CTJ's Tax Justice Digest, August 18, 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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Institute on Taxation and Economic Policy Launches New State Tax Information Page
The Institute on Taxation and Economic Policy has launched a new web page designed to make it easy to find tax news and policy analysis specific to a given state. Articles from the CTJ Tax Digest as well as reports issued by ITEP and reports issued by other organizations using ITEP data are all included on the new page.
Immigration in the News Again
In Missouri, the House Special Committee on Immigration Reform is holding a series of hearings across the state. Many immigration reform activists in Missouri advocate new laws that would deny undocumented immigrants access to state benefits such as education and health care. The Missouri-based Eagle Forum, a socially conservative political organization, says such measures are necessary because undocumented immigrants are a drain on state hospitals and schools.
However, a new study from the Missouri Budget Project disputes that claim. The report, which used data from the Institute on Taxation and Economic Policy, shows that immigrants pay between $29 million and $57 million in sales and property taxes each year. Since undocumented immigrants are ineligible for the state Medicaid, child care, and other services they receive less in state aid than citizens with similar income. In fact, according to the study, immigrants contribute $20 to $30 million more to the state's coffers each year than they use. Lawmakers should take a hard look at the data before making any decision on this emotionally-charged issue
Direct Democracy and Tax Policy: Lessons from the States
2006 is shaping up to be another important year for direct democracy in the states, with ballot initiatives piling up in all the usual places. And tax changes (usually bad ones) are once again a big part of the mix. California voters will decide whether to hike the cigarette tax by $2.60 a pack to fund health care, and whether to impose a new tax on oil producers. In Oregon, a cleverly regressive high-end income tax cut will face the music. Meanwhile, South Dakota voters will have the opportunity to enact not one but four new tax cuts, and will weigh in on policy areas as diverse as property tax caps, cell phone taxes, video lottery and the cigarette tax.
We'll have more details on these initiatives in coming months (including a detailed look at the emergence of TABOR initiatives). But whatever happens this fall, it would be nice if lawmakers (and voters) took a good long look in the mirror and thought carefully about whether arcane tax policy matters are best decided by a vote of the people.
Gas Tax Gimmicks
For many years, states have relied on gas taxes to build and maintain highways. This predictable and stable revenue stream made gas taxes very attractive to lawmakers. However, the growing cost of gas makes many state policymakers reluctant to increase gas taxes even as needs increase. As the Center for Budget and Policy Priorities points out, increased gas prices represent extra burdens on state budgets. Since most state gas taxes are fixed amounts and not a percent of the sale price, like a sales tax, higher gas prices do not increase gas tax revenues. In fact, prices at the pump may lead to a decline in consumption, lowering gas tax receipts. Finally, higher gas prices mean states have to pay more to keep their ambulances, police cars, fire trucks, and school buses running.
But this hasn't deterred some Illinois Republicans from calling for a suspension of the state gas tax to help counter high gas prices. This proposal is quite costly, with a price tag of at least $100 million, which represents the bulk of the Illinois transportation budget. In a state with a growing structural deficit now is not the time for tax cut gimmicks. Lawmakers should look to sustainable, fair, and adequate ways to fund state needs.
Funding Transportation Infrastructure: Issues and Options
The growing inadequacy and political unpopularity of gas taxes have left state governments scrambling to find new sources of revenue for highway infrastructure. One option under consideration in Indiana and other states are toll roads. Toll roads have long been unpopular with many motorists for increasing travel costs. Currently, twenty-four states maintain toll roads, and seven states plan to implement toll roads for the first time in the near future. Other localities fund infrastructure needs through local sales or property taxes. Policymakers justify these alternatives by arguing that local roads benefit local drivers the most. Across the country, the demand for adequate and fair transportation funding grows louder. For more information on this check out the Talking Taxes Blog.
Payoffs for Layoffs
Once again, the public is learning that tax funded corporate economic incentives don't really work. In Oregon, right after Georgia-Pacific received a property tax break that will amount to $15 million over 15 years, the company turned around and announced that it was laying off 130 workers. Chuck Sheketoff over at the Oregon Center for Public Policy puts it the best, "[i]t's payoffs for layoffs". On the other side of the country, AAA Mid-Atlantic demanded that Delaware grant the company tax incentives if the state wanted them to move there. The twist? AAA Mid-Atlantic already made the decision to move to Delaware before they demanded the tax incentives - Delaware simply paid AAA Mid-Atlantic to do something it was already going to do. For a more in-depth analysis of AAA Mid-Atlantic's scheme, check out this report by New Jersey Policy Perspectives.
School Funding Gets an F
It's back to school time and in the coming weeks you'll see schools buses in your neighborhood and school playgrounds full of kids. This is an expensive time for parents and if you live in Kansas now it's even more costly. Schools in Kansas and in some other states aren't adequately funded and user fees for education have become common place. Here's an interesting article detailing the back-to-school costs for one family. Proponents of adequately funded schools and fair taxation should take notice and give this funding trend an F.
International Tax Avoidance: The Press Pays Better Attention Than Congress
The early August hearings on high-end tax avoidance led by Senators Carl Levin (D-Mich.) and Norm Coleman (R-Minn.) may have fallen on deaf ears in the halls of Congress, but the media is starting to pick up the story. After the Levin committee issued a report showing that a small group of wealthy Americans are colluding with unsavory tax professionals to shift as much as $1 trillion to offshore accounts in the Cayman Islands and other tax havens, at an annual cost to U.S. taxpayers of up to $70 billion, the Boston Globe issued a dynamite editorial, as did the San Antonio Express-News. The New York Times' David Cay Johnston explains it all.
Estate Tax: Why Won't They Please Give Up...
Now that conservatives in Congress have failed several times in the past few months in their efforts to repeal the estate tax or to cut it (at a cost of $61 billion a year) you might think or hope that the issue would be forgotten. Unfortunately you'd be wrong. A "playbook" written for the Senate Republicans was leaked and posted on the Raw Story web site. On page 12 it offers a talking point stating that the estate tax "destroys 100,000 jobs each year and punishes family farms for saving and leaving something for their children." It is not clear where these numbers come from.
The staying power of this myth is peculiar. Back in 2001, the American Farm Bureau famously conceded to the New York Times that it could not cite a single example of a family that had to sell its farm because of the estate tax. As Citizens for Tax Justice has pointed out, family farms are given extra exemptions (on top of the $2 million or $4 million exemption all estates get) and are allowed 14 years to pay the tax. Another CTJ analysis shows that the percentage of people who pay the estate tax is around 0.5 percent to 1.5 percent in most states and those are concentrated among the very wealthiest Americans. But the talking points are being used nonetheless. A House member from Florida, Rep. Ginny Brown-Waite, was caught making similarly misleading statements and rebuffed in the St. Petersburg Times.
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