CTJ's Tax Justice Digest, May 5, 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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Lawmakers in many states have managed to get past budget shortfalls by shifting the tax load down to local governments. But New Yorkers have elevated this practice to an art form, according to a new report by state Comptroller Alan Hevesi. The report shows that New York local property taxes have grown three times faster than the rate of inflation over the last five years--even as the state has devoted billions of dollars to poorly-targeted property tax cuts. The Albany Times Union decries this "smoke and mirrors budgeting" in an editorial here.
Illinois lawmakers ended their 2006 regular legislative session this week, without coming to terms with the state's long-term over reliance on local property taxes. This is probably a good thing, as the only viable "reform" alternative this session was an extension of the state's temporary cap on growth in assessed value. The cap, which limits the allowable annual growth in the taxable value of homes in Chicago's biggest county to 7 percent a year, was seen even by its advocates as a temporary "band-aid" rather than a long-term solution. But a a new report commissioned by the Illinois Department of Revenue finds that many Chicago homeowners actually paid more property taxes due to the 7 percent cap. To understand more about why property tax caps can have this effect, check out this ITEP policy brief. Looking forward to the 2007 legislative session, Chicago Mayor Richard Daley has expressed his support for a "tax swap" that would replace local property taxes with more progressive state income tax revenue.
Earlier this spring, Wyoming became the latest state to exempt groceries from its sales tax. Now businesses are discovering that special sales tax exemptions can be harder to implement than they are to enact. As one local entrepreneur notes, "If the tax exemption is meant for food that's not immediately consumed will his employees need to treat the customer who buys a bagel to eat in the store differently from the customer who takes his bagel elsewhere to eat?" Sales tax exemptions are a progressive (but costly) approach to sales tax relief. ITEP has more on options for progressive sales tax reform here.
After abandoning earlier efforts to pass targeted income tax cuts for working families, Hawaii policymakers are poised to enact tax measures that largely benefit wealthy taxpayers. For more on how this plan would affect Hawaii's income tax threshold-- and more on the distribution of tax cuts under the new plan, click here. The Honolulu Star-Bulletin tells it like it is here.
Also in the Aloha State, the state legislature is moving to simplify the state's sales tax as a first step towards allowing the state to tax Internet-based retail transactions. The bill would take an important step towards eliminating the sales tax "digital divide" by eliminating the tax advantage for those (typically higher-income) families who make purchases online-- and could generate more than $100 million a year in tax revenue for Hawaii. But Governor Lingle is threatening to veto this measure. For more on the tax fairness implications of this issue, check out this ITEP Policy Brief.
In Washington, Congress is finalizing details of a budget resolution that would extend temporary tax breaks on capital gains and dividends. CTJ's analysis of the capital gains/dividends tax breaks is here. If your Representative doesn't know how you feel about these tax cuts now is a great time to contact them.
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