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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.

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.

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.

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.

Earlier this year, Kansas Governor Sam Brownback proposed another round of personal income tax cuts (on top of those he signed into law last year).1 The House and Senate each responded with their own tax cut plans and are expected to reconcile their differences this week. To date, much attention has been given to the major difference between the House and Senate plans — the Senate bill includes permanently preserving a sales tax rate hike that was set to expire this summer while the House plan would allow the rate hike to expire. However, the long term impact of either plan should be of paramount concern to all Kansans because both plans eventually lead to the elimination of the state’s personal income tax.

In recent weeks, Louisiana Governor Bobby Jindal has released many details of the tax plan he first sketched out in January. The Governor proposes a revenue-neutral “tax swap” that would repeal all state income taxes and increase the state’s sales tax among other changes. A new ITEP analysis of the Governor’s plan shows that, if fully implemented in 2013, the plan would increase taxes on the poorest sixty percent of Louisianans overall, while providing large tax cuts for the best-off Louisiana taxpayers.

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.

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.

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.

Kansas Governor Sam Brownback proposed, for the second straight year, major tax changes during his State of the State speech. These new changes include lowering the tax rates to 1.9 and 3.5 percent, eliminating itemized deductions for mortgage interest and property taxes paid, and raising the sales tax.