Naughty

Michigan’s legislature and Governor Snyder top the naughty list by giving away more than $1.6 billion in tax cuts for business and paying for it with tax increases on low-and middle-income working and retired families.

Florida continued to dole out more corporate pork this year, including a property tax break that happens to benefit huge commercial land owners, like Disney World and Florida Power and Light, and other corporations (that also happen to be major donors to the state’s Republican governor and legislative majority party).

Minnesota’s legislature missed an opportunity to do the right thing when it rejected a tax increase on the state’s wealthiest residents. The plan was proposed by Governor Dayton and supported by 63 percent of Minnesotans over the alternative, which was cuts to spending on education, health care and other vital public services.

Anti-tax activists in Missouri were hard at work again. This year they were collecting signatures for a ballot initiative that would eliminate the state’s personal income tax and replace it with a broadened and increased sales tax.

Nice

Connecticut’s Governor Malloy and the legislature adopted a $1.4 billion tax increase that improved tax fairness in the state and protected public investments like education and health care.  Most notably, the state added an Earned Income Tax Credit, a significant tax break for low-income working families.

District of Columbia lawmakers greatly reduced the ability of corporations to dodge their fair share of taxes by adopting combined reporting (which makes it harder to hide profits in other states) and a higher corporate minimum tax. The Council also temporarily increased taxes for individuals making more than $350,000 a year and limited itemized deductions, which are most often taken by high income filers.

Hawaii lawmakers also limited upside-down tax giveaways (itemized deductions) for their state’s richest residents and passed other tax changes to raise much needed revenue.

A Little Bit Naughty and Nice

New York’s Governor Andrew Cuomo reversed his campaign vow not to raise taxes and supported a tax increase on residents earning more than $2 million a year.   The plan, passed by the legislature, also included a tax break for those with income under $300,000.

However, New York lawmakers passed the governor’s cap on property taxes this summer, which is predictably creating crises and forcing dramatic cuts in local education, medical, and public safety services.

Illinois raised significant revenue earlier in the year through temporary personal and corporate income tax rate increases, all designed to stave off harsh spending cuts, but then turned right around and gave away hundreds of millions of dollars to Sears and CME, allegedly to keep them in the state.

On September 26, the Office of the Inspector General for the City of Chicago released its annual budget options report  to guide city officials as they debate how to close the city’s $1.2 billion budget deficit.  The recommendations are extensive (this year’s report is 136 pages long, more than 80 pages longer than last year’s), and contain some suggestions sure to be controversial, including instituting a city income tax and a commuter tax.

One promising recommendation, that the city broaden its sales tax base, is similar to a plan Mayor Rahm Emanuel proposed earlier this year.  It was quickly dubbed the “ Rahm Tax.”  The mayor’s plan would have imposed a sales tax on those services that he deemed “luxury items,” including limo services, tanning parlors and pet grooming.

The current sales tax base in Illinois is strikingly narrow.  A report released by the Federation of Tax Administrators shows Illinois taxing only seventeen out of 168 possible services; only Oregon, New Hampshire, Alaska, and Colorado tax fewer services. 

The obvious advantage to multiplying the goods and services subject to tax is that a state (or city) can actually lower its overall sales tax rate and still generate the same amount of revenue.  Those items purchased by all of us, at fairly consistent rates (think school supplies, shampoo, and shoes), are already subject to a sales tax.  Meanwhile, services – from limo rides to gym memberships to interior design – are not.  So while taxpayers might initially balk at the idea of “new taxes,” everyone is better off if the tax burden is more broadly shared. 

At 9.75 percent, Chicago’s sales tax rate is one of the highest in the country, so extending it to services is not insignificant. However, the prospect of more equity in the system, coupled with the potential to eventually reduce the overall rate, should actually make this an appealing option for Windy City residents.

Photo of Rahm Emanuel via Adam Fagen Creative Commons Attribution License 2.0

Here’s a headline that shouldn’t surprise anyone: “Business groups complain about Illinois taxes.”  That’s the headline that ran in Tuesday’s State Journal-Register after a hearing in Chicago on Illinois corporate income taxes adjourned. Three more hearings on this same issue will be held across the state through the summer. The hearings are a direct result of companies threatening to leave Illinois because of legislation this year that temporarily increased the state’s corporate income tax rate.

Senate President John Cullerton asked that businesses testify at the hearings. He also said he was hoping, through the hearings, “to take a holistic approach to business taxes as opposed to the continued piecemeal policies that often pit one business against another.” This is a laudable goal, but it doesn’t take a crystal ball to predict that the some in the business community will keep making the same basic demands.

Some corporations want to reduce the corporate income tax rate, while others say that tax credits or special incentive programs should be expanded. Of course, these are costly propositions that will make it even harder for Illinois to balance its budget.

We applaud Illinois lawmakers for delving more deeply into corporate tax reform and specifically tax expenditure reform. But it’s important that the committee hear from a range of voices rather than just the same old group saying the same old thing – that their taxes are too high.

Photos via  Jimmy Wayne Creative Commons Attribution License 2.0

Lower the tax rate…or else.  Continued threats from Illinois business lobbyists warning that businesses will leave the state have forced the Illinois state legislature to order a joint House-Senate Revenue Committee to review Illinois’s corporate tax structure.  Companies like Caterpillar and the Chicago Mercantile Exchange continue to complain about the corporate tax rate and threaten to skip town and find another state to do business in if the committee doesn’t respond with dramatic rate cuts.

Illinois Senate President John Cullerton says the committee will not only look at corporate tax rates, but will also consider reducing corporate subsidies and special exemptions to ensure any change in the rate won’t reduce the overall corporate tax revenues.

Many businesses have come out in support of eliminating loopholes, not surprisingly most of which pay the full statutory corporate tax rate.  David Vite, president of the Illinois Retail Merchants Association, said that “the most important thing is to have a fair structure that makes Illinois efficient and as attractive as it can possibly be so we can get more businesses here to spread the burden of running the government more broadly.”

A myth that the corporate tax rate is the primary factor in business decision-making just won’t die.  A recent CTJ article showed that business executives consider taxes low on their list of priorities.  The tax rate is just one small factor that businesses take into consideration when deciding what state will give them the best chance to be profitable.  As Doug Whitley, President and CEO of the Illinois Chamber of Commerce said, “robust economic activity also requires sustained and significant investments in transportation infrastructure…educational opportunities that ensure a quality workforce and support retraining when required.”  The fact is, these investments all cost money, and if corporations are going to benefit from them they should contribute to their funding, just as individual Illinois taxpayers do.

Similarly, when a family is looking for a place to settle down, low taxes are pretty low on their list of priorities.  They want to know about the educational system, the community, and whether or not this is a good place to raise their children. Everything that makes a community  appealing to that family is supported by the tax base.

You wouldn’t expect a family to uproot itself and move to another state simply because they could save a couple hundred dollars in taxes next year.  Why would a corporation?

Lost in this tax debate are the vital public services that support the growth of the private sector.  Corporate taxes are simply one cost of doing business.  This is not to mention that all of these complaining companies have failed to mention the extraordinary financial and logistical costs of moving an entire business to another state.

We can always expect business leaders to call for rate cuts that would fatten their profit margins, but we shouldn’t expect Illinois’ elected officials to believe they’re acting in the public interest.

Photo via  spudart Creative Commons Attribution License 2.0

How much is enough? On top of the close to $500 million in corporate tax breaks Illinois doles out each year, Governor Pat Quinn now finds himself confronted by a growing crowd of CEO’s demanding even more. In the wake of tax-break lobbying efforts by Motorola, Sears and Caterpillar, the latest corporation seeking preferential tax treatment is CME, owner of the Chicago Mercantile Exchange and the Chicago Board of Trade.  These companies claim that the temporary corporate tax rate hike enacted by Illinois lawmakers earlier this year might force them to pull up stakes and leave if the Governor doesn’t bend the tax code to accommodate their specific industry.  This tactic is widely viewed as an empty threat, but the Governor has said his door is open.

Matt Gardner, author of Balancing Act: Tax Reform Options for Illinois and Executive Director of the Institute on Taxation and Economic Policy, issued the following statement in response to the controversy:

"The real problem with the Illinois corporate income tax rules isn’t the rates, it’s the way the state has lavished industry-specific and even company-specific tax breaks and loopholes over the years.

“CME recognizes the inequities created by these corporate tax giveaways, but ironically, the solution put forward by CME and other highly profitable corporations is to create even more holes in the corporate tax code, further shifting the burden of the corporate tax to those companies not blessed with high-paid lobbying teams. For example, over the last three years, CME paid an effective state income tax rate of 7.7 percent, while Deere & Company  has been paying only 2.2 percent, and Wells Fargo a mere 0.7 percent.

“Capitulating to big businesses’ aggressive lobbying is what got Illinois in this mess in the first place.  The “single sales factor” tax break that lawmakers enacted a decade ago was designed to please manufacturing companies. This single tax break now costs the state close to $100 million a year—and shifts the cost of funding public services away from manufacturers and onto every other Illinois business – with no demonstrable impact on the size of Illinois’ manufacturing sector. Combined with nearly $400 million in other corporate tax giveaways annually, the single sales factor increases the pressure on state lawmakers to hike tax rates in order to preserve a minimal level of growth in the corporate tax.  Repealing the single sales factor is the first thing the governor and legislature can do to make the Illinois corporate tax system more equitable; creating more exceptions for corporations now lining up to renew their expiring deals will create even more instability in the state’s revenues.

“Taxes are part of the cost of doing business, and corporations get a big bang for those bucks: educated workers, reliable energy sources, roads and tracks that get them to work and their product to market, the list goes on.  If CME and other corporations want a stable, predictable economic environment, they should be asking for fewer loopholes, not more.”


Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP's mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. ITEP’s full body of research is available at www.itepnet.org.

Sales tax laws would be essentially meaningless if retailers were not required to collect the tax every time a purchase is made.  The opportunities for customers to evade the sales tax (either on accident, or on purpose) would be overwhelming.  Every state with a sales tax knows this — and as a result, the vast majority of retailers are legally required to collect and remit sales taxes.

Amazon.com and many other online retailers, however, are the major exception to this broad rule.  A 1992 Supreme Court case carved out a special exemption for any “remote sellers” that don’t have a “physical presence” in a state — like a store or warehouse.  The ruling has allowed the Internet to become an open highway for tax evasion. While customers shopping online owe the same sales tax they would if they shopped in a store, very few actually take the time and effort necessary to pay that tax.

This week, four states (California, Louisiana, Texas, and Vermont) made headlines for their attempts to limit the amount of sales tax evasion occurring through “remote sellers,” while a fifth state (Illinois) will soon have to defend its efforts to do the same in court.  By contrast, South Carolina lawmakers were recently bullied into granting Amazon an exemption from having to collect sales taxes for five years, despite the fact that it will soon have a “physical presence” in the state.

In Vermont, Governor Shumlin recently signed a so-called “Amazon law” that will eventually require all remote sellers partnered with affiliate companies physically based in the state to collect and remit sales taxes (see this ITEP report for more on “Amazon laws”).  Unfortunately, the bill was written so that it won’t take effect until 15 other states have enacted similar laws. 

Six states — Arkansas, Connecticut, Illinois, New York, North Carolina, and Rhode Island — have enacted such laws so far, and many more have given the issue serious consideration.  In the meantime, remote sellers like Amazon will be required to notify Vermont residents of the taxes they owe when making a purchase.

The California Assembly easily passed an Amazon law last week.  That legislation now goes back to the Senate, where a similar bill gained narrow passage last month.  Even if the Senate approves the Assembly’s version of the bill, however, it’s unclear whether Governor Brown will sign the measure.

Louisiana can now be added to the long list of states giving serious consideration to enacting an Amazon law.  The House Ways and Means Committee unanimously passed such a law in late-May, though opposition by Gov. Jindal makes it unlikely that it will be enacted any time soon.

In Texas, Gov. Perry recently vetoed a measure that would have required Amazon.com to collect sales taxes in the state, though the legislature may still try to enact the measure by inserting it into a larger bill that Perry is unlikely to veto. 

Unlike the true “Amazon laws” discussed above, the measure in Texas was designed to prevent Amazon from continuing to skirt its sales tax responsibilities by claiming that its Texas distribution center is actually owned by a subsidiary, and therefore does not amount to a “physical presence.”  The nearby photo is the actual sign in front of the Texas-based distribution center that Amazon claims it does not own.  

In Illinois, the Performance Marketing Association (PMA) has filed a lawsuit challenging the constitutionality of the state’s Amazon law.  The lawsuit is similar to one being pursued by Amazon against New York State.

And in South Carolina, Amazon.com has demanded, and received, a five year exemption from having to collect sales taxes on purchases made by South Carolinians, despite the fact that it plans to open a distribution center in the state (and will therefore meet the Supreme Court’s definition of having a “physical presence”). 

The granting of this exemption represents a stark reversal from just one month ago, when it was soundly defeated 71-47 in the House. 

Brian Flynn of the South Carolina Alliance for Main Street Fairness accurately summed up the unfortunate reality of this situation when he said that “with this economy, [Amazon was] in a good position to strong-arm legislators.”  Fortunately, the exemption is only supposed to last five years — though judging from Amazon’s past behavior, it’s reasonable to expect that the company will undertake an aggressive campaign to extend that five-year window.

In just the last few weeks, Arkansas and Illinois joined New York, North Carolina, and Rhode Island in enacting legislation requiring some online retailers, like Amazon.com, to collect sales taxes on purchases made by their state’s residents.  At least a dozen other states are considering enacting similar policies, and the list of states with a serious interest in this issue seems to be growing by the week.  In a new brief, ITEP explains the basics of so-called "Amazon taxes," and discusses the actions that Amazon, Wal-Mart, Home Depot, and other retailers have taken during this new surge of interest in sales tax reform.

Read the ITEP brief.

Earlier this year, Illinois took a major step toward balancing its budget for the upcoming fiscal year by increasing its flat-rate income tax from 3 percent to 5 percent. Even at that time, however, lawmakers were under no illusion that this important step had solved the state's fiscal woes.  A new report from the Center for Tax and Budget Accountability provides a sobering view of just how big a budgeting challenge Illinois lawmakers still face.  Among the findings of the CTBA report is that even after the recent tax hike, Governor Pat Quinn's budget proposal for fiscal year 2012 would leave the state with a revenue shortfall of over $1 billion.

This report was released at CTBA's annual fiscal symposium last week.  The symposium, aptly entitled "$7 Billion in New Revenue: Now What Do We Do?", included illuminating discussions of a number of spending and tax reform strategies that could help the state deal with its remaining short-term budget deficits, while simultaneously strengthening the state's long-term fiscal position.  Keynote speaker and Illinois Senate President John Cullerton reiterated his previous public statement that he viewed the state's costly and regressive income tax exemption for retirement income as a tax break worth examining as part of this process. And a  new ITEP report released to coincide with ITEP staff's participation in this symposium, "Should Illinois Tax Retirement Income?", confirms Cullerton's view. The report shows that this one tax break costs Illinois almost $1 billion a year -- roughly the size of the state's remaining fiscal shortfall.

Illinois lawmakers took an important step earlier this year to pay for needed public services in the short run -- but it's important to recognize that this year's legislative actions to date have done virtually nothing to achieve the structural tax reforms needed to ensure the long-term sustainability of the state's tax system. ITEP's report -- and Senator Cullerton's willingness to identify the costliest income tax break in Illinois as fair game -- clearly identifies one important strategy for achieving these long-term reforms.

Read the ITEP Report

Read the CTBA Report

Last week Illinois joined New York, North Carolina, and Rhode Island by enacting legislation requiring Amazon.com and other online retailers working with in-state affiliates to collect sales taxes.  Arkansas’s Senate and Vermont’s House recently passed similar legislation, and Arizona, California, Connecticut, Hawaii, Minnesota, Mississippi, and New Mexico are considering doing the same.  Interestingly, lawmakers in each of these states are being spurred to do the right thing by major retailers like Wal-Mart, Sears, and Barnes & Noble.

In most states, Amazon and other online retailers are not currently required to collect sales taxes unless they have a “physical presence” in the state, though consumers are still required to remit the tax themselves.  Unfortunately, very few consumers actually pay the sales taxes they owe on online purchases — in California, for example, unpaid taxes on internet and catalog sales are estimated to cost the state as much as $1.15 billion per year.

The so-called “Amazon laws” recently adopted in Illinois, New York, North Carolina, and Rhode Island are all designed to limit this form of tax evasion by broadening the class of online retailers that must pay sales taxes.  Specifically, under these new laws, any retailer partnering with in-state affiliate merchants is required to pay sales taxes on purchases made by residents of that state.

Up until recently, the reaction to these laws has been mostly hostile.  Grover Norquist has branded them a (gasp) “tax increase,” despite the fact that they’re designed only to reduce illegal tax evasion.  More importantly, Amazon has challenged the New York law in court, and has ended relationships with affiliates in North Carolina and Rhode Island in order to avoid having to pay sales taxes on sales made within those states.  Amazon has also promised to severe ties with its Illinois affiliates, and has threatened to do the same in California if a similar law is adopted there.  These tactics mirror a recent decision by Amazon to shut down a Texas-based distribution center in order to avoid having to remit taxes in that state as well.

But Amazon may not be able to bully state lawmakers for much longer.  Since New York passed its so-called “Amazon law” in 2008, North Carolina, Rhode Island, and now Illinois have already followed suit despite all the threats.  And it appears that Arkansas and Vermont may very well do the same — as proposals to enact Amazon laws in each of those states have already made it through one legislative chamber.  In addition, at least seven other states (listed in the opening paragraph) have similar legislation pending.

According to State Tax Notes (subscription required), Wal-Mart, Sears, and Barnes & Noble are each attempting to partner with affiliate merchants recently dropped by Amazon.  Even more importantly, several of the large retail companies (like Wal-Mart, Target and Home Depot) are joining forces to lobby in favor of Amazon laws. These companies’ interest is in large part due to the fact that they already have to remit sales taxes in the vast majority of states because of the “physical presence” created by their large networks of “brick and mortar” stores.  If more traditional retailers begin to voice support for Amazon laws, the progress already being made on this issue is likely to accelerate.

For more background information on the Amazon.com tax controversy, check out this helpful report from the Center on Budget and Policy Priorities.

We've written before that state governments provide a wide array of tax breaks for their elderly residents. Almost every state levying an income tax now allows some form of exemption or credit for its over-65 citizens that is unavailable to non-elderly taxpayers. But many states have enacted poorly-targeted, unnecessarily expensive elderly tax breaks that make state tax systems less sustainable and less fair. These breaks are being reconsidered in Illinois, Michigan, and Hawaii.

One of the most egregious examples of the special treatment retirees receive is the Illinois income tax exemption for all retirement income. But this exemption is getting more and more attention. Senate President John Cullerton recently said, “It would just be a matter of fairness” to tax this income.

The Chicago Tribune joins us in applauding Cullerton for raising this issue. “Illinois needs a talk about revising tax policies and rethinking exemptions," the Tribune editorializes. "Not to grab more from taxpayers, but to broaden the tax base as a matter of fairness. Why should the working family making $50,000 a year pay a tax that the retiree getting $100,000 a year avoids? Credit Cullerton for thinking creatively — and out loud. ”

Eliminating senior tax preferences is also receiving attention in Michigan, where Governor Rick Snyder has proposed scrapping the state’s generous exemptions for pensions, annuities, and various other types of retirement income.  Unfortunately, Snyder has paired this change with an elimination of the state’s EITC — a proposal that has contributed greatly to the overall regressivity of Snyder’s personal income tax changes.  Retaining the EITC and means-testing Michigan’s pension breaks, rather than eliminating them entirely, could greatly reduce the regressivity of Snyder’s plan. 
 
Finally, in Hawaii, a proposal to tax pensions earned by taxpayers with incomes over $100,000 (or $200,000 for married filers) recently passed the House.  Unlike in Michigan, this plan both includes protections for low-income retirees, and uses the revenue it would generate in order to close the state’s budget gap.

We recently brought you news of policymakers in Illinois voting to temporarily increase their corporate and personal income tax rates. The state’s flat rate income tax will increase from 3 to 5 percent until 2015. In 2015 the income tax rate will fall to 3.75 percent, and in 2025 the rate will fall to 3.25 percent. Corporate income taxes were also increased from 4.8 percent to 7 percent until 2015, when the rate will drop to 5.25 percent. In 2025, the corporate income tax rate will fall back to 4.8 percent.
 
For tax justice advocates and other folks worried about the state’s fiscal solvency (lawmakers passed the tax package in order to help deal with a $15 billion deficit) the tax increase was welcome news. In a bit of a twist, some public officials and lobbying groups from other states seem elated by the legislation too and hope that businesses will leave Illinois for their state.
 
In fact, Wisconsin Governor Scott Walker issued a statement saying, “Wisconsin is open for business.  In these challenging economic times while Illinois is raising taxes, we are lowering them.  On my first day in office I called a special session of the legislature, not in order to raise taxes, but to open Wisconsin for business.”

New Jersey Governor Chris Christie’s administration launched a campaign to lure Illinois businesses to the Garden State. An ad recently placed in the (Springfield) State Journal Register reads "Had enough of outrageous tax increases? We're committed to fiscal responsibility and lower taxes." And, according to the St. Louis Post Dispatch, the Missouri Chamber of Commerce and Industry's website says: "(We're) looking at ways to position Missouri to take advantage of our neighboring state's economic misfortune." There is even a movement afoot in Indiana to lower their state corporate income tax to lure Illinois businesses.

Illinois Governor Quinn’s response to Christie’s campaign was pretty direct. He recently said, “I don’t know why anybody would listen to him [Governor Christie]. New Jersey’s way of balancing the budget is not to pay their pension payment, not to deliver on property tax relief that was promised, to fire teachers, to take an infrastructure project — building a tunnel that had already been started — and end it and have to pay money back to the federal government.”
 
Despite these efforts to lure Illinois businesses we haven’t seen businesses packing up their computers and moving to other states. The reason is simple: There is much more to business location decisions than a state’s tax rate.

The overall business climate, education of the work force, quality infrastructure, and a variety of other factors determine a corporation’s location. Let’s not forget that revenue generated from the tax increase won’t just be flushed down the toilet — the money raised will help to fund the social and physical infrastructure that businesses need to thrive, including police, fire protection, and education.

As Paul O’Neill, former Bush Treasury Secretary and Alcoa executive, put it: “I never made an investment decision based on the tax code...” As the president of the Illinois Chamber of Commerce said, “I do not think there's going to be some immediate exodus to Missouri. Businesses don't operate that way.” States can bicker back and forth about whose state has the best business climate, but focusing only on corporate and personal income tax rates is silly and shortsighted.

Year after year, policy wonks, the media, and folks across the country have watched as Illinois balanced its budget with gimmicks and accounting tricks. This year the state faces a $15 billion budget gap, and policymakers in Springfield finally did the hard work of raising new revenue.

Wednesday morning, shortly before new legislators were to be sworn in, revenue-raising legislation was approved. The bill temporarily raises the state’s flat rate income tax from 3 to 5 percent until 2015. In 2015 the income tax rate will fall to 3.75 percent, and in 2025 the rate will fall to 3.25 percent. Corporate income taxes were also increased from 4.8 percent to 7 percent until 2015, when the rate will drop to 5.25 percent. In 2025, the corporate income tax rate will fall back to 4.8 percent.

The bill also included a strict spending cap which will mean that spending can’t increase by more than 2 percent in each of the next four years. As Governor Pat Quinn's budget director noted this week, imposing such a strict cap at a time when the state is struggling to pay overdue bills and unfunded pension obligations will almost certainly mean that state spending on all the core functions of government will not be allowed to grow at all over the next four years, which of course means that in real inflation-adjusted terms, state spending on everything from education to transportation to public safety will likely decline.

This is especially worrisome in light of a recent Center for Tax and Budget Accountability report noting that the real value of state spending has already fallen over the last fifteen years.

Illinois lawmakers should be applauded for passing this legislation. But the state is hardly out of the woods: this tax increase is expected to only fill about half of the state’s budget gap, meaning that the remaining budget hole will likely be closed exclusively through spending cuts.

The good news, as noted in a number of ITEP reports, is that when legislators find the political will to return to tax reform issues, they'll find the state has a wide variety of sensible revenue-raising (or fairness-enhancing) tax reform options at its disposal, including expanding the sales, income and corporate tax bases by eliminating unwarranted loopholes and expanding the state's relatively low Earned Income Tax Credit.

Good Jobs First (GJF) released three new resources this week explaining how your state is doing when it comes to letting taxpayers know about the plethora of subsidies being given to private companies.  These resources couldn’t be more timely.  As GJF’s Executive Director Greg LeRoy explained, “with states being forced to make painful budget decisions, taxpayers expect economic development spending to be fair and transparent.”

The first of these three resources, Show Us The Subsidies, grades each state based on its subsidy disclosure practices.  GJF finds that while many states are making real improvements in subsidy disclosure, many others still lag far behind.  Illinois, Wisconsin, North Carolina, and Ohio did the best in the country according to GJF, while thirteen states plus DC lack any disclosure at all and therefore earned an “F.”  Eighteen additional states earned a “D” or “D-minus.”

While the study includes cash grants, worker training programs, and loan guarantees, much of its focus is on tax code spending, or “ tax expenditures.”  Interestingly, disclosure of company-specific information appears to be quite common for state-level tax breaks.  Despite claims from business lobbyists that tax subsidies must be kept anonymous in order to protect trade secrets, GJF was able to find about 50 examples of tax credits, across about two dozen states, where company-specific information is released.  In response to the business lobby, GJF notes that “the sky has not fallen” in these states.

The second tool released by GJF this week, called Subsidy Tracker, is the first national search engine for state economic development subsidies.  By pulling together information from online sources, offline sources, and Freedom of Information Act requests, GJF has managed to create a searchable database covering more than 43,000 subsidy awards from 124 programs in 27 states.  Subsidy Tracker puts information that used to be difficult to find, nearly impossible to search through, or even previously unavailable, on the Internet all in one convenient location.  Tax credits, property tax abatements, cash grants, and numerous other types of subsidies are included in the Subsidy Tracker database.

Finally, GJF also released Accountable USA, a series of webpages for all 50 states, plus DC, that examines each state’s track record when it comes to subsidies.  Major “scams,” transparency ratings for key economic development programs, and profiles of a few significant economic development deals are included for each state.  Accountable USA also provides a detailed look at state-specific subsidies received by Wal-Mart.

These three resources from Good Jobs First will no doubt prove to be an invaluable resource for state lawmakers, advocates, media, and the general public as states continue their steady march toward improved subsidy disclosure.

Wisconsin Governor-elect Scott Walker and Ohio Governor-elect John Kasich want both of their states to stop any work on high speed rail projects that are funded with federal stimulus dollars. Yet, both newly elected governors seem to want the millions of dollars the federal government is offering. (For Ohio that amounts to about $400 million, and Wisconsin was slated to receive $810 million).

Neither governor wants to put the transportation money into high speed rail programs. Instead they want to use the money to fix roads and bridges. The newly elected Republican governors apparently like federal spending — when it means money they can spend as they please.  

It turns out that Ohio has already been given federal dollars to help with the transportation issues Kasich mentions. A letter from Transportation Secretary Ray LaHood reminded Kasich that Ohio has already received over $1 billion for road, bridge, and airport projects. As for the rail funding, LaHood clarified that, "none of those funds may be used for anything other than our high-speed rail program."   

On election night, Walker unveiled his new slogan “Wisconsin is Open for Business.” But shutting down the progress already made to produce a rail line connecting Madison to Milwaukee means that local employees at the company making the trains, Talgo Inc., fear for their jobs and plans to hire a total of 125 employees are on hold. Earlier this week three Wisconsin Congressman introduced a bill that would allow the state to return its federal high-speed rail money and put it toward federal deficit reduction. Of course, Wisconsin's share of the rail dollars is just a drop in the bucket compared to the deficit.

Not everybody is taking this same approach with the federal gift horse. Illinois officials seem ready to take the money and Talgo’s operations if no one else wants them. Illinois Governor Pat Quinn has said to Talgo that his office “stands ready to do whatever it can to make Illinois your new Midwestern home.”  The Illinois Transportation Secretary has said that if Wisconsin doesn’t want the money for high speed projects they will take it.  Local officials seem equally enthusiastic “Let’s get after it,” said one County Board Chairman. “I’m in line — what do I need to do? I don’t think I can do a back flip, but absolutely that would be fantastic.”

On Tuesday, voters in 37 states went to the polls to vote for Governor. The results of nine gubernatorial races provide a small glimmer of hope for sensible, balanced, and progressive approaches to addressing the next round of state budget shortfalls.  Two candidates campaigned on raising taxes, four incumbents were re-elected after implementing new taxes to close previous budget gaps, and three governors-elect won races against opponents who sought to dismantle progressive tax structures.

As for those governors-elect who have rejected revenue increases, the next four years will be quite a challenge. In Texas, Governor Rick Perry will face a projected two-year $21 billion budget shortfall.  Likewise in Pennsylvania, Governor-elect Tom Corbett is staring at a $5 billion budget deficit next year.  Faced with these problems, this new crop of state executives can take either a dogmatic cuts-only approach or they can opt for a more flexible approach that allows for raising new revenue by closing tax loopholes or implementing other reforms.

Candidates Who Campaigned on Raising Taxes

In Minnesota, Mark Dayton ran for governor on a progressive tax platform, calling taxes “the lubricant for the machinery of our democracy." He has proposed increasing taxes on the wealthiest 5 percent of Minnesotans to raise revenue to address the state’s continuing budget woes and to improve tax fairness.  Although the Minnesota gubernatorial race remains undecided and Dayton may face a recount, Dayton’s small lead demonstrates the support he has received for purposing such a beneficial progressive tax plan.

In Rhode Island, Lincoln Chafee won a three-way race against Republican John Robitaille and Democrat Frank Caprio.  Like Dayton, Chafee championed tax increases aimed at refilling the state’s depleted coffers.  During the campaign Chafee, whose father lost a Rhode Island gubernatorial race 42 years ago after supporting a state income tax, proposed a one percent sales tax on previously exempted items.  Though more likely to adversely affect low-income families than Dayton’s plan, Chafee deserves credit for supporting a moderate tax plan in this cycle of anti-government sentiment.

Candidates Who Defeated Opponents Targeting Progressive Tax Structures

Besides Dayton and Chafee, three other winners on Tuesday night defeated opponents who sought to drastically cut taxes and reduce spending and government services.  In California, Jerry Brown defeated Meg Whitman, who supported a regressive tax cut that would only benefit taxpayers who claim capital gains income. 

In New York, Andrew Cuomo defeated Carl Paladino, who promised to cut taxes by 10 percent and spending by 20 percent in his first year.  Unfortunately, however, Andrew Cuomo has not fully distanced himself from Paladino’s vilification of taxes.  Instead, Cuomo, along with eleven newly elected Republican Governors, has pledged to freeze taxes, vetoing any hike that comes his way.  This absolutist approach does nothing to alleviate the enormous deficit problems faced by each of these states.

In Colorado, Democrat John Hickenlooper defeated Republican Dan Maes and Independent Tom Tancredo.  Maes, who lost voter support after the Republican primary, promised to lower income taxes and cut spending.  As Maes’ popularity decreased, Tom Tancredo began to gain steam, eventually garnering around 37% of the vote.  In their final debate Tancredo proposed removal of “any tax rebates or incentives.”  For his own part, Hickenlooper never committed to raising or lowering taxes, but did call for a "voluntary" tax on the oil and gas industry to fund higher education.

Incumbents Re-elected After Raising Taxes

The Governors of Maryland, Illinois, Arkansas, and Massachusetts pulled off victories after enacting or supporting new taxes during their previous terms. 

In Maryland, Martin O’Malley, who defeated former Governor Robert Ehrlich, oversaw tax increases in his first term to fix a $1.7 billion deficit.  O’Malley’s plan relied in part on progressive tax increases, including a temporary increase in the income tax rate paid by millionaires. While Republicans criticized the tax increases, the citizens of Maryland approved enough to re-elect O’Malley with over 55% of the vote.

In Illinois, Governor Pat Quinn is the likely winner of a tight race against Republican challenger Bill Brady.  Since becoming Governor in the wake of former Governor Blagojevich’s scandal, Pat Quinn has repeatedly proposed to raise income tax rates to fill budget holes.  Quinn would use the revenue raised to fund education.  Meanwhile Brady, Quinn’s opponent, championed tax cuts that included repealing the sales tax on gasoline and eliminating the inheritance tax.

In Arkansas, Republican Jim Keet was soundly defeated by Governor Mike Beebe in his re-election bid.  During his first term, Beebe implemented a significant hike in tobacco sales taxes, raising the tax on a pack of cigarettes by 56 cents.  The increase was designed to increase revenues by $86 million to fund statewide trauma systems and expanded health care coverage for children.

In Massachusetts, Deval Patrick was re-elected Governor after signing last year’s budget that included an increase in the sales tax rate. Patrick also showed interest in improving fairness in Massachusetts’ tax code. Bay State voters rewarded Patrick for his tough decisions by handily re-electing him.