CTJ's Tax Justice Digest, July 7, 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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Tax Policy and the 2006 Elections Tax cuts will be one focus of the Congressional district races that are heating up across the country. Here's a reminder that Citizens for Tax Justice has resources to help voters make their own judgements about the impact of the tax policies enacted under President Bush. Click here to view the impact of the tax cuts by state from 2001-2010. Also, for a state specific look at the additional debt that must be paid by Americans as a result of these tax cuts click here. |
More on Senator Gregg's Budget Process Proposal: How States Would Be Affected
The budget process bill sponsored by Senator Judd Gregg (R-NH) and approved by his commitee on June 20 include caps on annually approved spending that would result in hundreds of thousands of people being cut off from important services like WIC, Head Start and nutrition programs. (Click here for CTJ's brief explanation of the Gregg bill.) A new paper from the Center on Budget and Policy Priorities shows the impact of these caps in each state.
Budget Deal Ends Government Shutdown In New Jersey
Yesterday, New Jersey's Governor Jon Corzine and the Legislature agreed to a compromise budget that includes raising the sales tax from 6 to 7 percent and using at least some of the increased revenue for property tax relief. This compromise ended a 6-day government shutdown that left many in New Jersey without state services. The Governor and state legislators did not make public any specifics about how the property tax relief would be structured. For a look at other options to reform the sales tax without raising the rate, read this report from New Jersey Policy Perspectives.
Property Tax Caps: The Perfect Bad Example
Florida remains the poster child for why property tax caps are a bad idea. For more than a decade, the state has capped the growth of taxable property values for full-time residential homeowners. This means homeowners with rapidly growing home values get a valuable tax break, while everyone else--businesses, renters, part-year residents and homeowners with stagnant property values--foots the bill.
Groups experiencing this tax shift are starting to complain in earnest. Some "snowbirds," or part-year residents, argue that Florida is becoming an unaffordable vacation destination, and small businesses are feeling the squeeze as well. A tax reform commission appointed by Governor Jeb Bush will likely recommend reforming the tax caps next year. These problems should serve as a warning to states like Illinois, which are experiencing rapid growth in home values, to avoid following Florida's tax-cap example.
Casinos and Competition
The recent shutdown of New Jersey casinos provided an opportunity for surrounding states to lure gamblers (and tax dollars) away from the Garden State. In Delaware, slot parlors saw an estimated increase of almost 20 percent in revenue. Nearby Pennsylvania has also legalized some forms of gambling and will also soon compete with New Jersey. As more and more states turn to casinos to generate tax dollars, states will probably find it more difficult to depend on revenue from this source. Instead of gambling on the future, lawmakers should focus on more reliable sources of funding. You can read ITEP’s policy brief on gambling by clicking here.
Stopping the Race to the Bottom Among Cities
Local governments are increasingly facing threats that corporations will relocate if they are not provided with large tax breaks. The result is a race to the bottom in which each locality feels pressure to compete in a way that reduces revenues for the entire region. However, some cities and towns are starting to fight back. Officials in Cleveland and surrounding suburbs are discussing a “no poaching” policy that would encourage cooperation instead of competition. This would consist of several reforms, including “a cap on property tax breaks, an end to payroll-tax rebates to businesses and a split of income taxes between losing and winning communities” which would reduce the ability of companies to demand special favors.
Tax Reform Summit Convened In West Virginia
This week in West Virginia, Governor Joe Manchin convened a summit as a stage for open tax reform discussion. The summit brought together a diverse set of participants, including a new coalition of labor, religious and nonprofit groups that wants any tax changes to help the working poor. It may seem odd to aim for tax reform at a time when revenues have exceeded estimates for several years running, but it is actually good planning. Projections for future years look less promising, and by engaging the public so early in the process West Virginia is trying to ensure that future reform is preceded by education and consensus. As a follow-up to the summit, the governor plans to host a series of meetings around the state and to call a special session towards the end of the year to consider proposals.
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