Carl Davis

report January 30, 2015
Who Pays? (Fourth Edition)

Major tax overhauls are on the agenda in a record number of states, and “Who Pays?” documents in state-by-state detail the precise distribution of state income taxes, sales and excise…
report May 28, 2014
Pay-Per-Mile Tax is Only a Partial Fix

The gasoline tax is the single largest source of funding for transportation infrastructure in the United States, but the tax is on an unsustainable course. Sluggish gas tax revenue growth has put strain on transportation budgets at the federal and state levels, and has led to countless debates around the country about how best to pay for America’s infrastructure.
report May 21, 2014
STAMP is an Unsound Tool for Gauging the Economic Impact of Taxes

The Beacon Hill Institute (BHI), a free-market think tank located at Suffolk University, frequently uses its State Tax Analysis Modeling Program (STAMP) to perform analyses purporting to show that lowering taxes, or not raising them, will benefit state economies. But STAMP suffers from a number of serious methodological problems and should not be relied upon by anybody seeking to understand the economic impacts of state tax policies.
brief May 20, 2014
State Gasoline Taxes: Built to Fail, But Fixable

An updated version of this brief was published on February 9, 2017. Read this report in pdf. Every state levies taxes on gasoline and diesel fuel, usually just called…
brief May 20, 2014
The Federal Gas Tax: Long Overdue for Reform

The federal gas tax is a critical source of funding for the nation’s transportation system, but its design is fundamentally flawed. In recent years, the consequences of those flaws have become increasingly obvious, as the federal government has struggled to fund a 21st century transportation network with a gas tax that has predictably failed to keep pace with the nation’s growing infrastructure needs. This ITEP Policy Brief explains how the federal gas tax works, its importance as a transportation revenue source, the problems confronting the gas tax, and the reforms that are needed to overcome these problems.
report May 8, 2014
Gas Tax Hits Rock Bottom in Ten States

In most states, the gasoline tax is set at a fixed number of cents per gallon of gas. South Carolina drivers, for example, have been paying 16 cents per gallon in state tax for more than a quarter century.1 But while this type of fixed-rate gas tax may appear to be flat over time, its lack of change in the face of inflation means that its “real” value, or purchasing power, is steadily declining. In ten states, this decline has brought the state’s inflation-adjusted gas tax rate to its lowest level in the state’s history.
report April 1, 2014
Most Americans Live in States with Variable-Rate Gas Taxes

The federal government and many states are seeing shortfalls in their transportation budgets in part because the gasoline taxes they use to generate those funds are poorly designed. Thirty-two states and the federal government levy “fixed-rate” gas taxes where the tax rate does not change even as the cost of infrastructure materials inevitably increases over time. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty years. And almost half the states (24) have gone a decade or more without a gas tax increase.
report March 24, 2014
Tennessee Hall Tax Repeal Would Overwhelmingly Benefit the Wealthy, Raise Tennesseans’ Federal Tax Bills by $60 Million

A new analysis performed using the ITEP Microsimulation Tax Model shows that the vast majority of Tennesseans would see very little benefit from Hall Tax repeal. Nearly two-thirds (63 percent) of the tax cuts would flow to the wealthiest 5 percent of Tennessee taxpayers, while another quarter (23 percent) would actually end up in the federal government’s coffers. Moreover, if localities respond to Hall Tax repeal by raising property taxes, some Tennesseans could actually face higher tax bills under this proposal.
report November 12, 2013
Personal Income Tax Reform: Improving the Fairness of Taxes in the District of Columbia

DC’s tax system is markedly regressive. This is driven largely by the regressive impact of the city’s sales, excise, and property taxes. The personal income tax is the only effective tool that DC has available for offsetting this regressivity. In the comments below I discuss four options for fine-tuning DC’s income tax to lessen its impact on moderate- and middle-income taxpayers. I also describe four options for funding those tax cuts with policies that would increase upper-income taxpayers’ effective tax rates to be more in line with those paid by their less affluent neighbors.
report October 10, 2013
Paying for Education Finance Reform in Colorado

As this report shows, this change would somewhat reduce the steep regressivity of Colorado’s overall tax system. In other words, taxpayers across all income levels would pay a more equal share of their income if Amendment 66 is approved, in large part because most of the revenue raised by the amendment would come from the wealthiest 20 percent of Colorado residents.
report September 23, 2013
A Federal Gas Tax for the Future

Gas tax revenues are on an unsustainable course. Over the last five years, Congress has transferred more than $53 billion from the general fund to the transportation fund in order to compensate for lagging gas tax revenues. By 2015, the transportation fund will be insolvent unless an additional $15 billion transfer is made. Larger transfers will be needed in subsequent years.
report August 14, 2013
Tax Expenditure Reports: A Vital Tool with Room for Improvement

State and local tax codes include a huge array of special tax breaks designed to accomplish almost every goal imaginable: from encouraging homeownership and scientific research, to building radioactive fallout shelters and caring for “exceptional” trees. Despite being embedded in the tax code, these programs are typically enacted with tax policy issues like fairness, efficiency, and sustainability only as secondary considerations. Accordingly, these programs have long been called “tax expenditures.” They are essentially government spending programs that happen to be housed in the tax code for ease of administration, political expedience, or both.
report August 14, 2013
Tax Incentives: Costly for States, Drag on the Nation

Tax incentives are intended to spur economic growth that would not have otherwise occurred. More specifically, these narrowly targeted tax breaks are usually offered in an attempt to convince businesses to relocate, hire, and/or invest within a state’s borders.
report June 12, 2013
Testimony: Evaluating the Motor Vehicle Fuel Tax Reforms in DC’s Bill 20-199

Mr. Chairman and members of the committee, thank you for the opportunity to testify today. My name is Matt Gardner. I am the Executive Director of the Institute on Taxation and Economic Policy (ITEP), a Washington-DC-based nonprofit research group. ITEP’s research focuses on federal and state tax policy with an emphasis on sustainability and fairness in the tax laws.
report May 20, 2013
Don’t Blame the Gas Tax for High Gas Prices

American consumers are keenly aware of the price of gasoline, but uninformed about what drives that price. When asked about the federal gas tax, for example, six in ten Americans said the tax rate goes up every year. In reality, the federal gas tax hasn’t budged from its 18.4 cent rate in almost twenty years, and roughly half the states haven’t seen their gas tax rates change in a decade or more.
report April 26, 2013
5% Cut in Indiana’s Income Tax is Stacked in Favor of the Wealthy

Indiana Governor Mike Pence and the state’s legislative leaders recently announced a budget agreement that, among other things, phases the state’s flat personal income tax rate down from 3.4 percent to 3.23 percent by 2017.
report April 8, 2013
Indiana Senate’s Income Tax Cut: Just as Lopsided as the Governor’s

The Indiana Senate Appropriations Committee recently approved a budget cutting the state’s personal income tax rate from 3.4 percent to 3.3 percent beginning in 2015. Although this proposal costs less than one-third the amount of Governor Pence’s preferred cut (which would take the rate down to 3.06 percent), it would still reduce state revenues by roughly $150 million each year.
report February 28, 2013
States with “High Rate” Income Taxes are Still Outperforming No-Tax States

Lawmakers in about a dozen states are giving serious consideration to either cutting or eliminating their state personal income taxes. In each case, these proposals are being touted as a way to boost economic growth.
report February 27, 2013
Laffer’s New Job Growth Factoid is All Rhetoric and No Substance

A new talking point printed on the opinion page of The Wall Street Journal is proving irresistible to state lawmakers looking for an excuse to reduce or eliminate their states’ income taxes:

A new analysis by economist Art Laffer for the American Legislative Exchange Council finds that, from 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax, though these states account for only about 20% of the national population.
report February 13, 2013
IDACorp– Biggest Winner Under Property Tax Plan– Pays Nothing in State Income Taxes

Idaho Governor Butch Otter and the state legislature are seriously considering repealing the personal property tax on business equipment. The governor claims that repealing the tax would help the state’s economy, but says that he is “painfully aware” that repeal would dramatically cut into the revenues that many local governments depend on to provide public services. 1 The tax generates $141 million in revenue every year for cities, counties, and public schools. As a result, the Governor says that he “can’t predict” whether lawmakers will be able to reach agreement on repealing the tax.
report January 23, 2013
More Inaccuracies, Bigger Omissions: Arthur Laffer’s Newest Study of Income Tax Repeal Falls Short

Arthur Laffer’s consulting firm–Arduin, Laffer & Moore Econometrics (ALME)–has released a report purporting to show that North Carolina could usher in an economic boom if it repeals its personal and corporate income taxes and replaces them primarily with a much larger sales tax. Prepared for the Civitas Institute, “More Jobs, Bigger Paychecks” relies on an economic analysis that is fundamentally flawed to the point of making it entirely useless.
report October 1, 2012
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.
report August 27, 2012
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…
report April 1, 2012
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…
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…