Recent Work

A Tale of Two States: How State Tax Systems Perpetuate Income Inequality

February 11, 2019 • By ITEP Staff

To explain how state tax systems make income inequality worse, we compared tax systems in New Jersey and Texas which, before taxes, have similar levels of income inequality. This comparison provides an example of how policymakers’ decisions affect the economic wellbeing of their constituents.

Trends We’re Watching in 2019

February 7, 2019 • By ITEP Staff

This year is full of opportunity for state policymakers and advocates seeking to improve upside-down tax systems and generate needed funding for shared priorities. In a series of blog posts, ITEP staff summarize key trends we are watching in statehouses this year, with special attention to the many efforts underway to reduce racial and economic inequities and better prepare state budgets for the next recession and reduced federal investments. Along the way, we’ll also draw attention to some of the more destructive policy ideas to watch for in 2019.

Trends We’re Watching in 2019: Attempting to Double Down on Failed Trickle-Down Regressive Tax Cuts

February 7, 2019 • By Lisa Christensen Gee

It’s always troubling for those concerned with adequate and fair public finance systems when states prioritize tax cuts at the cost of divesting in important public priorities and exacerbating underlying tax inequalities. But it’s even more nerve-racking when it happens on the eve of what many consider to be an inevitable economic downturn.

Trends We’re Watching in 2019: Cannabis Tax Implementation and Reform

February 7, 2019 • By Carl Davis

Few areas of state tax policy have evolved as rapidly as cannabis taxation over the last few years. The first legal, taxable sale of recreational cannabis in modern U.S. history did not occur until 2014. Now, just five years later, a new ITEP report estimates that recreational cannabis is generating more than $1 billion annually in excise tax revenues and $300 million more in general sales tax dollars.

Trends We’re Watching in 2019: Consumption Taxes: the Good, Bad and the Ugly

February 7, 2019 • By ITEP Staff

Consumption taxes are a significant source of state and local revenue, and we expect that lawmakers will continue to adjust state consumption tax levies to adapt to budget needs and a changing economy.

Trends We’re Watching in 2019: Addressing Lingering Federal Conformity Questions and Opportunities

February 7, 2019 • By Dylan Grundman O'Neill

In our last update on state responses to the federal tax cut (Tax Cuts and Jobs Act, or TCJA), we noted that several states were waiting until 2019 to make their final decisions, giving them additional time to (hopefully) respond in ways that improve their fiscal situations and upside-down tax codes. The TCJA is affecting the 2018 federal taxes people are filing now, in some cases adding urgency and/or confusion to these debates.

Trends We’re Watching in 2019: Raising Revenue and Spending Surpluses to Prioritize Critical Public Investments

February 7, 2019 • By Lisa Christensen Gee

A second notable trend in 2019 is states raising revenue to address longstanding needs and states allocating their surpluses to invest in critical public priorities such as early childhood programs, education and other human services.

Trends We’re Watching in 2019: The Use of Targeted Tax Breaks to Help Address Poverty and Inequality

February 7, 2019 • By Aidan Davis

Continuing to build upon the momentum of previous years, states are taking steps to create and improve targeted tax breaks meant to lift their most in-need state residents up and out of poverty. Most notably, a range of states are exploring ways to restore, enhance or create state Earned Income Tax Credits (EITC). EITCs are an effective tool to help struggling families with low wages make ends meet and provide necessities for their children. The policy, designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, allows struggling families to move toward meaningful economic…

Shared Prosperity: A Progressive Approach to Marginal Tax Rates

February 6, 2019 • By Steve Wamhoff

Panel: In recent years, economists have been engaged in robust academic debate over the top marginal tax rate, with leading researchers estimating the optimal rate to be 73 percent or even higher. Yet despite widespread public support for raising the rate from its current level of 37 percent, many policymakers and media figures have demonstrated misunderstandings over what marginal tax rates are and how they work.

New ITEP Report Shows How Congress Can Meet Public Demand for Progressive Taxes

February 5, 2019 • By Steve Wamhoff

A recent headline tells us that bold tax plans proposed by lawmakers today reflect a “profound shift in public mood.” But, in fact, the public’s mood has not changed at all. Americans have long wanted progressive taxes but few, if any, lawmakers publicly backed this view. What’s happening now isn’t a shift in public opinion, rather it’s Washington finally catching up with the American people.

Netflix Posted Biggest-Ever Profit in 2018 and Paid $0 in Taxes

February 5, 2019 • By Matthew Gardner

The popular video streaming service Netflix posted its largest-ever U.S. profit in 2018­­—$845 million—on which it didn’t pay a dime in federal or state income taxes. In fact, the company reported a $22 million federal income tax rebate.

Progressive Revenue-Raising Options

February 5, 2019 • By Matthew Gardner, Steve Wamhoff

America has long needed a more equitable tax code that raises enough revenue to invest in building shared prosperity. The Tax Cuts and Jobs Act (TCJA), enacted at the end of 2017, moved the federal tax code in the opposite direction, reducing revenue by $1.9 trillion over a decade, opening new loopholes, and providing its most significant benefits to the well-off. The law cut taxes on the wealthy directly by reducing their personal income taxes and estate taxes, and indirectly by reducing corporate taxes.

Senator Sanders Proposes to Reform the Estate Tax

February 1, 2019 • By Alan Essig

Progressive tax proposals are finally being discussed with the urgency and seriousness they deserve. Following Rep. Alexandria Ocasio-Cortez’s call for a much higher marginal tax rate for multi-millionaires and Sen. Elizabeth Warren’s proposal to introduce a wealth tax for those at the very top, Sen. Bernie Sanders has introduced a revised version of his proposal to reform the federal estate tax.

Congress Should Reduce, Not Expand, Tax Breaks for Capital Gains

February 1, 2019 • By Steve Wamhoff

Even though income derived from capital gains receives a special lower tax rate and is therefore undertaxed, some proponents of lower taxes on the wealthy claim that capital gains are overtaxed due to the effects of inflation. But existing tax breaks for capital gains more than compensate for any problem related to inflation. Congress should repeal or restrict special tax provisions for capital gains rather than creating even more breaks.

State Rundown 1/31: Governors and Teachers Dominate Headlines, Much More in Fine Print

January 31, 2019 • By ITEP Staff

Gubernatorial addresses and the prospect of teacher strikes continued to take center stage in state fiscal news this week, as governors of Connecticut, Maryland, and Utah gave speeches that all included significant tax proposals. Meanwhile, teachers walked out in Virginia, and many other states debated school funding increases to avoid similar results. State policymakers have many other debates on their hands as well, including what to do with online sales tax revenue, how to cut property taxes without undermining schools, whether and how to legalize and tax cannabis, and whether to update gas taxes for infrastructure investments.