Last week, Virginia Governor Tim Kaine unveiled his proposal to increase the state's income tax threshold. This proposal comes three years after former Governor Mark Warner signed into law a massive tax restructuring that was mostly geared towards adequacy. The current Governor's proposal builds on past tax reform efforts but is also intended to make the tax structure more fair. He's proposing to increase the personal income tax filing threshold from $7,000 to $12,000 for singles and from $12,000 to $24,000 for couples. Governor Kaine's proposal is a small step towards tax fairness but doesn't do much to offset the regressivity of the state's tax structure.

Alabama Governor Bob Riley is once again talking about lowering taxes on working families. But his latest proposal isn't without controversy and comes with quite a price tag. The Governor's proposal includes lowering taxes on families making less than $100,000 annually and eliminating the state income tax on the first $10,000 of retirement income. His plans take five years to fully implement and would cost $205 million. Some in the education community are concerned that these tax cuts will be paid for by cuts to the State's education budget. Questions also remain about whether or not the proposal provides targeted tax relief for Alabama families in need. Let's hope Governor Riley actually does more than talk about tax fairness and finds a way to pay for cuts without harming Alabama's children.

A paper from Citizens for Tax Justice describes some of the biggest tax loopholes enjoyed by Big Oil and what steps members of Congress have proposed to deal with them. When the price of oil and oil industry profits are at an all-time high, it's hard to imagine why the United States should subsidize Big Oil through the tax code. The new Congressional leadership understands this, and we hope the President does as well.

If some Kentucky legislators have their way, the Alternative Minimum Calculation (AMC), which is the state's alternative minimum tax paid by businesses, may be on its way out. According to the Louisville Courier Journal, the state has numerous unmet needs and faces a structural deficit, yet some legislators would rather spend the temporary budget surplus on permanent tax cuts for businesses. Earlier this year, the state held a special session where aspects of the AMC were amended to help small businesses. As a result, those with less than $3 million in gross profits are now exempt from the tax and those with gross profits of less than $6 million enjoy a reduced tax rate. But apparently that's not enough for some legislators and business people. Concerning the repeal, Tom Underwood, state director of the National Federation of Independent Business says, "It's not going to hurt anybody's feelings if it is repealed altogether." Maybe he meant anybody except the Kentuckians who will have a harder time paying for schools and and healthcare if the tax is eliminated.

ITEP Report: Louisiana's 2006 Special Legislative Session - Assessing Income Tax Reform Options

Louisiana lawmakers currently face a pleasant dilemma: how to dispose of a short-term budget surplus exceeding $2 billion. This analysis looks at the overall fairness of Louisiana's tax system, and assesses the impact of two proposals on Louisiana tax fairness.

The alternative minimum tax (AMT), which was originally intended to ensure that the wealthiest Americans pay at least some tax regardless of how many tax breaks they could otherwise claim, will affect 17 percent of taxpayers in 2007, rising to 23 percent of taxpayers in 2010. This is partially because President Bush's tax cuts were not accompanied by adjustments to the AMT and also partially because the exemptions that keep the AMT from applying to most people have not kept pace with inflation. A new analysis from Citizens for Tax Justice shows that there is a way to adjust the AMT -- without increasing deficits -- to ensure that the majority of it is paid by the richest one percent of taxpayers.

Many Democrats have expressed an interest in changing the AMT in the next Congress. Several lawmakers have expressed alarm that a significant number of voters will suddenly have to pay a tax that never applied to them before if Congress does not act. The problem is that the AMT is expected to bring in $250 billion in revenue in the next four years, so repealing it altogether would be outrageously irresponsible. The solution offered by CTJ allows for the same amount of AMT to be collected and also ensures that the tax will serve its original purpose -- to guarantee that the very wealthiest pay their fair share.

Senate Finance Committee Leaders Propose Repealing the AMT at a Cost of Hundreds of Billions

It would be comforting to believe that the Democrats who are now running Congress don't need to be convinced to support tax fairness. It would be comforting, but not entirely right. Senator Max Baucus (D-MT), the new chairman of the Senate Finance Committee, has joined forces with the now-ranking member Charles Grassley (R-IA) to again propose fully repealing the Alternative Minimum Tax (AMT). The Center on Budget and Policy Priorities finds that full repeal, if not offset by other revenue, could cost $790 billion over ten years and even more if the Bush tax cuts are extended past their expiration date in 2011.

It's true that if Congress doesn't do something, the AMT, which was originally intended to ensure that the wealthiest Americans pay at least some tax, will start applying to people it was never intended to affect. This is partially because President Bush's tax cuts were not accompanied by adjustments to the AMT and also partially because the exemptions that keep the AMT from applying to most people have not kept pace with inflation. But the solution to this problem is to reform the AMT in a way that is budget-neutral and concentrates the costs among the very wealthiest households, who were the targets of the AMT in the first place. Citizens for Tax Justice has proposed such a solution (see above), which is both budget-neutral and progressive.

The highest court in West Virginia has rebuffed an attempt to further restrict the right of states to tax the profits of multi-state corporations.

As explained in a new ITEP paper, the U.S. Supreme Court has already restricted the ability of states to impose sales taxes on remote sales by out-of-state companies, and Congress passed a law back in 1959 that restricts states' ability to tax corporate income generated by remote sales of goods into a state. In West Virginia tax Commissioner v. MBNA America Bank, MBNA argued that their profits in West Virginia "its gross receipts in the state exceeded $10 million during one of the years in question" could not be taxed under the U.S. Constitution because MBNA had no physical presence in the state.

Fortunately, the court found that the amount of business MBNA has done in West Virginia amounts to "economic presence" in the state that benefits from the services provided by West Virginia ... and that justifies the imposition of the state corporate income tax. Other state courts should follow West Virginia's lead in this area of jurisprudence.

Montana Governor Brian Schweitzer has a plan for disposing of the state's projected budget surplus. On the tax side, he is proposing a one-time property tax rebate for homeowners that would cost about $400 million. His proposal also includes more funding for education, mental health facilities, and corrections. Republicans are skeptical and may push for permanent (and potentially unaffordable) property tax cuts.

The fiscal storm clouds are already gathering for newly-elected District of Columbia Mayor Adrian Fenty. A Washington Post article reports that the city faces an unanticipated revenue shortfall of $300 million over the next two years. No big deal ... except that as a candidate seeking to distinguish himself from a crowded Democratic primary field this past spring, Fenty took a "no new taxes" pledge, arguing that that the books could be balanced with that old favorite, eliminating "waste, fraud and abuse." The new projected shortfalls are, of course, only projections ... but they serve as a dramatic reminder of the dangers of not leaving all fiscal policy options on the table.