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In recent months, the Tax Foundation has used its Taxes and Growth Model (TAG Model) to estimate the impact that a variety of tax policy changes would have on the nation’s economy–including tax plans proposed by current presidential candidates.

The Tax Foundation describes the underlying “logic” of its TAG Model as being rooted in the assumption that “taxes have a major impact on economic growth.” More specifically, the TAG Model has concluded that proposals to lower taxes for high-income individuals and businesses would dramatically grow the economy, and that proposals to raise taxes would significantly slow economic growth.

Many states’ transportation budgets are in disarray, in part because they are trying to cover the rising cost of asphalt, machinery, and other construction materials with a gasoline tax rate that is rarely increased. A growing number of states have recognized the problem with this approach and have switched to a “variable-rate” gas tax under which the tax rate tends to rise over time alongside either inflation or gas prices. A majority of Americans live in a state where the gas tax is automatically adjusted in this way.

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-one 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 22 years. And twenty states have gone a decade or more without a gas tax increase.

Thank you for the opportunity to testify on the tax policy issues associated with legalized retail marijuana. Our testimony includes five parts:
1. An overview of the marijuana tax rates and structures that exist in the four states (Alaska, Colorado, Oregon, and Washington) where retail marijuana can be legally sold.
2. An analysis of early stage revenue trends in the two states (Colorado and Washington) where legal, taxable sales of retail marijuana have been taking place since 2014.
3. A discussion of issues associated with different types of marijuana tax bases–specifically weight-based taxes, price-based taxes, and hybrids of these two structures.
4. A discussion of issues involved in choosing a tax rate for marijuana.
5. A discussion of long-run issues related to the structure of marijuana taxes and their revenue yield.

Thank you for the opportunity to comment on Vermont’s effort to establish a system for regularly evaluating its tax expenditure programs. Data-driven tax expenditure evaluations are a valuable tool for gauging the effectiveness of policy initiatives pursued via the tax code. ITEP is supportive of Vermont’s efforts in this area and is generally encouraged by the work completed thus far by groups such as the Joint Fiscal Office and the Pew Charitable Trusts. Rather than rehash the many useful recommendations made by those organizations, these comments focus on two areas that may be in need of further attention: the scope of what is labeled a “tax expenditure,” and the importance of data infrastructure advancements to the success of these evaluations.

When thinking of tax havens, one generally pictures notorious zero-tax Caribbean islands like the Cayman Islands and Bermuda. However, we can also find a tax haven a lot closer to home in the state of Delaware – a choice location for U.S. business formation. A loophole in Delaware’s tax code is responsible for the loss of billions of dollars in revenue in other U.S. states, and its lack of incorporation transparency makes it a magnet for people looking to create anonymous shell companies, which individuals and corporations can use to evade an inestimable amount in federal and foreign taxes. The Internal Revenue Service estimated a total tax gap of about $450 billion with $376 billion of it due to filers underreporting income in 2006 (the most recent tax year for which this data is available).[i] While it is impossible to know how much underreported income is hidden in Delaware shell companies, the First State’s ability to attract the formation of anonymous companies suggests that it could rival the amount of income hidden in more well-known offshore tax havens.

The U.S. Census Bureau released data in September showing that the share of Americans living in poverty remains high. In 2014, the national poverty rate was 14.8 percent – statistically unchanged from the previous year. However, the poverty rate remains 2.3 percentage points higher than it was in 2007, before the Great Recession, indicating that recent economic gains have not yet reached all households and that there is much room for improvement. The 2014 measure translates to more than 46.7 million – more than 1 in 7 – Americans living in poverty. Most state poverty rates also held steady between 2013 and 2014 though twelve states experienced a decline.

Despite some economic gains in recent years, the number of Americans living in poverty has held steady over the past four years. At the same time, wages for working families have remained stagnant and more than half of the jobs created by the economic recovery since 2010 were low-paying, mostly in the food services, retail, and employment services industries. Our country’s growing class of low-wage workers often faces a dual challenge as they struggle to make ends meet. First, wages are too low and growing too slowly – despite recent productivity gains – to keep up with the rising cost of food, housing, child care, and other household expenses. At the same time, the poor are often saddled with highly regressive state and local taxes, making it even harder for low-wage workers to move out of poverty and achieve meaningful economic security. The Earned Income Tax Credit (EITC) is designed to help low-wage workers meet both those challenges.

Annual data from the U.S. Census Bureau appear to lend support to Tennessee’s reputation as a “low tax state,” ranking it 50th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Tennessee’s tax system very differently. In particular, the poorest 20 percent of Tennessee residents pay significantly more of their income (10.9 percent) in state and local taxes than any other group in the state. For low-income families, Tennessee is far from being a low tax state.2 In fact, only thirteen states tax their poorest residents more heavily than Tennessee.