The Associated Press today has the story of Stephen Kahn, a Massachusetts residents who bought a plane in Massachusetts, then flew it to his Maine vacation home-- and Maine slapped him with a $26,000 tax bill.

The story is more complicated than this, of course: it turns out that Massachusetts sales tax doesn't apply to sales of airplanes. So when Kahn showed up in Maine with a tax-free plane, the state told Kahn he had to pay the state's 5 percent "use tax" on his plane.

The use tax is supposed to prevent residents of sales-tax states from buying things tax-free in states that don't have sales taxes. It's meant to be a backup to the regular sales tax. It applies to basically the same things a sales tax applies to, but only comes into play when a state's resident avoids the state sales tax by buying something tax-free in another state. So if Kahn had bought his plane in New Hampshire, which doesn't have a sales tax, then his home state of Massachusetts could very plausibly have claimed that he'd bought the plane there to avoid Massachusetts sales tax, and could have charged him a use tax instead-- if, of course, Massachusetts sales tax rules applied to planes.

But it's less clear why the same thing should happen when a guy who clearly lives in Massachusetts buys a plane tax-free because his state's elected officials have decided it should be tax free.

The answer given by Maine tax administrators (as best I can make out from the AP article) is that they think, in fact, that Kahn lives in Maine too. He's got a vacation home there, and in the year he bought his plane, the plane spent more than 20 days (excluding travel days) in Maine. And that makes him a resident in their eyes.

According to the AP story, some states go even further with their use tax on planes:

Florida assesses a 6 percent use tax on plane owners who didn't pay sales tax on their planes and bring them to Florida even once within six months of the purchase date.

The story doesn't say whether Florida has a residency requirement, or whether any untaxed plane passing through the state is subject to tax.

Leaving aside the question of whether we should feel sorry for a guy who had to pay a 5% sales tax when he bought a plane (at $26,000 in tax, Kahn's plan must have cost him over $500,000), are these states doing the right thing when they apply the use tax laws in this way?

The spirit of the use tax law is that it's designed to prevent tax-avoiding behavior by a state's residents. Kahn is at least a part-time resident of Maine, and may well have bought his plane in Massachusetts to avoid owing sales tax in Maine, but you certainly couldn't prove it either way. And you can construct a very simple explanation of why he bought his plane in Massachusetts that has nothing to do with tax avoidance: Massachusetts is his primary state of residence.

On the other hand, Maine and Massachusetts each have their rules about who can be counted as a resident of their state. Maine can make a decent case that Kahn "lives" in Maine, and should be subject to the state's tax rules. And the folks in Maine would presumably make a fairness argument by contrasting the tax treatment of this guy with a full-time Maine resident who lives next door to Kahn's vacation home. If Kahn's purchase of the $500,000 plane is tax-free, how can we justify taxing the neighbor's purchase of the same plane?

But (I think) they would be wrong in making this argument. Or, at least not as right as Massachusetts folks would be in making the same sort of comparison. That is, if Kahn's neighbor in Mass. buys the same plane (and doesn't have the misfortune of owning a Maine vacation home), the sale is tax free. So, how can we justify imposing a higher tax on Kahn than on his Massachusetts neighbor?

More generally, it seems to me that (assuming this all boils down to whether Maine can treat part-time residents as subject to the same use tax requirements as full-time residents) the real effect of letting Maine's actions stand is to deny multi-state residents the potential sales tax benefits of either of the states they live in.

That is, every state chooses to exempt certain things from each of its taxes. Massachusetts exempts groceries, clothing and, yes, planes. Maine's action basically says that any Massachusetts resident who also happens to own a vacation home in Maine should be denied the benefits of these Massachusetts tax breaks.

And, abstracting from the fact that this sort of multi-state residency is a really enviable problem to have, it's hard to defend that on fairness grounds.

This week the House approved an energy bill (H.R. 6) that the Senate passed last week after stripping from it a $21 billion tax title that would have shifted tax breaks away from oil and gas companies to more sustainable energy sources. In the Senate, the bill with the tax package received 59 votes, one short of the 60-vote threshold needed to consider the bill, prompting Democratic Senate leaders to remove the tax provisions.

The remaining provisions, which passed easily, are still important. They would increase fuel efficiency standards for automobile manufacturers (known as corporate average fuel economy, or CAFE) to 35 miles per gallon by 2020 and would require gasoline to contain a certain level of biofuels by 2022. The President signed this legislation on Thursday.

Last year around this same time we brought you word about the groundbreaking study from the Institute for Wisconsin's Future which found that two-thirds of companies filing 2003 Wisconsin income tax returns owed nothing in state taxes. This month the Institute issued another report that "highlights a $643 million shortfall in corporate income tax receipts in 2006 due to the use of tax loopholes."

The new report once again brings to light the number of Wisconsin companies that simply aren't paying any tax." Almost fifty thousand corporations filed tax returns with the Wisconsin Department of Revenue in 2005. Two out of three returns showed a bottom-line tax of zero dollars."

The study's shocking findings won't be allowed to collect bookshelf dust. Instead, the results have prompted a legislative response. On Wednesday Senator Hansen unveiled a creative corporate tax disclosure proposal that would, "require the large public corporations doing business in Wisconsin to submit publicly accessible annual disclosures of their income and all items that can be used to reduce their Wisconsin tax liability." Stay tuned into the new year for more developments on this important disclosure legislation.

Earlier this week, the California Assembly approved a plan that would provide access to basic health care for the nearly 4 million Californians who currently lack it. One of the key elements of the plan is a tax credit, available to low- and moderate-income families who purchase health care on their own and intended to ensure that their healthcare costs do not exceed a certain share of their incomes.

While the plan has the support of Governor Arnold Schwarzenegger, much about it remains in flux. The state Senate will not consider the plan until mid-January at the earliest and a means of funding the more than $14 billion in costs it would incur are not included in the enabling legislation. As it now stands, funding for the plan will be decided by a ballot initiative in November 2008. Still, the Assembly's plan is one more example of states stepping into the void created by federal inaction on this critical matter. The California Budget Project provides a brief summary of the plan here.

All across the country property tax bills are coming due and outrage about the most unpopular tax is growing. Proposals for various types of property tax cuts, reforms, and relief abound.

In Michigan, legislators are proposing to limit property tax increases and make it easier for homeowners to appeal their assessments. In West Virginia lawmakers want to freeze property taxes for seniors, and also limit property tax increases for younger homeowners. Politicians in Utah are considering a broad range of options including changing school district funding from reliance on property taxes to sales taxes and increasing their state's circuit breaker credit. Property taxes tend to be the tax that everybody loves to hate. The tax comes due in a lump sum, it's usually difficult to understand, and often it's not based on one's ability to pay.

Lawmakers in these three states and others should investigate property tax credits that ensure that low-income folks aren't burdened by the tax. While it may be popular with constituents to discuss property tax cuts, it's vital that replacement revenue be identified as well.

McCain's Tax Plan: I Was Wrong About Everything

Senator John McCain (R-AZ) released his tax plan on Wednesday, which consists of repealing the Alternative Minimum Tax (AMT) without paying for it, extending the Bush tax cuts without paying for them, and requiring a 3/5 majority of both chambers of Congress to enact any tax increase.

Remarkably, this is the same senator who voted against the biggest of the Bush tax cut packages in 2001 and 2003. During a debate on September 5 he explained that he voted against those bills because they did not include cuts in spending, which he thought were also necessary. But at the same time, he also makes the claim that the tax cuts have boosted revenues, which would seem to imply that no cuts in spending are ever needed to pay for tax breaks.

This seems to be the position he has settled on, since he has no plans to pay for any of his tax cuts and has a somewhat vague proposal to require a "3/5 majority vote in Congress to raise taxes." Since even revenue-neutral bills are considered tax increases by the GOP now (because they offset the costs of, say a lower corporate rate by closing tax loopholes that benefit somebody) this apparently means a supermajority would be needed to enact any basic tax reform. John McCain is now committed to the idea that tax cuts will pay for themselves and even raise revenues.

(Those who are tuning in late to this ongoing debate may be utterly confused as to why anyone thinks tax cuts could cause revenues to increase. Anti-tax activists have convinced some conservative politicians that cutting taxes actually increases revenues because tax cuts encourage work and investment so much that incomes and profits increase enormously, in turn increasing tax collections by more than enough to make up for the costs of the cuts. Mainstream economists do not believe this and Bush's own Treasury Department and OMB director have admitted that they don't believe it either.)

Also, McCain would like to stop taxing "innovation" by making permanent the ban on internet access taxes and by banning taxes on cell phone use. As we've argued before, it's a shame that Thomas Edison didn't think to lobby for a moratorium on taxing electric devices, or that Henry Ford didn't lobby for a moratorium on taxes on automobiles, since those products were innovations for their time. McCain would also make permanent the research credit, which is a tax subsidy for certain companies supported by politicians who can't decide whether the free market works or doesn't work.

Huckabee's 50% Sales Tax

Now that former Arkansas governor Mike Huckabee has been climbing in the polls, reporters are suddenly inconvenienced by the need to read up on and explain the tax proposal Huckabee has been touting for months. His proposal is often described as a 23 percent national sales tax, but supporters prefer to call it the "Fair Tax," because they've apparently figured that the idea of a new sales tax is not inherently appealing to people. Actually the tax would be 30 cents on an item that costs a dollar, which most of us would call a 30 percent tax, but supporters argue that 30 cents is only 23 percent of $1.30. But that's not even half of the problem. Citizens for Tax Justice studied this proposal back in 2004 and found that to actually replace all the revenue collected by our current tax system, the national sales tax would actually have to be set at a rate of 50 percent.

So to recap:

• The proposed national sales tax rate claimed by Fair Tax supporters: 23%


• The proposed rate as any normal person would define it: 30%


• The rate necessary for the Treasury to break even under realistic assumptions: 50%


• The chances of anything like this being enacted: 0%

Giuliani's' Mind: A Place More Peaceful than Reality

Most Republican candidates reveal some sort of ambivalence or inner-conflicts over tax and fiscal matters. On one hand, they're all fairly intelligent people who must understand that revenues cannot be increased by tax cuts. On the other hand, they must find some way to appeal to the masses who want to hear the good news of free tax cuts without any troubling analysis that might disprove this appealing message. Hence you see McCain's convoluted explanations of his votes, Huckabee's attempts to avoid discussing the less right-wing aspects of his governorship, and Romney's policy acrobatics.

Former New York mayor Rudy Giuliani's mind appears to be serene and untroubled by such turmoil. He has been able to maintain throughout his campaign so far that the way to raise revenue for any initiative is to cut taxes, apparently freeing himself from any complicated thinking. He continued hammering this appealing message home at the debate on December 12. He argued that the solution to our national debt is that "the federal government has to restrain its spending" and that we need a policy "leaving more money in the pockets of the American people" without showing the slightest awareness of how little sense this makes.

Romney's Offshore Tax Evasion

Meanwhile, it has come to light that former Massachusetts governor Mitt Romney "was listed as a general partner and personally invested in BCIP Associates III Cayman, a private equity fund that is registered at a post office box on Grand Cayman Island and that indirectly buys equity in US companies." In other words, Romney was using a shell company -- a company located, on paper only, in a tax haven country -- to avoid paying taxes on money he was investing for his clients and himself. He had a similar arrangement in Bermuda. His campaign staff maintains that this was all perfectly legal. As far as we're concerned, that is the real scandal.

Congress is hurtling toward adjournment after resolving a series of stand-offs between Democrats and Republicans and between Congress and the President. Republicans in the Senate twice successfully blocked attempts to pay for AMT relief, while the President twice successfully vetoed expanded health insurance for children. Meanwhile, an attempt to shift tax breaks from "dirty" energy to "clean" energy failed by one vote, although Congress did enact some important non-tax-related energy provisions.

Alternative Minimum Tax: Congress Passes "Patch" But Doesn't Pay for It

On Wednesday, the House of Representatives approved a Senate-passed bill to "patch" the Alternative Minimum Tax (AMT). The "patch" is basically a one-year measure that extends through 2007 the exemptions that keep most of us from paying the AMT, which is a sort of backstop tax that ensures the wealthy pay at least some minimum amount of income tax regardless of how many deductions and credits they claim.

The AMT was originally intended to target only the very wealthy. Over time its reach expanded because the exemptions were never indexed to inflation, and the Bush tax cuts caused the AMT to expand much more. Since the AMT is in fact an alternative tax, if regular income taxes are cut without corresponding cuts in the AMT, more people pay the AMT.

In 2001, the President chose not to include corresponding adjustments to the AMT in his tax cut plan, although he surely assumed Congress would prevent the AMT from taking back a large portion of the tax cuts for moderately well-off families. And that's exactly what Congress has done, albeit through temporary patches passed periodically rather than a permanent fix. The cost of these patches was never included in the cost estimates of the Bush tax cuts that were presented to the public when they were being debated, effectively masking the true costs of those cuts.

This obviated the need for even a pretense of offsetting those additional costs. Today Congress is still not offsetting those costs.

Republicans Block Two Fiscally Responsible AMT Bills

The Republicans in the Senate were able to block two attempts to pay for the AMT patch in the last two weeks, both of them approved by Democratic majorities in the House. The first bill (H.R. 3996) would have replaced the revenue, partially by closing the loophole for "carried interest" paid to managers of buyout funds and other types of funds which allows these super-wealthy individuals to pay taxes at a lower rate than middle-income people.

Every Democrat in the Senate voted to act on this version (minus the Presidential candidates who almost certainly would have voted for it if they had been present) and every Republican who voted voted against. In the Senate, 60 votes are required to consider most legislation, so the bill could not be acted on despite the support of every member of the majority party. Senate Democrats were then forced to approve the $50 billion patch without any offsets, violating their pledge to adhere to newly reinstated pay-as-you-go (PAYGO) rules.

The House passed another version of the AMT patch with offsets (H.R. 4351), this time focusing more on cracking down on offshore tax avoidance by fund managers. The pattern repeated itself in the Senate, as the Republican minority was able to block the bill, choosing to protect wealthy tax evaders who use offshore shell companies rather than paying for AMT relief.

On Wednesday the House of Representatives voted to approve the Senate-passed AMT patch without offsets. Ways and Means Chairman Charlie Rangel said that it would be pointless to oppose AMT relief since it is very unlikely that the public would understand why a tax no one had ever heard of was suddenly affecting some families who were fairly well-off but not rich.

Media Neglects Role of GOP Obstruction

The press has focused unfairly on the "failures" of the Democrats to meet all of their goals.

This is unfair partly because the goals were extremely ambitious in retrospect. Democrats promised to provide $50 billion worth of AMT relief and also promised not to increase the deficit. This was while the Republicans in Congress and the President took an extreme stance on tax matters. Closing any tax loophole, even the most blatantly unfair tax loophole, represents a tax increase that will wreck the economy according to the President and his allies in Congress. They even equate stopping offshore tax evasion with tax increases that will discourage investment. In hindsight, it's clear that lawmakers taking this extremist position on taxes were ready to follow their President off a fiscal cliff by obstructing common sense measures.

It's also unfair to say the Democrats "caved" on PAYGO, as some media accounts have it, given that every Democrat in the Senate voted to pay for the AMT relief as did all-Democratic majorities in the House. Thanks to the 60-vote threshold to pass legislation in the Senate, the minority party was able to block the fiscally responsible legislation. Why the press has largely failed to note that Republican obstruction is the root cause of the AMT-PAYGO debacle is entirely unclear.

A new report from the American Legislative Exchange Council (ALEC) purports to construct a "State Economic Competitiveness Index" with which you can rank your state on how well it "foster[s] economic growth and prosperity."

No one seems to have taken a crack at debunking its findings yet; this could be because everyone's busy during the holidays, or it could just be because no one is taking the report's "findings" at all seriously.

Here's just one quick thought: the ALEC competitiveness index is made up of 16 equally-weighted variables. But none of the variables have anything to do with the quality of state services, like, say, education or transportation infrastructure.

From a fiscal policy perspective, in fact, the ALEC index basically asks "how bad are the bad things" and ignores the general question "how good are the good things." So, for example, a state that has higher than average taxes but also has better than average schools will score absymally on the ALEC ranking, because taxes count as a bad thing but quality public education doesn't count as a good thing. Put another way, if you have two states that have exactly the same overall tax levels, one of which has excellent schools and the other of which has terrible schools, the ALEC index won't see a difference between them.

So if you construct an index of competitiveness that says taxes hurt your economic climate but public investments don't help, it's neither surprising nor useful to solemnly present a finding (as ALEC does in this report) that low-tax states have better economic climates. Sometimes the answer you get is entirely determined by the way you ask the question, and that's the case here.

The report deserves a thorough debunking, just in case anyone ever does mistakenly treat it as a meaningful study. But for the moment, all you really need to know is that the ALEC report is really little more than the longest Wall Street Journal editorial of all time (one of its two authors is actually on the WSJ's editorial board).

To drive this point home, here's an excerpt from a January 2007 WSJ editorial discussing a proposal to repeal Georgia's state income tax:

Georgia may beat Mr. Sanford to the punch. House Republicans in Atlanta have announced that one of their top priorities is to use the half-billion-dollar budget surplus as a downpayment to "dismantle the current tax code." House Republican Majority Leader Jerry Keen tells us the debate in Atlanta is between a flat-rate income tax and a plan that would "do away with the personal income tax but broaden the sales tax by eliminating 107 exemptions. We're committed to a pro-growth tax plan that announces to the country that Georgia is open for business."

A nearly identical paragraph shows up in the December 2007 ALEC report:

Georgia may beat Gov. Sanford to the punch. House Republicans in Atlanta have announced that one of their top priorities is to use the half billion dollar budget surplus this year as a down payment to "dismantle the current tax code." House Republican Majority Leader Jerry Keen tells us the debate in Atlanta is between a flat rate income tax and a plan that would "broaden the sales tax by eliminating 107 exemptions and then do away with either the personal income tax or all property taxes. We're committed to a pro-growth tax plan that announces to the country that Georgia is open for business," he said.

Cutting and pasting is an author's privilege, I suppose. But the "cut and paste" approach shouldn't be confused for well-designed economic policy research.

Via the 21st Century Taxation blog, news that history may be repeating itself in the Golden State.

California's historic 2003 recall of then-Governor Gray Davis, and subsequent election of Arnold Schwarzenegger, was one of the biggest tax-policy-related electoral dramas in recent memory. (And was certainly one of the most flagrant abuses of "special elections" in modern California history-- but that's another story.)

Every Californian-- including, no doubt, Schwarzenegger, who owes his job to this bit of political theater-- remembers that what drove the recall election was public anger (almost certainly fueled by out of state money, but again, that's another story) over Davis' decision to balance the state's budget by ending a state-financed cut in the annual "car tax" that he himself had pushed through back in 1998. And most Californians probably also remember that the first thing Schwarzenegger did after taking office was to restore the car tax cut.

So it might seem downright absurd to hear anyone talking about repeating Davis' tactic and ending the car tax cut. But that's what the Sacramento Bee's Dan Walters has to say in his column this week-- and he's right.

Walters points out, correctly, that Schwarzenegger's move to permanently cut the annual car tax from 2% of a car's value to 0.65% of value is simply not affordable now-- and probably wasn't affordable when he first did it in '03.

In states such as Virgina and Washington, the debate in the past decade has been more about whether an annual car tax should even exist (answer: it should), rather than what the rate should be. This doesn't appear to be the case in California, where the tax is in no danger of being repealed entirely.

The question in California is simply whether the rate cuts enacted in 1998, and permanently extended after Davis' recall debacle, were ever-- then or now-- remotely affordable. Walters makes a convincing case that Schwarzenegger has used short-term surpluses to paper over the inherent unaffordability of the car tax cut.

With those budget surpluses suddenly and spectacularly gone, a sensible approach for state lawmakers-- and the governator-- would be to put all cards back on the table, including the state-funded car tax cut. If the state can't afford to pay for the car tax cut, lawmakers owe it to their constituents-- and to the state's future-- to either repeal the cuts, or to hike some other tax to pay for it.

It remains to be seen whether lawmakers can achieve this standard of sensibility. But California wouldn't be the first state in which lawmakers were forced to eat crow by repealing tax cuts enacted during the boom days of the late 1990s-- or even the first in late 2007. Michigan lawmakers earlier this year raised that state's flat income tax rate, essentially reversing the signature tax cut pushed through by then-Governor John Engler in the late 90s.

If Michigan can come to its senses, can California be far behind?

Last month, the California Legislative Analyst's Office (LAO) released a report examining the state's largest tax expenditure, its personal income tax deduction for mortgage interest. At an annual cost of $5 billion, the deduction loses as much personal income tax revenue as some states collect in a given year, yet Californians -- particularly low- and moderate-income taxpayers -- don't seem to be getting much for their money.

Nearly half of the benefits from the mortgage interest deduction go to the richest 10 percent of taxpayers in the state and, as the report points out, the deduction probably isn't doing all that much to improve homeownership rates. Accordingly, the report offers a number of recommendations -- such as converting the deduction to a credit -- for making this particular tax expenditure more cost-effective, ideas that Daniel Borenstein of the Contra Costa Times recently endorsed.

Of course, such critical thinking about California's tax system will be even more essential in the months ahead, as it now appears that the Golden State will face a budget deficit as big as $14 billion in the coming fiscal year.

On Wednesday, December 12, the U.S. House of Representatives passed a bill, H.R. 4351, that would extend the exemptions that keep the Alternative Minimum Tax (AMT) from affecting most Americans and would replace the revenue the AMT is projected to otherwise collect. One provision would help replace the AMT revenue by restricting offshore tax avoidance schemes by wealthy individuals. Another provision would delay the implementation of an unnecessary tax break for multinational businesses which hasn't even gone into effect yet.

Dropped from this bill is a provision that would end the tax subsidy for "carried interest," a type of compensation paid to wealthy fund managers. Carried interest is currently taxed at a special, low 15 percent rate, lower than the tax rate paid by many middle-class families. Last week, Republicans in the Senate blocked a similar House-passed bill that would have ended this tax subsidy because they were committed to defending this break for millionaire fund managers. So, in the spirit of compromise, the House passed H.R. 4351 on Wednesday without the carried interest provision.

Incredibly, Republican leaders in the Senate are insisting that they will block this new bill even though it lacks the "controversial" carried interest provision. They seem to believe that H.R. 4351 includes "tax increases" that will hurt the economy. By this logic, the economy literally depends on the ability of rich individuals to avoid taxes by using offshore shell companies. Also by this logic, the economy depends on a tax break for multinational companies that has not even gone into effect yet.

Meanwhile, 17 Democratic members of the House, mostly members of the Progressive Caucus, signed a letter sent to House Speak Nancy Pelosi demanding that the cost of AMT relief be fully offset. The letter argues, quoting Citizens for Tax Justice, that "AMT relief, by itself, would not be particularly progressive ... Most of the benefits would go to the richest fifth of taxpayers, and if it's deficit financed, the cost could be borne in the future by middle-income Americans in the form of cuts in public services or higher taxes. But AMT relief can be progressive if the costs are offset with revenue-raising provisions that target the very wealthiest Americans, those who have benefited the most from the Bush tax cuts." The leadership of the 48-member Blue Dog Coalition of Democrats in the House also has stated repeatedly that any AMT relief that is not paid for will be unacceptable.

For more information about the House bill and how it offsets the cost of AMT relief, see the new short paper from Citizens for Tax Justice describing the legislation.

On Thursday, the Senate failed by one vote to agree to consider legislation that would shift tax breaks away from oil and gas companies and towards more sustainable forms of energy. The move to invoke cloture on the energy bill received only 59 votes, one short of the 60-vote threshold needed to consider the bill. The sticking point for many Republicans is the $21 billion tax title, which Senate Majority Leader Harry Reid (D-NV) then removed from the bill to ensure passage. The bill, (H.R. 6) minus the tax title passed the Senate, 86-8, the same day.

The remaining provisions of the energy bill would increase fuel efficiency standards for automobile manufacturers (known as corporate average fuel economy, or CAFE) to 35 miles per gallon by 2020 and would require gasoline to contain a certain level of biofuels by 2022.

The tax provisions stripped from the bill include an extension and expansion of the renewable energy production tax credit (known as the Section 45 credit), which is a tax subsidy for deriving energy from wind, geothermal sources, hydropower or several other specific renewable sources. This provision would have cost $6.2 billion over ten years. Other provisions would encourage cleaner coal facilities, greener commercial buildings, electronic energy meters and the use of electricity from wall sockets to power automobiles, among many other advances.

The tax title included revenue-raising provisions to offset these costs, which the President and the Republicans disingenuously claim are tax increases that would hurt the economy.

The biggest offset would have barred the big oil and gas companies from using the deduction for domestic manufacturing (often called the Section 199 deduction). A legislative slight-of-hand in the tax break law enacted in 2004 redefined manufactured goods to include oil and gas so that energy companies could enjoy this tax break. (The deduction is 6% of the cost of domestic manufacturing activities this year, rising to 9% in 2010.) This tax break should arguably have never applied to oil and gas in the first place.

Other offsets included new basis reporting requirements for securities transactions to prevent avoidance of taxes on capital gains, restrictions on foreign tax credits for oil and gas, and several other provisions.

As we've argued here before, experts can certainly debate whether or not energy policy should be implemented through the tax code, but perhaps the more important point is that Congress has already showered oil and gas companies with numerous tax breaks that CTJ has criticized in the past. The tax title that has been dropped from the energy bill would have merely shifted some tax breaks away from oil and gas towards more sustainable types of energy.

In Kansas, several school districts are fighting to lure casinos into their boundaries. As the Kansas City Kansan notes, "Each of the five casino proposals on the table would bring different levels of funding to each of the local school districts." These local school districts are lobbying hard for casinos that would add to their their district's property tax base. Millions of dollars in new tax revenue -- as well as millions of dollars in social costs -- could result for the school district "lucky" enough to be the recipient of a new casino.

Meanwhile, Illinois lawmakers continue to grapple with funding education, construction, and Chicago area public transportation. Some are predicting a financial "doomsday" next year for the state if new revenues aren't created in a hurry. House Speaker Michael Madigan has come out in favor of a plan to increase state gambling to forestall the doomsday. His plan "would put a casino in Chicago, auction off two other licenses, expand existing riverboats and put thousands of slot machines and video poker at horse tracks." Illinois House members are expected back in Springfield on Monday to consider increased gambling.

Policymakers in both Kansas and Illinois have the opportunity to meet the needs of their residents through progressive and stable means, like income tax reforms. Unfortunately, gambling revenue is not stable over the long term and is certainly a regressive revenue source. Residents in both states lose when gambling proposals like these are on the table.

In last night's Republican presidential debate, moderator Carolyn Washburn asked the sort of tax policy question that each candidate should have been able to really tee off on: "Who in this country is paying more than a fair share of taxes relative to everyone else: the wealthy, the middle class, the poor or corporations?"

The answers rarely touched specifically on the actual question, possibly due to poor guidance from the moderator. Where salient, the responses varied, from "the rich" (Thompson, implicitly), "not the rich" (Romney, sort of), to "not the poor" (McCain), to "the middle class" (Romney, Paul, Giuliani) to "everyone" (Tancredo). In a separate category was Alan Keyes (who I quite honestly had no idea was running for President until I read the transcript), who adopted the clever and unique strategy of spontaneously combusting in response to the question.

The New York Times has the full transcript. Here's the relevant section, very slightly edited for non sequiturs (this standard is not applied to Keyes' response, which would have had to be excised completely), including each candidate's answer to the moderator's question:

MS. WASHBURN: ... I want to go down the line in reverse order and hear from everyone very briefly, please, 15 seconds or so.
Who in this country is paying more than a fair share of taxes relative to everyone else: the wealthy, the middle class, the poor or corporations?
Starting with Mr. Keyes.
MR. KEYES: It's one of those let you and him fight questions the people in the media always want to get us involved in; because they would like to pretend that the tax question is about fighting amongst ourselves when the real sacrifice that's required from the American people we need to start sacrificing some of these incumbents who have funded their political ambition using our money --
MS. WASHBURN: Remember, we have 15 seconds.
MR. KEYES: -- who have spent overboard into deficits after promising us on the Republican side that they would limit the government, and then produced the highest budget deficits in the history of our country.
MS. WASHBURN: Senator McCain?
MR. KEYES: I think we need to stop listening to these phonies and start looking for people who will actually fulfill the words that they speak. That's what I think.
MS. WASHBURN: Senator McCain?
SEN. MCCAIN: I know that I'm happy to say low-income Americans, except for payroll taxes, don't pay taxes, but we've got to reform the tax code. Nobody understands it. Nobody trusts it. Nobody believes in it. And we have to fix it. And we can't raise taxes as our Democrat friends want.
So I don't know exactly who's paying the most of the burden, but I would say that the American people need a tax code they can understand and that they know is fair.
MS. WASHBURN: Governor Huckabee?
MR. HUCKABEE: Over 80 percent of the American people know that the tax code is irreparably broken. I would lead one to a fair tax, and that means that the rich people aren't going to be made poor, but maybe the poor people could be made rich. That ought to be the goal of any tax system -- not to punish somebody, but to enable somebody so that they can have a part of the American dream. The fair tax does just that.
MS. WASHBURN: Governor Romney?
MR. ROMNEY: I don't stay awake at night worrying about the taxes that rich people are paying, to tell you the truth.
I'm concerned about the taxes that middle class families are paying. They're under a lot of pressure. Gasoline's expensive. Home heating oil, particularly in the Northeast, is very difficult for folks. Health care costs are going through the roof. Education costs and higher education are overwhelming. And as a result, we need to reduce the burden on middle-income families in this country.
MS. WASHBURN: Okay, a little snappier, gentlemen. (Laughter.)
Senator Thompson.
MR. THOMPSON: My goal is to get into Mitt Romney's situation, where I don't have to worry about taxes anymore. (Laughter.)
Five percent of Americans pay over half the income taxes in this country. 40 percent of Americans pay no income taxes at all. I think we need to concentrate on preserving the tax cuts of '01 and '03. That's going to be a monumental battle that's going to be coming at the end of 2010.
MS. WASHBURN: Congressman.
REP. TANCREDO: Everyone that is presently paying tax, you could be -- you can make a case that they're paying too much. The reality is, of course, you need a different system entirely. We do need to move away from this archaic -- a system that taxes productivity, which is what we do, to a system that allows for a fair tax. I believe in that.
MS. WASHBURN: Thank you.
Congressman.
REP. PAUL: The most sinister of all taxes is the inflation tax and it is the most regressive. It hits the poor and the middle class. When you destroy a currency by creating money out of thin air to pay the bills, the value of the dollar goes down, and people get hit with a higher cost of living.
It's the middle class that's being wiped out. It is most evil of all taxes.
REP. HUNTER: The tax that we're all paying that doesn't help anything -- it doesn't go to defense, it doesn't go to the roads, it doesn't go to medical care -- is the $250 billion-plus that we pay each year not to the federal government, to the Treasury, but to prepare our taxes, defend our taxes, and for the massive cost of the IRS. That's all overhead -- 250 billion-plus dollars. What we ought to do is have a system -- the fair tax system is a good one, or a flatter tax or a simpler tax, because that young couple that pays 1,450 bucks in taxes may pay $450 to their tax preparer. That's a second tax.
MS. WASHBURN: Mayor?
MR. GIULIANI: A flatter tax, a simpler tax that you could file on a one page, as an option, would be a good idea. Reducing the corporate tax, as I suggested. Reducing income tax rates across the board, which would mostly benefit the middle class. That's where the focus should be.
But we've got to reduce taxes across the board, and we should give the death penalty to the death tax. It really is a very unfair tax.
MS. WASHBURN: Thank you.

The NYT has the full transcript here. NPR's coverage is here.

Well, that's not exactly what he said. But it's apparently what he meant.

In last night's Republican presidential debate (yes, another one) from Iowa, presidential candidate Rudolph Giuliani responded to a fairly open-ended question about fiscal policy strategies by calling for a reduction in the corporate tax rate, which (it turns out) would actually bring in MORE money, not less:

Right now we should reduce the corporate tax. We should reduce it from 35 percent to 25 percent. It would be a major boost in revenues for the government.

In other words, a tax hike. He's almost certainly wrong, of course: there is no credible evidence that corporate tax rate cuts would pay for themselves, let alone providing a "major boost" to tax revenues. But it would have been fun to hear a follow-up question about whether Giuliani really believed what he'd just said-- and, if so, whether the other candidates on the stage would find such a tax hike acceptable.

The Wall Street Journal's editorial board this week, in its discussion of how to reform the individual Alternative Minimum Tax (AMT), asks itself the bold question: if we start out by telling a half-truth and make it even more misleading, what do we end up?

The answer: an outright lie.

We've noted before that the WSJ guys enjoy blurring the truth about the AMT's history. But they now clearly think "blurring" is not enough.
RE the apparently all-important question of who should be blamed for the impending AMT mess, here's what they say in a December 10 editorial:

The AMT was never supposed to hit the middle class, and it only does so now because the Democrats who designed it failed to index it for inflation and raised AMT rates under Bill Clinton in 1993.

This is laughably wrong for two reasons, in descending order of importance:
1) The Clinton AMT changes of 1993 actually reduced the growth of AMT liability.
2) Failure to index the AMT for inflation is a bipartisan failure, equally attributable to the folks who run Congress now (Dems) and the folks who ran it for most of the last two decades (Republicans). To pin this excusively (or even primarily) on Democrats is both pointless and wrong.

Thing #2 is pretty clear, and is too obviously politically motivated to spend much time with. Thing #1 is worth explaining a bit. Here goes:

The idea of the AMT is simple: we've got a regular income tax that has a top tax rate of 35 percent (now) and a ton of loopholes. Now, if Congress could repeal all the loopholes, the rates could be lower. But they have never been able to agree on eliminating the loopholes, so instead they created a backstop tax, the AMT, that doesn't have as many loopholes and has a much lower rate. So upper-income Americans either pay higher tax rates applied to a narrower base, or lower tax rates applied to a broader base, whichever is higher.

The thing to take away from this is that the regular tax and the AMT act in concert. If you want to keep the two working together, changes in the regular income tax need to be accompanied by changes in the AMT.

Now the big tax bill in 1993 did three things that affected the AMT.
1) it increased the top regular income tax rates.
2) it increased the AMT tax rates, to keep pace with the regular rates.
3) it increased the AMT exemptions, to help keep middle-income families out of the tax.

Of course, the WSJ conveniently omits things #1 and #3 in this list, and just says Clinton hiked the AMT rate. Which makes it sound like Clinton hiked the AMT.

But, as the Tax Policy Center has demonstrated, when you look (sensibly) at the net impact of all the 1993 tax changes in the AMT, what you see is that the Clinton changes actually reduced the growth of the AMT.

The TPC report also notes that, aside from inflation, the biggest factor contributing to the AMT explosion is the Bush tax cuts.

And this makes all the sense in the world. If the regular tax and the AMT are working in concert, and you cut the regular tax rates without cutting the AMT rates, OF COURSE you're gonna push more people into the AMT. That's just the way it works. But the Bush people did it, and they did it knowingly.

So let's recap: there's two kinds of policy changes that people are talking about that affect the AMT. One has to do with inaction (the lack of indexing) and the other has to do with actions (the Clinton 1993 tax changes and the 2001 Bush tax cuts).

The WSJ correctly notes that inaction is part of the problem, so kudos to them for that. All they're doing wrong on this front is saying that it's all the Democrats' fault.

But on the "action" side, the WSJ is completely ignoring one thing that obviously, glaringly, undeniably pushes more people into the AMT (that is, the 2001 Bush tax cuts), and is dishonestly mischaracterizing the other thing (the 1993 Clinton tax changes) in a (wrong) effort to say that it's all the Democrats' fault.

Politically motivated newspaper people must, I magine, face a constant struggle between telling their readers things that are true and telling them things that will help score political points. There's often a tension between these goals. The WSJ editorial board's party line on the "Clinton AMT" may ultimately help achieve their "scoring political points" goal, if only by making people more confused about taxes. And I'm sure they'll be happy about that.

But it also subtracts from the sum total of human knowledge. Not something you can often say about a newspaper article-- that you are dumber or less-well-informed after reading it than you were before you read it. But that's exactly what the WSJ has achieved with their latest Clinton-AMT screed.

Not content to allow the state's Supreme Court to restore some degree of sanity to the state's property tax system, legislators in Washington last week voted to reinstate a property tax cap that the Court had recently found to be unconstitutional. The cap, initially imposed as a result of a 2001 ballot initiative, had prevented - and, now, will continue to prevent - certain property taxes from growing by more than 1 percent per year, a rate less than the rate of inflation and well below the rate of growth necessary to maintain public services. In fact, the Legislature's vote occurred during a special one-day session hastily called by Governor Chris Gregoire, a move that seems at least partially motivated by a desire to keep localities from doing something rash, like taking the opportunity to increase property taxes and spend them on such luxuries as police or fire departments.

During the session, the Legislature also approved a change in law that will allow homeowners with incomes under $57,000 to defer payment of as much as half of their property taxes until they sell their homes. The Washington State Budget and Policy Center has produced a series of short papers examining property tax caps, deferrals, and other related issues; read them here.

In Georgia, the radical plan to abolish property taxes and hike sales taxes, proposed earlier this fall by House Speaker Glenn Richardson, is shrinking by the day. Last week, Richardson pared back his proposal so that instead of repealing all property taxes, the plan would "only" repeal all homeowner property taxes for schools (plus the annual "car tax" Georgians pay on their motor vehicles), and would pay for the change by taxing personal services.

The plan still raises worrisome questions, however. Georgia already allows large state-funded (and local-option) homestead exemptions and other tax breaks for fixed-income families. If further residential property tax relief is necessary, a state-funded "circuit breaker" tax credit would be a better-targeted (and less expensive) option than outright repeal of all homeowner school property taxes. (Circuit breakers are provisions that prevent property taxes from exceeding a certain percentage of a family's income.) And expanding the sales tax base to include services, while a shot in the arm for a sustainable sales tax, would make Georgia taxes even more regressive unless accompanied by low-income tax breaks of some kind. As the Georgia Budget and Policy Institute has pointed out, a state Earned Income Tax Credit could be an important part of this mix.

A state cannot improve the lives of its residents by becoming the "discount store of the U.S." warned Dr. William Fox, the respected Director of the Center for Business and Economic Research at the University of Tennessee, in a speech at the Annual Economic Outlook Conference in South Carolina this week. Fox said of South Carolina's tax structure, "If you want to be the discount store of the U.S. that certainly is an option. But it is not the way to create a rising income relative to the U.S. and the rest of the world."

According to The State, Fox reportedly said that South Carolina "needs to put in place a tax system that grows with the need for education and infrastructure, "so that you can invest in yourself." Fox and other colleagues are consulting with the Palmetto Institute (a South Carolina based think-tank) regarding ways to improve the state's tax structure. Let's hope that in the coming legislative sessions South Carolina follows Fox's advice instead of attempting to become the tax policy equivalent of K-Mart.

Late week few in Minnesota were surprised to learn of the state's forecasted $373 million shortfall for the FY08-09 biennium. Policymakers must find a way to fill this gap by the end of the 2009 fiscal year. The Minnesota Budget Project says, "These forecast results are further evidence that Minnesota's experiment in this decade to respond to fiscal troubles with budget gimmicks, short-term fixes and reduced investments in the state's physical and human capital has failed. The promised benefits -- a stronger economy and continued high quality of life -- have not materialized." In a November 30 press release Governor Tim Pawlenty said, "that state government should hold the line on spending and not raise taxes on Minnesotans." The Governor's release says that he "will propose tax cuts for individuals" that would be paid for by eliminating corporate tax loopholes which relate to how business income is defined.

The Michigan service tax, a six-percent tax on select services, was repealed by the Michigan Legislature only hours after it look effect last weekend. The service tax was initially passed by the legislature because it was billed (and correctly so) as a way to modernize the state's tax structure; it was also intended to help to fill a multi-million dollar shortfall in the state's 2007-08 budget.

A number of issues led to the tax's untimely demise. The enacting legislation was passed very quickly without the planning necessary to ensure a quality bill; there were inconsistencies regarding which services were taxed (for example, skiing was taxed, but golf was not); and business-to-business services were included in the legislation (something most economists recommend against). The revenue hole from repealing the service tax will be filled by a surcharge on the Michigan Business Tax. Many state business interests preferred the business tax surcharge over the sales tax base expansion proposal. Clearly Michigan's path to sales tax base expansion was rocky, but as the bases for state economies continue to change from goods to services, it's inevitable that states looking for revenue will turn to expanding their sales tax base. There are important lessons to be learned from Michigan's attempt. For more read ITEP's policy brief.

New Paper from CTJ Criticizes Turn to Borrowing

On Thursday, December 6, Republicans in the Senate voted en masse against consideration of a bill (H.R. 3996) passed last month by the House of Representatives to provide relief from the Alternative Minimum Tax (AMT) and offset the cost by closing loopholes for extremely wealthy financial managers. Instead, Republican leaders demanded that the federal government borrow the $50 billion. They got their way later in the evening, when the chamber passed a bill simply extending AMT relief without paying for it.

This sets the stage for a standoff with the House, where Democratic leaders are adamant that no laws be enacted to increase the federal deficit, in keeping with the pay-as-you-go (PAYGO) rules that were reinstated when the Democrats took control of Congress earlier this year. But in the Senate, because 60 votes are needed to pass most legislation, the Republicans were able to block the fiscally responsible approach even though it was supported by every member of the majority party.

Citizens for Tax Justice released a two-page paper today with figures explaining why this is a bad deal for middle-income Americans.

"I'm willing to accept a tax cut for people making upwards of $100,000 a year, if we send the bill to people making millions," said CTJ director Robert S. McIntyre. "But I can't support cutting taxes for such well-off people and sending the bill to people who make $50,000. Yet sadly, it's exactly those ordinary taxpayers who will likely bear the cost of the increased debt -- through higher taxes or reduced public services in the future."

Republicans Manage to Preserve Loophole for "Carried Interest" -- for Now

In the AMT relief bill passed by the House last month, one of the revenue-raising provisions to offset the cost would have closed the loophole for "carried interest," a type of compensation paid to buyout fund managers. Republican leaders have demanded that this loophole allowing wealthy fund managers to pay taxes at a lower rate than middle-income families be preserved. They appear to have gotten their way for now, as House Ways and Means Committee Chairman Charles Rangel has said he would drop the carried interest provision and replace it with some potentially more palatable revenue-raising provision.

But the battle over carried interest is far from over. In September, CTJ sent to the House and Senate a letter signed by around 300 organizations from every state urging that the loophole be closed. Lobbyists for the industry have acknowledged that the issue is likely to come up again in the next couple of years as Congress considers broader tax reform.

CTJ would like to thank all those who helped begin the fight to close the carried interest loophole. As a result of these efforts, the majority party in both chambers has, after some initial hesitation, completely adopted the position that the loophole should be eliminated. We will continue to build on these efforts as Congress turns to broader tax reform.

President Bush Relied on Expanding Reach of AMT to Mask Cost of His Tax Cuts

Republican congressional leaders claim that Congress should eliminate the AMT without paying for it because no one ever intended to collect the AMT's revenues. But that's not true.

When George W. Bush proposed his tax cut plan, he and his tax advisors were well aware that, since the AMT is an alternative tax, lowering the regular tax rates without adjusting the AMT would push tens of millions of people into the AMT. But they needed the added AMT revenues to significantly reduce the projected cost of Bush's tax cut program. In fact, Bush's chief economic advisor was adamant that Bush's plan contemplated a huge increase in the AMT.

"Having created most of the AMT problem, Bush and his congressional allies are now trying to rewrite history so they can get away with loading even more debt on our children," said McIntyre. "They shouldn't be allowed to get away with it."

An interesting subtext in the battle between Republican presidential hopefuls has been the state tax record of the major candidates. Mitt Romney and Mike Huckabee each have track records you can look at from their time as governors, and Rudy Giuliani ran the city of New York, which has a budget rivalling some states. And each of these three have drawn some flak from the others (most of it B.S.) for being "tax hikers" during the debates so far. But the developing story around Huckabee's record is by far the most interesting (and infuriating).

Critics of Huckabee are now painting him as a tax-and-spender because he signed into law (and expressed approval for) state tax increases during his tenure as governor of Arkansas. This is, on its face, pretty aggravating, because Huckabee had some pretty valid reasons for supporting tax hikes. In 2003, when the state legislature voted to temporarily increase the income tax and permanently increase the sales tax, Arkansas had essentially been told by the state's highest court that it was violating basic constitutional guarantees by not adequately funding K-12 education-- and that they had to fix this problem by coming up with more money for education.

Anyway, there are extenuating circumstances here, so it's quite simplistic to chastise Huckabee for being willing to consider tax hikes at a time when the state was basically flouting its own constitution.

In fact, as George Stephanopoulos noted in an interview with Huckabee on the morning talk shows this past Sunday, even if anti-taxers are correct in citing a basic disjunction between what Huckabee did as governor and what he says he'd do as president, they've actually got the problem backwards. The real question is not why he spent like a drunken sailor as governor and is holding the line on spending as a presidential candidate; the real question is why a guy who comes off, overall, as pretty reasonable on fiscal policy issues as a governor is willing to assert "no new taxes" today.

Here's the exchange from This Morning:
.....................................................
GEORGE STEPHANOPOULOS: Let me move to your record on taxes in Arkansas, which is also coming under a lot of scrutiny and great criticism from this group called the Club for Growth, which is now starting to run ads in Iowa about your record. Here's part of it.
(Plays clip of Huckabee) "There's a lot of support for a tax at the wholesale level for tobacco, and that's fine with me. I will very happily sign that. Others have suggested a surcharge on the income tax. That's acceptable. I'm fine with that." (End clip)
STEPHANOPOULOS: And the tax burden in Arkansas did go up during your tenure from about $1,900 per person to $2,900 per person over 10 years and also an overall increase of about $500 million. So how do you plead to the charge of raising taxes?
MIKE HUCKABEE: Well, first of all, I plead to the charge of cutting taxes 94 times. I also recognize that the income tax was the same when I left office as it was when I started. The overall tax burden, according to the US Department of Commerce, state and local taxes in my state in the nearly 11 years I was governor went up by 1.1%....[T]hat was a put up or shut up moment as I spoke to the legislature. If you play that whole speech, what you would see is that the context was we were days away from a budget shutdown that would have closed the government in Arkansas. We had had an impasse on the budget.
I was taking various positions of here's how we can fix this budget crisis, and every time I said this might work, there would be a press conference by some of the Democrat legislators who were saying, well, if that's what the governor wants, we're against it. So what I did was go to the legislature and I said, okay, you don't like any of my plans, fine, let's come up with yours and I started listing what some of theirs were. And the context of that speech was you want a surcharge, you want a sales tax, okay, but we've got to have a budget, people. We've got to come up with a way to keep state government working. We've got people in nursing homes. We have schools to run. We have roads to take care of. And we can't afford a complete meltdown of the government.
STEPHANOPOULOS: But if that's the right...
HUCKABEE: So if you don't like my ideas, let's get yours out there.
STEPHANOPOULOS: If that's the right thing to do as governor when you're facing a crisis, why wouldn't it be the right thing to do as president? Now in this presidential campaign you've signed a pledge saying you wouldn't raise taxes under any circumstances.
HUCKABEE: Because I don't think the federal government needs more money. If you look at the spending issues that we have, it's pretty evident to me that we need some policy changes more than we need some tax changes at the federal level. So it's a different thing when you're running a state government and you have to balance your budget, you have to make sure that you're living within the means, and the second thing is, you're constantly barraged by federal programs pushed down your throat. That's why nearly every one of the governors, 43 governors, I believe, maybe 48 face serious budget shortfalls in '01/'02 because of the combination of the recession, federal mandates that were unfunded, as well as the impact and effects of 2000 - of 9/11.
.........................................

In other words, Huckabee is saying it's OK to take irresponsible fiscal policy positions as a presidential candidate because, as we all know, federal policymakers don't have to live within their means.

Stephanopoulos goes a bit overboard here by criticizing Huckabee's allowing the per-capita tax load to increase during his watch-- after all, when per capita income goes up, per capita taxes will go up too, even if you don't change the tax system at all-- but on the narrow question of consistency, George has it exactly right: if there's mud to be slung at Huckabee for taking irresponsible fiscal policy positions, it's not what he said then, it's what he's saying now. No one who's willing to take a "no tax" pledge-- especially at a time of large, persistent budget deficits-- has any business running our country.

Today's excellent Daytona News-Journal editorial on the likely user fee explosion that would result from passing the Florida legislature's January property tax ballot measure includes an interesting rationalization from Florida House Speaker Marcio Rubio. Here's Rubio explaining why it would be OK if local governments made up for unaffordable property tax cuts by hiking a variety of user fees:

The West Miami Republican told the South Florida Sun-Sentinel newspaper that such fees are fair. "Fees are clear; they're not hidden," he said. "If you don't like that city and county officials are raising them, you can vote them out of office on Election Day."

But exactly the same thing can be said of local property taxes. And in fact, the transparency and accountability of property taxes is what makes so many advocates of local control very protective about this revenue source.

This isn't to say, of course, that Florida's property taxes are currently all that transparent--they're not. They're unfair and unpredictable, imposing unjustifiable tax penalties on first-time homebuyers and rewarding people for nothing more exceptional than staying in the same home for a long time. But these flaws can be remedied quite easily if lawmakers are willing to renounce the "Save Our Homes" tax break that makes it all go wrong.

Moreover, user fees are actually fairly sneaky, in the same way that the sales tax is sneaky: it nickel-and-dimes you in a way that makes it hard to gauge the overall annual impact on your pocket book. In other words, you can make a pretty good case that user fees are actually less transparent than the property taxes Rubio wants to get rid of.

The Florida Taxation and Budget Reform Commission, which meets once a generation (true) to recommend structural changes to Florida's tax system, has come up with a good one: expanding the sales tax base to include more services.

This very sensible idea has an unfortunate history of inducing groans wherever it's brought up; just ask lawmakers right now in Maryland or Michigan.

But that doesn't mean it's a bad idea: it's not. It just means that implementing a sales tax on services would require taking unwarranted tax breaks away from very specific groups who would like to keep them, thank you very much, and who tend to have lobbyists on call 24-7 ready to defend these tax breaks. And that's a tall order.

Florida lawmakers probably know this better than anyone, since they were among the first (and only) states to pass (and quickly repeal) something approaching a comprehensive sales tax on services, back in the late 1980s. But at least one member of the commission who remembers those days, Martha Barnett, thinks the bitter experience from the last go-round should be used to help push through this always-good idea now. The problem last time, she thinks, was that lawmakers rushed the process:

"We tried to do too much too fast with too little information," she said.

Lawmakers in Maryland and Michigan would probably nod their heads in agreement on that one, as well.

It's easy, of course, for an unelected body such as the Commission to propose something as politically volatile as a services tax. And if lawmakers act on the Commission's recommendation, they can count on a lot of political opposition.

But it's still the right thing to do. Check out Fair Tax Florida's policy brief on taxing services for more information.