It's true that the gas tax is a regressive tax, requiring low-income drivers to pay more of their income in tax than wealthier drivers. But the gas tax is different from most other taxes in ways that minimize the importance of tax fairness. Most notably, the gas tax can serve to help reduce demand in a market where many would agree demand is far too high. With gasoline in limited supply (Paul Krugman explains that the supply is actually fixed for the next few months), environmental concerns continuing to mount, and traffic congestion remaining a problem, any effect the gas tax has on reducing demand should be a welcome one.
Senator Clinton would replace the money in the Highway Trust Fund by enacting a new windfall profits tax for oil companies. With a White House opposed to anything that can conceivably be called a tax increase and a Senate that has trouble paying its bills, it's hard to imagine this part of the proposal being enacted during this Congress. President Bush said he was open to considering the idea of a gas tax holiday, but there appears to be no chance he would ever support a windfall tax on oil companies to pay for it.
As Hallett notes, “Tax cuts are easy to love. But the reality is that taxes pay for services citizens want and need.” This latest report from Policy Matters Ohio details the substantial revenue losses
As the New Orleans Times-Picayune reported earlier this week, Sen. Joe McPherson apologized to his colleagues for casting the deciding vote in favor of an amendment to repeal the state’s income tax, which currently yields nearly $3 billion per year. It seems that the Senator expected the amendment to lose, but “wanted to be on the record as doing away with income taxes.” He later owned up to being “cutesy” with his vote.
The bill that Senator McPherson and his colleagues voted to amend would have repealed yet another element of the 2002 Stelly plan, which substantially improved the fairness of
The bill being debated now was intended to raise the income tax brackets that had been lowered under the Stelly plan. It would have (before being amended) reduced state revenue by roughly a quarter of a billion dollars per annum and, despite the claims of proponents, yet again help the most affluent. As the Times-Picayune notes, the bill’s proponents portray it as a prototypical “middle-class tax cut”, but preliminary estimates from the Institute on Taxation and Economic Policy indicate that more than 70% of the benefits from changing
But there is one very serious change to the state tax structure that has left progressives wishing the Commission would have stuck to making only minor changes. Well aware of the existing $3.4 billion budget shortfall facing Florida, the Commission has nonetheless proposed that school property taxes be abolished at an annual cost of $9 billion. In order to meet the requirement established by the Commission that school funding not decline as a result of this change, it was recommended that the legislature raise the sales tax rate by one percent, eliminate numerous sales tax exemptions (on both goods and services), and cut spending. In addition to these ideas, the Commission helpfully suggested that the legislature might try to find “other revenues”.
A 1% sales tax hike is expected to raise less than half of the revenue needed to replace school property taxes, so expansions of the sales tax base appear imminent if the proposal gains approval in November. Expanding the sales tax base is good policy, assuming that it is done carefully, but doing so would ideally be coupled with much better targeted tax cuts. An across-the-board property tax reduction of the kind proposed here will provide huge benefits to those wealthier individuals with the most valuable homes.
And as if all of this wasn’t bad enough, the Commission has also proposed tightening the caps on increases in a home’s assessed value (criticized in the Digest just a few weeks ago) for homes not occupied by the owner.
McCain replied, "Uh, no, of course not, because we don't want to increase people's taxes during a recession..."
About two weeks ago, the Massachusetts House of Representatives approved a bill that, among other things, would institute combined reporting of corporate income for tax purposes in the Commonwealth. Combined reporting is the single most important reform states can adopt to prevent corporations from using legal and accounting techniques to shift income from one state to another in order to avoid taxation. It is now used in 20 states. Should the House bill be made law,
Yet, during its consideration of the measure, the House approved, with little open debate, a last-minute amendment that would seriously weaken the reform, to the likely benefit of such behemoths as Wal-Mart and McDonald’s. The amendment would constrain the Commonwealth’s ability to enforce combined reporting, would create new tax planning opportunities for companies with operations both in Massachusetts and overseas, and would compensate companies for accounting losses they might incur due to statutory changes intended to curb tax avoidance. Ultimately, the Massachusetts Department of Revenue indicates that the amendment could lead to annual revenue losses of “at least $100 million to $200 million” -- or about half of the corporate tax revenue the bill might otherwise be expected to generate! Importantly, that expected revenue yield is already diminished by the fact that the bill also would, over time, reduce the tax rate paid by corporations from 9.5 to 7.5 percent and by financial institutions from 10.5 to 9 percent.
Fortunately, as the
Colorado might permanently loosen a constitutional constraint that has caused the state on-going fiscal damage, the so-called Taxpayer Bill of Rights (TABOR).
Voters approved an amendment to their constitution enacting TABOR in 1992. TABOR limits the growth of state revenues to a combination of inflation and population growth by requiring that any revenue in excess of this limit be refunded to taxpayers. TABOR also requires that any tax increase be approved by voters. The main problem is that inflation is only a very crude measure of changes in the costs faced by state and local governments, which for the most part have outpaced inflation in the rest of the economy.
In 2000, Colorado voters complicated matters further by approving a very different measure, Amendment 23, which mandates an increase in funding for K-12 education by at least 1% plus inflation every year. This amendment was a response to the dismal state of Colorado public schools in the wake of unrealistic revenue restrictions enacted in TABOR.
Enacting both of these provisions made sense to many voters who would like to see both lower taxes and more spending on education. The problem is that the combination of TABOR and Amendment 23 serve to starve transportation, higher education and just about anything that is not K-12 education.
Now, Colorado House Speaker Andrew Romanoff, with the backing of Governor Bill Ritter, plans to unshackle the legislature from these impossible demands. His proposal, if approved by two thirds of both chambers and by the voters, would repeal Amendment 23 and the part of TABOR that requires the state to refund taxes when the revenue limit is exceeded. Fortunately, the citizens of
But one problem associated with TABOR would not be fixed under this plan: tax increases would still require voter approval. Of course, it would be better if the
State legislators in Maine last week missed a great opportunity to expand health care coverage to a significant number of residents. The state’s health insurance program was originally created in 2003 with the mission of providing insurance to 135,000 uninsured persons by 2009. Currently, just 15,000 people are covered by the program. The reason for this huge disparity is primarily an unwillingness on the part of legislators to raise taxes to pay for it. In describing this year’s legislative session, one representative stated that avoiding tax increases was one of the “overarching goals that we began the budget deliberations under”.
Rather than seizing upon the fast-approaching 2009 target they set for themselves, legislators working under the “overarching goal” chose to expand coverage to only 4,000 of the additional 120,000 people they had originally planned to cover by next year. Instead of addressing the problem head-on with needed tax increases, Maine legislators sidestepped the issue by only enacting relatively minor excise tax increases on alcohol and soda.
This proposal is totally inadequate and will disproportionately affect those lower-income Mainers who are most likely to have trouble affording health care coverage in the first place. In addition to having all the regressive traits of the sales tax, excise taxes possess an additional degree of regressivity in their per-unit rather than percentage basis. That is, rather than being levied at a fixed percentage of a product’s price (5-7% for general sales taxes in most states), excise taxes are levied at a fixed amount on a specific type of good, regardless of that good’s price. The Maine excise tax collected per gallon of wine, for example, is the same 65 cents whether that wine costs $6 or $600 per bottle. The obvious result is that low-income people who purchase less expensive brands will usually face a higher effective tax rate than their wealthier neighbors.
Admittedly, Maine has taken more initiative to provide health care than most states. This does not change the fact, however, that thousands remain uninsured and many would quickly enroll in the state-subsidized program if funding was to be provided in amounts sufficient to meaningfully raise existing enrollment caps. Next time health care is debated in the Maine legislature, policymakers would do well to make assisting the uninsured, rather than steadfastly avoiding tax increases, the “overarching goal” of their work.
A report released this week from Citizens for Tax Justice explains how "tax day" has changed under President George W. Bush. The answer for most Americans is: very little. Despite claims made by the President and his supporters, the tax breaks enacted after 2000 provide little benefit for the middle-class. However, for the richest one percent of American families, tax day is considerably easier. Once the President's tax cuts are fully phased in, the majority of the benefits will flow to this small group of lucky families.
What has changed for most Americans is the very real threat posed by the increased national debt resulting from these tax cuts. The national debt must eventually be paid off with tax increases or cuts in public services that Americans -- particularly the middle-class -- rely on.
The report explains that:
- The tax cuts received by the typical American are nowhere near as large as the President and his supporters imply, and are in fact too small to make any difference in the life of a typical American family.
- When the Bush tax cuts are fully phased in, the majority of the benefits will go to the richest one percent.
- If the Bush tax cuts are made permanent, as the President proposes, the cost will be $5 trillion over the 2011-2020 period. To put that in context, the federal government collected $2.6 trillion in revenue last year.
- The Bush tax cuts received by the richest one percent in 2008 will be more than the funding received by the Department of Education, almost twice as much as the funds received by the Department of Homeland Security and over ten times as much as received by the Environmental Protection Agency.
