Quick Hits in State News: Tax Breaks Spell Trouble Everywhere



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The difficulty of enacting real tax reform is on display in Louisiana, where a commission studying the state’s tax breaks just heard from some of the industries and interests seeking to protect their special breaks and loopholes.  For example, a retail group claimed that a sales tax exemption for international tourists doesn’t actually cost the state because it raises $1.80 in revenue for every $1.00 foregone. In the end, though, it did cost the state $1.1 million in sales taxes last year.

Transportation officials in Kansas and Tennessee are in an increasingly common situation: looking for new revenues as their states’ gas taxes dwindle because of rising construction costs and improving vehicle fuel-efficiency.  Officials in both states seem to recognize that a gas tax hike is needed, but in Tennessee at least, the state’s anti-tax governor has reportedly ruled that out.

In November, voters in Kansas will be asked to decide whether their state constitution should be changed to lower taxes on boats and other watercraft. Changing a state’s constitution to reward boat purchases? Seriously? The experts who wrote the ITEP Guide warn that “tax policies that systematically favor one kind of economic activity or another can lead to the misallocation of resources or, worse, to schemes whose sole aim is to exploit such preferential tax treatment.”  Let’s hope Kansas voters don’t start down this slippery slope.

The Savannah Morning News editorial board is urging the state legislature to fix a tax break in the Georgia Tourism Development Act which was intended to encourage development but “apparently is indecipherable” and can’t be implemented. The bureaucratic quagmire the legislation created highlights one of many problems with trying to micromanage economic development through the tax code.

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