CTJ's Tax Justice Digest, March 10, 2006Welcome to CTJ's Tax Justice Digest, our regular survey of new and interesting trends in state and federal tax policy. Click here to browse through archived editions of the Digest. |
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In Washington, Congress is poised to put another nail in the coffin of the federal estate tax by voting to permanently repeal the tax. This vote could take place as early as May. Of course, every state with an estate tax of its own is affected by what happens in Washington, since these state taxes are usually based on federal rules - and different states are reacting to federal estate tax legislation in very different ways. Connecticut Governor Jodi Rell has proposed repealing the state's estate tax outright, although some in-state observers are having second thoughts. Similar movements are underway in Oklahoma, Virginia, and Kansas - but there is also resistance to these efforts.
"No new taxes" often means "lots of new user fees." That's the lesson from Texas, where a recent article documents the proliferation of hidden user fees on everything from parking tickets to civil court filings. The Talking Taxes blog has more.
A new survey from Michigan researchers offers some lessons for lawmakers seeking to improve their state's economic development climate. It turns out that having an educated workforce can be the trump factor that makes a state attractive for "new economy" businesses.
Arizona may become the next front in the battle for sensible property tax reform. Rapidly rising home values are starting to worry residents of the Grand Canyon State. Signatures are already being gathered for a ballot initiative to cap property taxes at 1 percent of the value, aping California's Proposition 13. Read more about it here. On the other side of the coin, Florida lawmakers are struggling to cope with the unintended consequences of their own tax cap, which has been in place for over a decade. Florida legislators have proposed allowing homeowners who have benefitted from the state's 3% tax cap to take their tax breaks with them when they move, adding further complication and inequity to the state's troubled tax system.
Ronald Reagan and Bill Clinton didn't see eye to eye on much, but they each took steps to ensure that the federal income tax would not tax low-income working families further into poverty. A new study from the Center on Budget and Policy Priorities shows that many states have not yet learned this lesson. The report shows that 19 states require families living in poverty to pay state income taxes. In two of these states, Alabama and Hawaii, the report is helping to inform ongoing debates over how to design state income tax cuts. Alabama lawmakers seem increasingly likely to enact an increase in the state's exemptions and deductions, a move that will make the state's income tax less unfair - but also less adequate. Hawaii lawmakers are engaging in a healthy debate over two approaches - increased exemptions and low-income targeted tax credits.
Since temporary relief from the federal Alternative Minimum Tax (AMT) expired at the end of 2005, the clock has been ticking for Congressional efforts to prevent millions of upper-middle-income families from having to pay the AMT. But the Republican leadership remains more intent on extending capital gains and dividend tax breaks that aren't scheduled to expire until 2008. A Citizens for Tax Justice analysis shows that the capital gains breaks would go overwhelmingly to the very wealthiest Americans, while extending the AMT tax breaks would provide needed tax relief to a broader swath of middle- and upper-income taxpayers.
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