Every State Sales Tax by April 1

For decades, Amazon.com helped its customers dodge the sales taxes they owed to gain an advantage over its competitors. But as the company’s business strategy has changed, so has its…
report March 15, 2017
Taxes and the On-Demand Economy

A growing number of Americans are getting rides or booking short-term accommodations through online platforms such as Uber and Airbnb. This is nothing new in concept; brokers have operated for hundreds of years as go-betweens for producers and consumers. The ease with which this can be done through the Internet, however, has led to millions of people using these services, and to some of the nation’s fastest-growing, high-profile businesses.

The rise of this on-demand sector, sometimes referred to as the “gig economy” or, by its promoters, the “sharing economy,” has raised a host of questions. For state and local governments, one of them is: How do the services provided by these companies fit into the current tax system? All three of the major categories of revenue sources relied upon by state and local governments, including consumption taxes, income taxes, and property taxes, are impacted to some extent by the on-demand economy. While Uber, Airbnb, and similar on-demand companies are still relatively small in relation to the overall U.S. economy (accounting for 0.5 percent of the U.S. workforce), they are large enough to have a meaningful impact on state tax collections, and their explosive growth and entry into new lines of business will amplify their importance in the years ahead.
report February 9, 2017
State Gasoline Taxes: Built to Fail, But Fixable

Every state levies taxes on gasoline and diesel fuel, usually just called “gas taxes.” These taxes are an important source of state revenue–particularly for transportation–but their poor design has resulted in sluggish revenue growth that fails to keep pace with state infrastructure needs. This ITEP Policy Brief explains how state gas taxes work, their importance as a transportation revenue source, the problems confronting gas taxes, and the types of gas tax reforms that are needed to overcome these problems.
blog February 6, 2017
Dodging Tough Fiscal Decisions with State Tax Cut Triggers and Phase-Ins

The most challenging problem that tax-cutting state lawmakers face is dealing with the budgetary tradeoffs that tax cuts require. Should education spending be reduced? Should investments in infrastructure be halted?…
blog February 2, 2017
What to Watch in the States: Gas Tax Hikes and Swaps

This is the second installment of our six part series on 2017 state tax trends. The introduction to this series is available here. State tax policy can be a divisive…
blog January 30, 2017
And Then There Were Six: Amazon Expands Its Sales Tax Collection

UPDATE: After this post was published, Amazon announced that it will begin collecting sales tax in Oklahoma on March 1. This post has been updated to reflect this development. The…
blog January 26, 2017
A Visual Tour of Who Pays State & Local Taxes

While it can be hard to look away from the important federal policy debates occurring right now in Washington D.C., state lawmakers across the country will also be debating consequential…
report January 26, 2017
Fairness Matters: A Chart Book on Who Pays State and Local Taxes

When states shy away from personal income taxes in favor of higher sales and excise taxes, high-income taxpayers benefit at the expense of low- and moderate-income families who often face above-average tax rates to pick up the slack. This chart book demonstrates this basic reality by examining the distribution of taxes in states that have pursued these types of policies. Given the detrimental impact that regressive tax policies have on economic opportunity, income inequality, revenue adequacy, and long-run revenue sustainability, tax reform proponents should look to the least regressive, rather than most regressive, states in crafting their proposals.
blog January 25, 2017
47 Years Later, Alaska Considers Playing Catch-Up with its Motor Fuel Tax

Alaska Gov. Bill Walker recently proposed tripling the gasoline and diesel tax rates paid by Alaska motorists to generate funding for the state’s infrastructure. In a different state, tripling the…
report January 25, 2017
Alaska’s Motor Fuel Tax: A National and Historical Outlier

Alaska Gov. Bill Walker recently proposed tripling his state’s motor fuel tax rates.[1] While a variety of fuel types would be affected by this proposal, three-fourths (or $60 million) of the revenue raised each year would come from higher taxes on gasoline and diesel fuel–sometimes referred to as highway fuels–purchased by Alaska motorists.

Absent any national or historical context, tripling Alaska’s gasoline and diesel fuel tax rates may sound like a radical policy change. But an adjustment of this size is necessary because Alaska lawmakers have not updated the state’s basic highway fuel tax rate since May 1970–almost 47 years ago.[2] Because of this inaction, Alaska’s highway fuel tax has become an outlier when compared to other states’ tax rates, or when compared to Alaska’s own history.

This brief discusses four ways in which Alaska’s highway fuel tax is an outlier:
brief January 17, 2017
Most Americans Live in States with Variable-Rate Gas Taxes

The federal government and many states are unable to adequately maintain the nation’s transportation infrastructure in part because the gasoline taxes intended to fund infrastructure projects are often poorly designed. Thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty-three years. Likewise, more than twenty states have waited a decade or more since last raising their own gas tax rates.
brief January 17, 2017
How Long Has It Been Since Your State Raised Its Gas Tax?

Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.

The chart accompanying this brief shows (as of January 1, 2017) the number of years that have elapsed since each state’s gas tax was last increased.
brief November 18, 2016
Collecting Sales Taxes Owed on Internet Purchases

Retail trade has been transformed by the Internet. As the popularity of “e-commerce” (that is, transactions conducted over the Internet) has grown, policymakers have engaged in a heated debate over how state and local sales taxes should be applied to these transactions. This debate is of critical importance for states as sales taxes comprise close to one-third of all state tax revenues and hundreds of billions of dollars in retail spending is now occurring online.
report October 28, 2016
The Short and Sweet on Taxing Soda

The concept of taxing sodas and other sugary beverages has gained traction recently across the United States and around the world. The World Health Organization officially recommended a tax on sugar sweetened beverages as a way to battle the obesity epidemic. In the US, multiple states and localities have looked to taxes on sugar sweetened beverages as a way to improve public health and increase revenue. In 2014, Berkeley, California became the first U.S. locality to enact such a tax. In 2016, similar taxes were enacted in Boulder, Colorado; Albany, Oakland, and San Francisco, California; Cook County, Illinois; and Philadelphia, Pennsylvania.
report October 12, 2016
State Tax Subsidies for Private K-12 Education

This report explains the workings, and problems, with state-level tax subsidies for private K-12 education. It also discusses how the Internal Revenue Service (IRS) has exacerbated some of these problems by allowing taxpayers to claim federal charitable deductions even on private school contributions that were not truly charitable in nature. Finally, an appendix to this report provides additional detail on the specific K-12 private school tax subsidies made available by each state.
brief September 14, 2016
Options for a Less Regressive Sales Tax

Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.