CTJ's Tax Justice Digest, March 24, 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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At a time when many states are flirting with expensive, irresponsible property tax caps, Utah lawmakers are seeking a better way: building on the success of its existing "circuit breaker" tax credit, which provides targeted tax relief to low-income elderly homeowners and renters. Legislation signed into law by Governor Jon Huntsman this week will make the credit available to more middle-income seniors and will increase the credit amount for those already claiming it. Oddly, the new law not only fails to remedy the main flaw of the current circuit breaker (its unavailability to fixed-income non-elderly homeowners and renters), but actually makes it worse by gradually increasing the age limit for eligibility from 65 to 67. While two-thirds of the states have enacted elderly circuit breakers, only a handful have extended the same tax breaks to fixed-income homeowners and renters who are under 65. For more on circuit breaker "best practices" click here.
Pending legislation in California seeks to make corporations honest taxpayers. Assembly Bill 675, known as the Honest Taxpayer Corporate Tax Reporting Act, would require corporations to disclose any difference in profits reported to its shareholders and the state for tax purposes. Corporate tax disclosure is important for anyone interested in making sure that profitable businesses pay their fair share of taxes. Read an ITEP Policy brief on this topic here.
New Jersey Governor Jon Corzine this week introduced a budget proposal that included major spending cuts and increases in the state's sales and cigarette taxes, coupled with a surcharge for the corporate income tax and an extra sales tax on luxury automobiles. Corzine also indicated that the state may not be able to fully fund expanded property tax rebates enacted two years ago. Even if these changes are enacted, all agree that property tax reform will be a major issue once the budget has passed.
Georgia already allows one of the most generous income tax breaks for pension benefits in the nation, exempting the first $35,000 of retirement income. Now lawmakers are pushing a constitutional amendment that would increase this exemption to as much as $100,000. A critical analysis of the Georgia plan is here. For national perspectives on how best to design tax breaks for seniors, check out what ITEP and the Center on Budget and Policy Priorities have to say.
Battles are raging in Mississippi and Tennessee about the impact of lowering the sales tax on food and making up the revenue loss with a cigarette tax hike. In Mississippi, Governor Haley Barbour has vetoed, for a second time this year, a proposal that would cut the sales tax on food in half and would eventually raise the cigarette tax from 18 cents to a dollar. Tennessee policymakers are in the midst of their own debate and propose raising the cigarette tax from 20 to 65 cents. For more discussion of these tax swaps, check out the Talking Taxes blog.
New from CTJ: Thanks to an expiration of temporary relief from the federal Alternative Minimum Tax (AMT) on January 1, more than 15 million Americans will get up close and personal with the AMT for the first time in 2006-- unless Congress acts soon to extend the temporary higher exemptions that just expired. A new CTJ analysis estimates the number of taxpayers in each state who will fall into the AMT in 2006 if the temporary exemptions are not extended. New Jersey is the big loser, with more than a quarter of its taxpayers slated to pay the AMT in 2006 unless Congress acts. Find out how your state stacks up here.
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