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The Trump Administration recently released its proposed budget for Fiscal Year 2018. The administration claims that its proposals would reduce the deficit in nearly every year over the next decade before eventually achieving a balanced budget in 2027, but the assumptions it uses to reach this conclusion are deeply flawed. This report explains these flaws and their consequences for the debate over major federal tax changes.

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 flawed design of federal and state gasoline taxes has made it exceedingly difficult to raise adequate funds to maintain the nation’s transportation infrastructure. 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, nineteen states have waited a decade or more since last raising their own gas tax rates.

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.

For years, a subset of the well-to-do and well-connected have been able to exploit the intricacies of our global financial system to shelter their income and investments from taxation. The U.S. government took a stand against this type of willful tax evasion with the passage of the Foreign Account Tax Compliance Act – or FATCA – enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010.

With many states currently facing budget shortfalls—whether due to weak economic recovery after the Great Recession, struggling commodity prices, or self-inflicted tax cuts—and all states bracing for possible federal budget cuts in areas from education to health care to infrastructure, states are unlikely to be able to continue providing high-quality services to their residents without raising new revenue. In this context, states must find ways to generate additional revenue without increasing taxes on individuals and families who are already struggling to make ends meet and may bear the biggest brunt of federal funding cuts.

If lawmakers truly want to create an environment in which economic mobility is possible for more working people, budget-busting tax cuts are the wrong way to achieve this goal. Dramatic tax giveaways would force cuts to programs that provide early education, health care, job training, affordable housing, nutrition assistance, and other vital services that promote economic mobility. Further, current tax proposals from Congress and the Trump Administration defy what most Americans would consider true reform and, instead, embrace supply-side economic theories. This policy brief outlines two sensible, broad objectives for meaningful federal tax reform and discusses six tax policies that can help achieve these objectives.

The trend is clear: states are experiencing a rapid decline in state corporate income tax revenue. Despite rebounding and even booming bottom lines for many corporations, this downward trend has become increasingly apparent in recent years. Since our last analysis of these data, in 2014, the state effective corporate tax rate paid by profitable Fortune 500 corporations has declined, dropping from 3.1 percent to 2.9 percent of their U.S. profits. A number of factors are driving this decline, including: a race to the bottom by states providing significant “incentives” for specific companies to relocate or stay put; blatant manipulation of loopholes in state tax systems by corporate accountants; significant cuts in state corporate tax rates; and the erosion of state corporate tax bases, largely due to ill-advised state-level linkages to the federal system.

This report specifically examines the state and local tax contributions of undocumented immigrants who are currently enrolled or immediately eligible for DACA and the fiscal implications of various policy changes. The report includes information on the national impact (Table 1) and provides a state-by-state breakdown (Appendix 1).

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.