CTJ's Tax Justice Digest, May 22, 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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The ink is barely dry on the latest federal tax cut-- but Congressional tax writers are already moving to enact a raft of additional tax breaks, mostly for corporations. Meanwhile, Republican leaders have moved into "spin" mode, and are frantically trying to describe the latest capital gains and dividends tax breaks as something other than a $70 billion sop to wealthy campaign contributors. A new CTJ analysis shows how they're fudging the numbers.
In a setback for opponents of corporate tax giveaways, the US Supreme Court ruled last week that Ohio taxpayers did not have a legal right to contest the constitutionality of $300 million in tax incentives given by the state of Ohio to the DaimlerChrysler corporation. The good news is that by relying on this technicality to dismiss the case, the Court left the door open for the main policy question at stake: whether corporate tax incentives violate the Commerce Clause of the US Constitution. Good Jobs First has issued a short analysis of the decision's implications here. The text of the Supreme Court's opinion is here.
Rising gas prices continue to provoke a variety of responses from state policymakers. Good multi-state summaries are here and here. New York Governor George Pataki has signed legislation capping the state's sales tax on gas, despite the bill's $225 million annual price tag. But Tennessee lawmakers aren't jumping on the gas tax elimination band wagon just yet, due to well-justified concerns about the state's ability to fund needed infrastructure improvements. And Massachusetts Lieutenant Governor Kerry Healey's proposal to suspend the state's 21 cent gasoline tax is receiving a lukewarm reception.
Advocates of Colorado-style "TABOR" tax and spending limits are seeing mixed success in efforts to get TABOR limits on the November ballot. Maine voters will have their say on a TABOR proposal that the Portland Press Herald sees as "the wrong approach." But a restrictive Ohio proposal will likely be pulled from the November ballot. Meanwhile, a terrific Denver Post editorial argues that their TABOR law still hurts the state's economy-- even after being pared back by voters last fall.
New Jersey continues to struggle with property tax reform. A task force has signaled that it will call for a July special legislative session to deal with the state's growing homeowner property taxes. One lawmaker has proposed paying for major homeowner tax cuts with an income tax hike, while others think consolidating school districts is a necessary first step. Meanwhile, Texas lawmakers are wrapping their special session up after finally figuring out a way to cut school property taxes -- but a lot of people are unhappy with the outcome. The new law reduces school property tax rates across the board, and pays for this major tax cut with three major sources: the state's short-term budget surplus, a cigarette tax hike, and a revamp of the state's major business tax. The Texas Center for Public Policy Priorities sensibly points out that since the budget surplus part of this equation will eventually disappear, once these changes are fully phased in, this "tax swap" will create a $10.5 billion hole in the state's biennial budget.
California's state income tax collections for the month of April were a breathtaking $11.3 billion-- up from $7 billion the previous year. A San Francisco Chronicle report estimates that up to an eighth of this revenue boom could be due to employees of just one company--Google. The article estimates that 14 Google executives cashed out stock options generating up to $450 million in tax liability. This latest rebound in California's fiscal health is not an indictment of the progressive income tax, but of the massive tax cuts enacted by lawmakers during the last boom. A Mercury-News editorial correctly advises a more cautious approach to disposing of "surplus" revenues this time around. Meanwhile, some wealthy Californians aren't ponying up as generously as Google employees: the California Budget Project reports that 1,659 households earning more than $200,000 managed to pay no state income taxes at all in 2003. A San Francisco Chronicle editorial connects the dots between these "tax vacationers," the unaffordable tax cuts enacted during the last income tax boom, and the state's current budget deficits.
Few state lawmakers would disagree with the goal of targeted tax cuts for fixed-income seniors-- but efforts to provide such tax breaks are frequently hijacked by anti-tax lawmakers eager to enact cuts for the wealthiest retirees. And that's pretty much what happened in Iowa this year, where a new elderly income tax break provides new tax preferences for retirees at the expense of working seniors and non-elderly Iowans. The Iowa Policy Project has a terrific overview of the flaws in this legislation that should be required reading for anyone confronting similar schemes in other states. The Talking Taxes weblog has more here.
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