Maryland Governor Martin O’Malley announced that he will call a special legislative session to start next week.  Lawmakers are widely expected to pass a progressive income tax package in order to avoid massive “doomsday” budget cuts.

Tennessee’s inheritance tax will be eliminated beginning in 2016.  Legislators recently sent Governor Haslam a bill repealing the tax, seduced by bogus claims about the economic benefits of repeal.  Lawmakers also passed two other notable tax cuts: one repealing the gift tax (which The Commercial Appeal says will benefit Gov. Haslam himself, along with other wealthy taxpayers), and another cutting the state sales tax on groceries by a quarter of a percent.

The gubernatorial race in Washington State is heating up and costly tax expenditures are getting long overdue attention from the candidates. But as this piece in the Seattle Times highlights, eliminating spending programs embedded in the tax code is easier said than done.  Read CTJ’s advice for how to do it here.

Finally, check out this timely column describing why Minnesota Governor Mark Dayton should veto a bill passed by the legislature under the guise of job creation. (Hint - it’s really a massive tax cut for business.)

The history of states subsidizing professional sports stadiums with taxpayer dollars is long and, increasingly, controversial. Maryland provided nearly one hundred percent of the financing for the Orioles’ and Ravens’ shiny new facilities in the 1990s. In 2006, the District of Columbia subsidized the Washington Nationals’ new stadium at a cost to taxpayers of about $700 million.  And even though most stadiums are, in the long run, economic washes at best, losers at worst, there are still politicians willing to throw money at them.

Minnesota legislators, for example, are currently grappling with how to fund a new stadium for the Vikings in response to threats that the franchise may leave the state.  But before the legislature gives away nearly a billion dollars, State Senator John Marty raises some excellent points about the math, and morals, behind the proposed taxpayer subsidies for the stadium:

“The legislation would provide public money in an amount equivalent to a $77.30 per ticket subsidy for each of the 65,000 seats at every Vikings home game. That's $77 in taxpayer funds for each ticket, at every game, including preseason ones, for the next 30 years.… Public funds can create construction jobs, but those projects should serve a public purpose, constructing public facilities, not subsidizing private business investors. The need to employ construction workers is not an excuse to subsidize wealthy business owners, especially when there is such great need for public infrastructure work.” 

In  Louisiana, the House of Representatives has gone ahead and approved a ten-year, $36 million tax subsidy  to keep the state’s NBA team, the Hornets, in New Orleans until 2024. Some are asking if the state can really afford it given a $211 million budget gap.  Representative Sam Jones noted that while the state has cut health and education spending, it still found a way to come up with millions of dollars to help out the ”wealthiest man in the state.” That would be Tom Benson, owner of not only the Hornets but the legendary New Orleans Saints football team, whose net worth is $1.1 billion dollars.

In California, however, a different scenario is unfolding. Sacramento Mayor Kevin Johnson just abandoned negotiations with owners of the city’s NBA team, the Kings.  The Kings organization was unwilling to put up any collateral, share any pre-development costs, or commit to a more than a 15 year contract; this would have left the city shouldering all the costs – and all the risks – for developing the $391 million downtown facility.  Mayor Johnson said he’d offered everything he could to the team and it still wasn’t enough, so he pulled the plug. 

Given the high cost and low return (including in terms of jobs) that sports facilities generate, more leaders should follow Minnesota’s Marty and Sacramento’s Johnson and stand up for the taxpayers who pay their salaries.

(Thanks to Field of Schemes and Good Jobs First for keeping tabs on these subsidies!)

• The Maryland Budget and Tax Policy Institute just unveiled a “Doomsday Clock” on their website.  The countdown shows how many days are left until massive budget cuts take effect on July 1.  The Institute explains that these cuts can be avoided if Governor O’Malley calls a special session and lawmakers pass the progressive income tax package agreed to in conference committee.

• Former Mississippi Governor Haley Barbour continues to lobby for taxing internet sales even after leaving the Governor’s mansion. In fact, in his farewell address to Mississippians the Governor said, “It is time for the federal government to allow Mississippi and every other state to choose to enforce our laws and to collect these taxes. They are owed us today, and there is no longer any public policy reason to keep us from collecting. Indeed, good public policy says it is past time that our brick-and-mortar merchants on Main Street and in our shopping centers get a level playing field with Amazon and the Internet. That they get fair treatment for paying our taxes.”

• Thanks to an obscure tax loophole which offers Iowans the ability to write off all of their federal income taxes paid, Governor Terry Branstad had a 2011 tax bill of just $52. One state senator is pondering whether or not the state needs a “ Branstad rule” to ensure that upper income Iowans pay more in state taxes. The Governor’s lack of a tax bill illustrates just how preposterous the loophole is – and why there are only six states that allow it.

• Now that the rush to make sure our taxes are filed on time is over, here’s a downright beautiful essay from a priest in Kansas reminding us the good that comes from all the frenzy.

• Here’s a thoughtful editorial from the St. Cloud Times describing Minnesota’s need to fund important transportation projects. Lawmakers there are looking into toll roads because the political will to raise gas taxes doesn’t exist – yet the editors rightly conclude, “It’s not that we oppose building this bridge or expanding roads. It’s just that the fairest revenue stream to do so is the gas tax. Legislators just need the courage to adjust it as needed.” To see how Minnesota’s gas tax has effectively shrunk over time, check out this chart from the Institute on Taxation and Economic Policy ( ITEP).

Calling it “a far-out idea that would force Missourians to pay much more for groceries, homes and everything in between, while sparing wealthy citizens the need to pay income taxes,” the Kansas City Star editorial board bids good riddance to an income tax repeal proposal in Missouri.

Apparently not content with the massive business tax cut enacted last year, Michigan lawmakers are continuing to push to repeal the property tax on business equipment – a vital revenue source for local governments who can expect a net, permanent 19 percent revenue loss.

Instead of an immediate income tax cut that will cost significant revenue (that the state can’t afford),  Oklahoma lawmakers are contemplating a “trigger” plan tying cuts to year-over-year revenue growth that would eventually eliminate the tax altogether.  The Oklahoma Policy Institute explains that triggers are sold as a “responsible” way to cut taxes, "but it’s the opposite. It’s an attempt to avoid responsibility by putting the tax system on auto-pilot.“

An important study from the Pew Center on the States showing the lack of accountability in tax giveaways to business keeps getting good press. Here’s a piece from Illinois describing how, despite some very public giveaways to companies like Sears and the CME Group, the state lags in holding companies accountable for the tax breaks they receive.

This great article explains who actually pays Minnesota taxes. It cites data from Minnesota’s own tax incidence analysis report – a report that only a handful of states have the technology to develop, but is vital to understanding how taxes impact people of different income levels.

• New Mexico legislators took important steps last week to level the playing field between in-state mom and pop stores and multi-state big box stores when they sent Governor Martinez a bill mandating combined reporting, in other words, closing the loophole that allows national retailers to shelter their profits in no-tax states.  Despite strong support among small business owners for closing corporate loopholes, the governor is likely to veto the legislation.
• Some Minnesota legislators are not backing down from their pledge to cut the business property tax, promising what tax cut advocates always promise: it will be good for the state’s economy.   In effort to paper over the hole the cut blows in the budget, they propose to gut a tax credit for low- and middle income families and seniors who rent – a credit that was already reduced last year.
• The Washington State Senate overwhelmingly passed a bill that would require any new or expanded tax breaks to “sunset” (or expire) after five years.  Washington already has over 250 tax breaks that automatically drain the state’s coffers every year without ever having to be voted on.  Both Citizens for Tax Justice  and The Institute on Taxation and Economic Policy (ITEP) support this kind of accountability, as does the Washington State Budget and Policy Center.

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.

Minnesota lawmakers balanced the state’s budget earlier this year (after an historic government shutdown) by cutting vital programs, delaying payments to schools and issuing bonds against future tobacco settlement monies.  Of course, they have been boasting that they balanced the budget without raising taxes, but in reality all they did was pass the buck to localities.  Literally.  Their cowardice and unwillingness to consider Governor Dayton’s proposal to ask the wealthiest Minnesotans to pay a little more in income taxes is astounding and is resulting in a new kind of “trickle down” economics that we’re seeing in more and more states. 

This week the Star Tribune reported that in November a record number of  Minnesota school districts – 133 to be precise – will be asking taxpayers to support referendums to help “ward off cuts that have condensed class schedules, provoked higher pay-to-play fees and forced schools to resort to in-school advertising to make ends meet.”  Some school districts are accepting ads on student lockers and in mailings to parents. Other still have invited businesses to parent-teacher conferences to hawk their wares, and many have increased parking fees for students.  All at a time when 40 percent of school aged children in Minnesota are eligible for reduced cost meals because their parents are already facing their own hard times.  

In the St. Cloud area, some local officials are reeling from the impact of the state budget, which reduced the property tax base for some localities and cut local aid.  As St. Cloud Mayor (and former state senator) Dave Kleis put it, “There’s certainly a tendency to shift that burden onto those local communities.”

With the multiple fiscal pressures cities face, state legislators who balance their budgets by cutting local funds are putting short-term political gains over the long term economic health of their citizens.

Given the recent and unprecedented government shutdown, you’d like to think that lawmakers in Minnesota would want to make it easier, not harder, for the state to balance its budget. But some lawmakers haven’t learned their lesson and are, in fact, proposing to use the state constitution to ban any tax increase that does not receive a supermajority of votes in both chambers. 

Folks at the Minnesota Budget Project (MBP) argue, “The amendment would guarantee gridlock by creating extra hurdles for passing a responsible budget, leading to more budget gimmicks as policymakers seek to fund critical state services.” MBP also points out that surveys show that a majority of Minnesota residents want lawmakers to use both spending cuts and revenue increases to deal with deficits.

In these difficult economic times, lawmakers need more, rather than fewer, tools and options to address budget shortfalls and rising needs. In a state that just survived a horrific budget battle, it should be clear that the more options on the table, the better — for all Minnesotans.

From Duluth to Edgerton the wheels of Minnesota government will start turning soon.  Wednesday morning Governor Mark Dayton signed into law legislation that will end the nation’s longest state shutdown in a decade. The compromise legislation was passed during a marathon legislative session that started Tuesday and ended early Wednesday morning. 

Governor Dayton and the legislature finally came together in a compromise that balances the budget by delaying payments to schools and issuing bonds against future tobacco settlement monies. Despite wide voter approval, the progressive tax policy proposals that the Governor pushed during his campaign and during the budget fight never came to fruition.

The Minnesota Budget Project (MBP) reminds us that the compromise reached comes at a huge cost. For example, in the budget agreement higher education was cut by $351 million.  The compromise budget also includes a $54 million cut to transportation. Obviously, it’s a good thing that Minnesota will be up and functioning shortly, but in terms of spending and taxes, the budget is a real disappointment after Governor Dayton’s promising start.  MBP puts it best, “the compromise agreement means Minnesota will fail to maintain the investments we need to create the workforce of the future.”

Photo via Governor Dayton Creative Commons Attribution License 2.0

Twice in a span of just three days, the Wall Street Journal has run articles suggesting that anti-tax Minnesota lawmakers got their way because the voters were on their side.  This couldn’t be further from the truth.

Last week, in an effort to end an increasingly costly shutdown of the Minnesota government, Governor Dayton ended his push for a much needed tax increase on the state’s wealthiest residents.  As the Governor explained, “continuing the state government shutdown would be … destructive for too many Minnesotans.”  A budget, without the tax increase, will likely be enacted some time this week.

While it’s disappointing that the Governor was unable to secure the enactment of one his most significant campaign promises, this may have been the best outcome possible given the level of stubbornness exhibited by anti-tax Republicans.  It was not, however, the outcome that Minnesota voters wanted.

Polling from just before the shutdown made clear that a full 63% of Minnesotans wanted their elected officials to enact a tax increase on the richest 2% of taxpayers.  The same poll also showed that voters viewed Gov. Dayton much more favorably than the state legislature’s Republican majority.

With this in mind, the level of spin contained in a pair of recent Wall Street Journal opinion pieces is nothing short of astounding.

In a bizarre July 16 article that railed against “socialist holdouts,” “the welfare state,” and “perhaps the most liberal governor in the country,” one op-ed writer claimed that Republicans succeeded because they “reflected more accurately the electorate’s mood.”

Just two days later, Stephen Moore wrote in the Journal that Gov. Dayton “blinked” because “Minnesota voters seemed to understand that the state would only make its economic troubles worse” by raising taxes.

It’s true that Minnesota’s forthcoming “compromise” budget will be heavily tilted in favor of Republican legislators’ priorities, even though most Minnesotans do not share those same priorities. 

The Wall Street Journal’s opinion pages are famous for this kind of journalistic fiction.  A more interesting question is whether other news outlets will do any better in representing the opinions of ordinary Minnesotans.  The fact is, raising taxes on the richest of the rich is widely popular across the country yet strangely invisible from most media coverage of budgets and taxes.

“Relieved, but not celebrating” is one of the headlines in Friday’s StarTribune. Governor Dayton and the state legislature finally reached a compromise that would balance the budget and reopen the state by delaying payments to schools and issuing bonds against future tobacco settlement monies.

In his statement to lawmakers Governor Dayton said, “despite my serious reservations about your plan, I have concluded that continuing the state government shutdown would be even more destructive for too many Minnesotans. Therefore, I am willing to agree to something I do not agree with -- your proposal -- in order to spare our citizens and our state from further damage.”  In his statement the Governor listed three conditions:

1) The removal of social policy issues from further consideration this year (like requiring voters to bring identification to the polls or ending taxpayer funding for abortions).

2) Dropping a provision which would have required a 15 percent across the board reduction in the number of state employees.

3) Support for a $500 million bonding bill to “put people back to work throughout Minnesota.”

The details of the budget are still being worked out, but the state will likely be up and running in just a few days.

Obviously this compromise is a huge blow to tax fairness advocates. Dayton had previously campaigned on and proposed raising taxes in a progressive way to avoid making radical cuts. Delaying payments and issuing bonds is not a fiscally responsible way to solve Minnesota’s budget problems over the long term.

Dayton closed his statement this way: “I urge the members of both of your caucuses to consider carefully the advisability of supporting alternative sources of revenue, which would provide better, long-term financial stability for Minnesota than the two sources in your offer.” It’s a real shame that his words are falling on deaf ears; by all accounts, substantial, beneficial tax reform is going to be shelved for the time being.

Photo via Governor Dayton Creative Commons Attribution License 2.0

Government functions in Minnesota shut down July 1 and that shutdown continues, nearly two weeks later, as a result of a stand off between Governor Mark Dayton and conservatives in the state’s legislature.

The Governor is using this week to talk directly with Minnesotans and share his message of taking a balanced approach to the crisis. He says, “I'm asking the wealthiest Minnesotans to pay a little more in taxes so that children with special needs don't have to be denied services ... and that's a Minnesota value.”

The Governor has recently offered an olive branch to conservative lawmakers saying he’d be willing to compromise. He’s even offered  to make his proposed tax on millionaires temporary, increase cigarette taxes, increase surcharges on hospitals and health plans and even delay payments to schools.  Yet legislators rejected these ideas and have yet to offer any alternative budget proposal of their own.

Dayton is clearly willing to negotiate (though we question the wisdom of a cigarette tax), but the uncompromising negotiation technique of the legislature leaves Minnesotans to deal with the consequences of this avoidable standoff.

Make no mistake, each day that the shutdown is allowed to continue Minnesotans and their state’s economy are harmed. Paul Anton in a recent MinnPost piece notes that “Layoffs of state workers drain about $23 million a week in purchasing power from the state’s economy. Estimates are that the state loses $1 million a week in revenue while the state parks are closed and another $1.25 million a week while the state lottery is not operating.” Of course there are tremendous incalculable impacts too.  Background checks and license renewals for health care professionals simply aren’t happening. Let’s not forgot the impact to local governments, schools districts may actually end up having to pay higher interest costs because they may need to borrow more money to balance their own budgets because of delays in state payments.

The St. Cloud Times recently opined, “We don’t support Gov. Mark Dayton traveling the state to talk about his efforts to solve the state’s budget problem. History shows these efforts tend to preach to the choir, no matter the political faith. Then again, we can’t really blame Dayton because the people he needs to talk with — Republican legislative leaders — are clearly not willing to do anything remotely constructive to end this shutdown.”

Dayton has shown he’s willing to negotiate and he’s got the right idea to raise taxes in a progressive way to ensure vital services aren’t cut. Let’s hope for the sake of Minnesota that it doesn’t take the Legislature too much longer to come to a similar conclusion.

Photo via Governor Dayton Creative Commons Attribution License 2.0

Minnesota state government is on the brink of shutting down.  Despite months of intense negotiations between the state’s Democratic governor, Mark Dayton, and the Republican controlled legislature, neither party seems prepared to budge from their preferred positions on balancing the budget. 

Their positions were staked out in last year’s campaign season and both sides are looking to deliver on their promises.  Governor Dayton wants to address the state’s budget shortfall with a combination of sensible spending reductions and increased taxes on Minnesota’s wealthiest households.  Republican lawmakers aim to block all tax increases and prefer to slash state spending to damaging levels.

An Institute on Taxation and Economic Policy opinion editorial on the budget predicament explains that the legislature’s approach disproportionately burdens Minnesota’s low- and moderate-income working families.  The piece goes on to say that Governor Dayton’s proposed tax increases on the richest two percent of Minnesotans is entirely reasonable.  “Asking the wealthiest to pay more simply means that the state will have more revenue to invest in the public structures and services provided now and over the long term.”

Update: The Government of Minnesota is now shutdown.

Early last week, Governor Mark Dayton vetoed nine budget bills passed by the Republican-led legislature and lawmakers adjourned with no spending plan for the upcoming fiscal year. Since releasing his initial budget plan in February, the Governor has called for a balanced approach to handle the state’s $5 billion shortfall.

Many Republicans in the legislature believe that the only way to fix the state’s books is to cut spending, including tax credits for low-income families.

“I chose a balanced approach to our budget," Governor Dayton said, "one that included both significant cuts, but asked the top two percent of Minnesotans to pay more to ensure our quality of life and the services millions of Minnesotans depend on.  My approach chooses not to balance the budget on the backs of the other ninety-eight percent of Minnesotans.”

The budget presented to the Governor, by contrast, included proposals that would slash aid to local governments and the state’s renters' credit, which is an important anti-poverty tool.

Dayton sent a letter, along with his veto, to the Speaker of the House stating, “Your tax proposal would require most Minnesota property owners and renters to pay higher property taxes," because the massive cuts to local governments “would result in significant property tax increases.” 

Dayton’s veto letter goes on to say, “...your bill then directs over $200 million from those cuts to expanded tax expenditures for corporations and others.”

Since the legislature adjourned without a budget, it will need to meet in a special session. What is not at all clear is how the Governor and legislature will come to some sort of compromise. The Governor has said, “I’m in the middle, and they haven’t moved.” Read more about what to expect from the Minnesota Budget Project.

In Missouri and Minnesota, property tax “circuit breakers” ensure that property taxes do not take more than a limited percentage of income from taxpayers of modest means. As ITEP has explained, it is widely accepted that property taxes are passed on by landlords to renters in the form of higher rents, which is why these circuit breakers are usually available to renters, as well as homeowners. However, lawmakers in these two states have tried to change that.

Effort to Take Credit from Renters Fails in Missouri

In Missouri, a victory for tax fairness came in the form of inaction. The Missouri legislature ended its session on May 13th without passing legislation that would have eliminated the property tax credit for renters. Making the property tax “circuit breaker” unavailable for renters would have left thousands of low-income families and individuals unable to claim the credit.

The measure would have cut off $57 million in critical tax relief for individuals making less than $27,500 a year, in the name of budget austerity.

Supporters of the circuit breaker tax credit questioned the legislature’s priorities, as it sought to end this benefit for low-income individuals while showering a single air freight facility with as much as $33.4 million annually in tax credits.

New Proposal in Minnesota

Even as a temporary victory was won in Missouri, the Minnesota’s legislative tax conference committee is proposing to cut the state’s renter’s credit by a proposed $186 million next year.

According to the Minnesota Budget Project, under the proposal, seniors and people with disabilities would face an average reduction in their credit of $190, while all other families would face an average reduction of $335. In fact, about 72,500 households would lose their refund entirely.

The move to eliminate the renter’s credit will be especially harmful in Minnesota, which already ranks dead last in rental affordability among low-wage workers.

Circuit breaker property tax credits are one of the most effective ways to use the tax system to reduce poverty. During a recession, states should be considering ways to enact or expand these credits, rather than scaling them back.