Last month, New Jersey Governor Chris Christie made a bold and reckless promise to cut personal income taxes across the board. 

Christie used his annual budget address this week to spout conservative talking points to justify his tax cut plan.  There are two claims in particular we take issue with: the idea that high tax rates harm economic growth; and that high tax rates cause families to flee states.

From Christie’s speech:

“First, any job growth plan for New Jersey has to start with cutting taxes… So, to the naysayers, I say this. We have been down the road of high taxation. It didn’t work. The result was high unemployment, high taxes and low growth. The result was families leaving New Jersey.  The old way was a dead end for New Jersey. High taxes and excessive spending left us stranded in a world of declining growth, declining prospects and a diminished ability to compete as a state.”

Christie’s claim that cutting taxes will lead to job growth is one of the most frequently repeated talking points used by conservative lawmakers  seeking to reduce or eliminate state personal income taxes. 

Two new reports from ITEP clearly dispel this conservative tenet. “'High Rate’ Income Tax States Are Outperforming No-Tax States” explains that the nine states with the highest top marginal tax rates (New Jersey included) are outperforming the nine states without income taxes, in terms of both growth in economic output per person and median income levels. 

Between 2001-2010, New Jersey beat six out of nine states with no-personal income tax in terms of lowest unemployment rate.  And over the same time period, New Jersey topped four out of nine no-tax states in terms of economic growth per-capita.

A second report, “Athur Laffer Regression Analysis is Fundamentally Flawed, Offers No Support for Economic Growth Claims” shows that an analysis on which tax-cutters like Christie rely, that predicts huge economic gains as a result of cutting state personal income taxes, is fundamentally flawed. 

The conclusion of both reports: there is simply no evidence that state income tax rates harm state economies (or the national economy, but that’s another matter).

Then Christie invoked the millionaire-migration canard:

“Our tax rates, and our overall tax burden, were also the worst in the region. And the effects were being felt: a study by scholars at Boston College found that $70 billion of wealth had left the state in the prior five years. That exodus hurt jobs, economic growth and yes, even state tax revenues…”

This claim – that high taxes will (and have) force wealthy New Jerseyans to flee the state – is yet another unfounded conservative myth. 

In fact, as ITEP has pointed out in the past, the Boston College study Christie referenced made no mention of taxes at all, let alone in New Jersey families’ migration decisions.  A second study that actually looked at the role of taxes in New Jersey migration decisions (which Christie did not mention), found the impact of the state’s “half-millionaires’ tax” on New Jersey’s high-income earners was “small,” and that the change in the net out-migration rate following the enactment of the tax was “negligible.”  The researchers for this second study also review Census Bureau interviews that show that while people gave a lot of reasons for leaving the state – retirement, new jobs, family needs – none reported they were leaving because of tax rates. 

Photo of Governor Chris Christie via   Bob Jagendorf Creative Commons Attribution License 2.0

New Jersey Governor Chris Christie made a bold and reckless promise in his January State of the State address: a personal income tax cut for all.  His plan is to gradually reduce income tax rates by 10 percent across the board, at a cost of $1 billion a year once fully implemented.

Democratic lawmakers and public interest advocates were quick to point out one very big problem with Christie’s plan: the state simply cannot afford it.  The Governor has yet to say how he would pay for it, yet the likely scenario is more cuts to education spending and local aid which would, in turn, force local governments to increase property taxes to make up the difference.  As Senate President Stephen Sweeny said, “ it’s taking money out of one pocket and putting it in another.”

And, now thanks to an analysis by the nonpartisan NJ Office of Legislative Services (OLS), we know exactly which pockets will be fuller as a result of Christie’s grand plan.  It’s no surprise given Christie’s past allegiance to millionaires that the wealthiest New Jerseyans stand to gain the most from a billion dollar cut in one tax (personal income) that will likely force an increase in another (property). 

Even if property taxes are not increased as a result of Christie’s proposals, New Jersey families are already paying more in property taxes in recent years thanks to Christie’s reductions in property tax credits and rebates (all of which could be restored for a smaller price tag than the proposed personal income tax cut).

OLS’s findings are consistent with the Institute on Taxation and Economic Policy’s (ITEP) research on the share of income New Jerseyans pay in state and local taxes.  Both OLS and ITEP agree – low and middle-income families spend a greater share of their income on property taxes than on income taxes.  The reverse is true for New Jersey’s wealthiest families, which is why a cut in income taxes, accompanied by an increase in property taxes, will make an unfair situation even worse.

Rather than a “tax cut,” Christie’s plan is more accurately characterized as a “tax swap.”  New Jersey Policy Perspective’s Deborah Howlett called the plan “a gimmick."  Indeed. The plan is based on projected revenues which may or may not materialize. The Governor said that if they do, however, this tax cut will be at the top of his list of ways to spend whatever extra money trickles in. There are more important things at the top of a lot of his constituents’ lists, however, including restoring those property tax credits.

Photo of Governor Chris Christie via Bob Jagendorf Creative Commons Attribution License 2.0

There are few areas of policy where lawmakers’ shortsightedness is on display as fully as it is with the gasoline tax.  Now, with a series of twenty six new charts from the Institute on Taxation and Economic Policy ( ITEP), you can see the impact of that shortsightedness in most states as shareable graphs.

Overall, state gas taxes are at historic lows, adjusted for inflation, and most states can expect further declines in the years ahead if lawmakers do not act.  Some states, including New Jersey, Iowa, Utah, Alabama, and Alaska, are levying their gas taxes at lower rates than at any time in their history.  Other states like Maryland, Oklahoma, Massachusetts, Missouri, Tennessee, Arkansas, and Wyoming will approach or surpass historic lows in the near future if their gas tax rates remain unchanged and inflation continues as expected.

These findings build on a 50-state report from ITEP released last month, called Building a Better Gas Tax.  ITEP found that 36 states levy a “fixed-rate” gas tax totally unprepared for the inevitable impact of inflation, and twenty two of those states have gone fifteen years or more without raising their gas taxes.  All told, the states are losing over $10 billion in transportation revenue each year that would have been collected if lawmakers had simply planned for inflation the last time they raised their state gas tax rates.

View the charts here, and read Building a Better Gas Tax here.

Note for policy wonks: Charts were only made in twenty six states because the other twenty four do not publish sufficient historical data on their gas tax rates.  It’s also worth noting that these charts aren’t perfectly apples-to-apples with the Building a Better Gas Tax report, because that report examined the effect of construction cost inflation, whereas these charts had to rely on the general inflation rate (CPI) because most construction cost data only goes back to the 1970’s.  Even with that caveat in mind, these charts provide an important long-term look at state gas taxes, and yet another way of analyzing the same glaring problem.

Example:

Last week, Republican New Jersey Governor Chris Christie and Democratic New York Governor Andrew Cuomo together approved a substantial increase in the toll rate paid to cross bridges and tunnels between New York and New Jersey.  The increase of $1.50 on EZ pass users (or $2 for cash payers) will go into effect next month.  This will be followed by four consecutive increases of 75 cents each annually from 2012 through 2015, for a total hike of at least $4.50 over five years.

Both governors supported the toll increases, saying that the dire fiscal situation facing the Port Authority, which is reliant on toll revenue, means that the “increase cannot be avoided.” The governors’ willingness to shore up revenue for the Port Authority through toll increases stands in sharp contrast to their reputations as “anti-tax” governors who have relentlessly refused to increase any taxes to deal with their states’ current fiscal disparities.

As the Institute on Taxation and Economic Policy explains, increases in tolls or other “user fees” are often used by politicians to increase revenue while avoiding having to enact anything that could be called a “tax increase.”

Josh McMahon, writing for the New Jersey News Room, argues that Christie is just playing “a game of semantics” so that he can continue the “charade that he’s not raising any taxes.”

The move by the governors is proving relatively unpopular with New Jersey voters, 54% of whom oppose the increases, according to a recent poll.

In contrast, 72% of New Jersey voters and 64% of New York voters support ‘millionaires tax’ proposals, which would help counterbalance some of the regressive features of both the New Jersey and New York tax systems. Both Cuomo and Christie went out of their way to torpedo these proposals in recent months.

Voters in both states can’t be blamed for wondering whose interests their governors are protecting.

Photos via Gisele 13 Creative Commons Attribution License 2.0

New Jersey Governor Chris Christie used his line-item veto power to rip the legislature-approved budget to shreds earlier this month.  New Jersey Policy Perspective put it best when stating that Christie’s numerous vetoes “did serious damage to virtually every constituency imaginable in this state – except for corporations and the super-rich.”

As expected, he shot down a proposed tax on New Jersey millionaires who make up only .2 percent of all taxpayers in the state.  At the same time, he refused to restore the state’s Earned Income Tax Credit to previous levels, which, at a cost of only $50 million, was no-brainer strategy to provide much needed assistance to struggling low-income working families.

He also stripped away hundreds of millions of dollars for schools, aid to local governments, health care for working families, legal assistance for low-income individuals, and other critical programs. 

New Jersey Senate Democrats are meeting this week to attempt to override Christie’s spending cuts, however, they have been unsuccessful in gaining enough Republicans to join them and so far the vetoes stand.  They have yet to tackle the millionaires’ tax and Earned Income Tax Credit, but given that members are sticking to party lines, there is no realistic chance of restoring either of them.

The New Jersey Assembly Democrats are taking a different approach.  They first announced a plan to hold a series of hearings over the summer on Christie’s vetoes and wait to schedule override votes until the fall, hoping to gain some Republican support along the way.  But, by law, if an override vote fails in the Senate, the Assembly cannot take up a vote on that same issue.   

Despite the fact they are essentially powerless now in overturning Christie’s vetoes, Assembly Democrats are still planning to hold hearings starting next week on the impact of the cuts on children’s programs.  In a statement announcing the hearings, Assembly Budget Chair Lou Greenwald said, “The impact of these cuts demand immediate attention, and we’re committed to trying to find a way to make sure these programs continue to serve children suffering through horrific cases of abuse, illness and poverty.”

With just a few days left before the end of the fiscal year, Democratic lawmakers who control the legislature released an alternative to Governor Christie’s budget that the good people over at New Jersey Policy Perspective call a “this is what we stand for budget.”

Most notably, the budget reintroduces a tax on millionaires which the governor vetoed last year.  The proposed “millionaires' tax” would raise around $500 million and help avoid damaging cuts to public education in a way that affects only the very wealthiest taxpayers. The proposed tax -- a 10.75 percent marginal rate -- would only apply to taxpayers with taxable income above $1 million, or about .2 percent of all households.  

Moreover, this plan would take back only a fraction of the huge federal income tax reductions accruing to these best-off taxpayers as a result of the recent extension of the Bush tax cuts.  According to an Institute on Taxation and Economic Policy analysis, these very same taxpayers are already enjoying an average $72,505 in federal tax savings in 2011.  It is entirely reasonable to ask the less than 1 percent of the state’s wealthiest households to pay more in state income taxes now, particularly as New Jersey continues to struggle with the consequences of the national recession.

Governor Christie wasted no time criticizing the alternative plan and is expected to veto any tax increase just as he did last year.

While the battle over the millionaires’ tax is in the spotlight, another tax change in the Democrats’ proposal is worthy of attention.  The alternative plan would also restore the single most effective anti-poverty tax strategy available to state lawmakers -- the Earned Income Tax Credit -- to its previous levels. The EITC provides targeted tax cuts to low-income working families, helping low-wage families to stay above the poverty line.

The decision of Governor Christie and the legislature to reduce the EITC from 25 to 20 percent of the federal credit last year directly pushed more families into the increasingly frayed safety net—a shortsighted and counterproductive decision that Democratic lawmakers are smart to propose reversing.

By law, New Jersey must have a budget in place for next fiscal year by the end of the day on Thursday, June 30th.  The alternative budget plan passed out of House and Senate committees on Monday and is expected to be approved in both chambers on Wednesday.  While it is all but certain that Governor Christie will use his line-item veto power to strike out portions of the Democrats’ plan, at this point it is unclear if the Democrats have enough Republican support to overturn the governor’s veto. Also not known is whether the governor’s allies in the legislature can afford to back him on an override vote: with 72 percent of the New Jersey voters supporting a millionaire’s tax, it won’t be easy for legislators to explain or justify their opposition.

California, Delaware, Michigan, New Jersey, Oregon, and Wisconsin have all experienced better than expected revenue growth over the past few months.  This is unambiguously good news, but for many lawmakers it’s unfortunately an excuse to ditch any restraint on tax-cutting.

California

In California, stronger-than-expected revenue growth has made the GOP even more vocal in opposing efforts to extend a variety of temporary income, sales, and vehicle tax increases.  Governor Jerry Brown’s continued push to extend these tax hikes is very sensible given that the unanticipated revenue boost was still quite small compared to the state’s total budget.  

Brown has behaved much less sensibly, however, in deciding to abandon efforts to end a variety of business tax credits.  As Jean Ross of the California Budget Project points out, “One of the virtues of the original budget was that there was some level of shared sacrifice.  But now, some businesses are going to come out ahead of where they were last year.”

Delaware

In Delaware, a surprise bump in revenue collections has inspired the state’s Democratic Governor, and a number of Republican legislators, to begin pushing for tax cuts.  

Specifically, the Governor has proposed cutting taxes for banks, businesses, and individuals with taxable incomes of over $60,000.  

In reference to the windfall that banks would receive under the Governor’s plan, Rep. John Kowalko argues that "They do pretty damn well with the federal handouts … I want to see a return on the investment before I will blindly vote on that."

Michigan

In Michigan, better-than-expected revenue growth in the current fiscal year may be used to reduce cuts in school spending that are currently under consideration.  

Any unexpected revenue growth in subsequent fiscal years, however, will be swallowed up by the massive business tax cuts that Michigan’s legislature passed last week.

New Jersey

In New Jersey, unanticipated revenue growth is expected to be used by Governor Chris Christie as yet another excuse for doling out billions in corporate tax breaks.
 
As New Jersey Policy Perspective points out, however, “the state remains stuck in a very deep hole … even with that growth, the state’s revenue collections would still be $3.4 billion less than was collected in FY2008, the year prior to the recession … the state must choose to invest these revenues wisely, using the money to restore the devastating cuts made to services and to pay into the state pension system.”

Oregon

In Oregon, unexpected revenue growth will likely be used to restore cuts to human services and public safety, at least in the short term.  By 2013, however, the state’s “kicker” law will probably require that some amount of revenue growth be dedicated to tax cuts.  

As Rep. Phil Barnhart points out, "Because this budget is so bad, we don't take care of schoolchildren, basic health issues and maintaining prisons — and we have a kicker at the end … We are stuck with this kicker law when we really need to spend some of this money on the budget."

Wisconsin

Finally, in Wisconsin, Governor Scott Walker has stubbornly refused to adapt to changing conditions on the ground.   If Walker gets his way, $1 billion will still be slashed from public schools, despite the state’s recently improved revenue picture.

The Boss a Local Hero with Anti-Poverty and Children's Advocates

With a short letter to the editor of his hometown paper, the Asbury Park Press, Bruce Springsteen sided with anti-poverty and children’s advocates, teachers, and other New Jersey residents who oppose Gov. Christie’s cuts-only approach to the state’s budget gap.

The letter was a response to an article about rising poverty amidst budget cuts to the very programs that assist low- and moderate-income families in the state.  Springsteen praised the article for being “one of the few that highlights the contradictions between a policy of large tax cuts, on the one hand, and cuts in services to those in the most dire conditions, on the other.”

The letter has forced Governor Christie to spend the past week defending his cuts to critical and core services and his adamant objection to reinstating a tax on New Jersey millionaires. 

New Jersey Senate and Assembly Democrats support a plan to raise $600 million in revenue by instating a surcharge on households with taxable income of more than $1 million (the households impacted make up less than half of one percent of the state’s taxpayers). 

A similar policy was in place temporarily in 2009.  Democrats passed a bill to reinstate the surcharge last summer, but the governor vetoed the bill and has vowed to do the same this year. 

During the governor's ABC News interview this week, Diane Sawyer said that Springsteen "has written a letter in which he says that it's simply a contradiction between your large tax cuts including for really rich people and doing things that change education for the kids that affect teachers, cut the services to those in the most dire conditions.” 

Christie responded that Springsteen is a liberal who “believes that we should be raising taxes all the time on everyone to do all the things that he'd like to see government do.”

Reason to Believe in the Role of the State

Of course, Springsteen is right that in a time of economic distress, when demand for state-funded services has increased alongside growing poverty, states more than ever need to focus on education, assistance to families and communities in need, and keeping the public healthy and safe, which will in turn support economic recovery.  To do this, New Jersey must have adequate revenue.

Christie Stands Up for the Mansion on the Hill

Christie went on to suggest that it was the previous New Jersey governor, Jon Corzine, who cut taxes on millionaires, which is a completely false statement.  When Corzine was governor, he enacted a temporary increase on millionaire’s that expired after tax year 2009.  As previously noted, a bill passed the Senate and Assembly last year to reinstate the tax, but Christie vetoed it and continues to voice opposition to any tax on millionaires. 

When Sawyer pressed him more on the issue, Christie argued that the tax would “only raise $600 million.”  While $600 million may be only loose change to Christie, that money would go a long way to the hard-working New Jersey families struggling to make ends meet in the face of more and more cuts to the very services they depend on. 

The honest truth is that Christie would rather shrink government at the expense of the vast majority of New Jerseyans than ruffle the feathers of millionaires.

In the past year, we've documented ad nauseum the lengths that anti-tax advocates will go to in order to convince lawmakers that the so-called "millionaire's tax" is prompting wealthy taxpayers to move to other states. In Maryland, New Jersey and Oregon, these groups have selectively presented data in order to "show" that resident millionaires are packing up their Lear Jets and moving to Florida. And in each case, we've shown that when the data are presented honestly and fully, there's simply no evidence that millionaires are voting with their feet.

But the latest such effort, by the Partnership for New York City, breaks new ground by simply making data up. For example, the report says that "Since the imposition of New York's surcharge in 2009, there has been a 9.4 percent decrease in the state's taxpayers who earn $1 million or more, decreasing from 381,786 in 2007 to 345,892 in 2009." Take a minute and read that quote again. What the Partnership is implying is that millionaires had the magical ability to see into the future and start moving out of New York in 2007 and 2008 as a result of a tax increase that hadn’t even happened yet.

Next, it’s worth taking a closer look at that 381,786 figure, the supposed amount of millionaires in New York in 2007. Interestingly enough there is state-by-state data available from the IRS which shows that there were actually only 375,265 returns with federal adjusted gross income over $200,000 in 2007. Of course, not all 375,265 returns were all millionaires. So the 381,786 figure sited by the Partnership is troubling to say the least.

What is even more troubling is that there isn’t actual data available (from New York or the federal government) for 2009 showing the number of tax returns by income group. Which leaves us with a very troubling question — where does the Partnerships earlier figure of 345,892 millionaires in 2009 actually come from?

The answer: they're using a forecast of the number of households in each state with wealth, not income, of $1 million or more. See the data. Released last September by a marketing firm, these estimates tell us a few interesting things. One is that between 2007 and 2009, the nation as a whole lost 13.9 percent of its net-worth "millionaires" between 2007 and 2009, which makes the 9.4 percent loss for New York seem not that impressive. Another is that 43 of the 50 states lost proportionally more of their net-worth "millionaires" over this period than did New York. So, leaving aside the minor detail that income taxes are based on income rather than wealth, which makes these marketing data utterly irrelevant to the point the Partnership is trying to make, any objective look at this data would suggest that New York is doing better than most other states.

For more on the many flaws of the Partnership’s paper, read this brief from the Fiscal Policy Institute. Suffice to say, the theory that New York millionaires are moving because of a targeted tax increase is based on deeply flawed (and perhaps even made up) data.

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.

Although it is less than a month into the New Year, the battles over New Jersey’s budget are still going as strong as ever.

The so-called “Back to Work” package of bills has already passed the New Jersey legislature and is awaiting Governor Chris Christie’s signature.

As New Jersey Policy Perspective explained in their January 24th Monday Minute, six poorly conceived tax breaks constitute over $568 million of the package, including a change in the deduction of net operating losses, restoration of film tax credits, and tax credits for historic preservation.

One especially poorly conceived part of the package will shift the state to the "single sales factor" method of calculating multistate corporations' tax liabilities. This measure would result in an estimated $215 million loss of revenue while providing no benefit to corporations that do all their business in New Jersey. It would also create serious economic distortions resulting in many businesses in New Jersey facing higher tax rates.

While showering corporations with over $800 million in tax breaks, Christie is still resisting any effort to reinstate the ‘millionaire’s tax’, which would increase the marginal tax rate on income over $500,000 by 2%.

One needle of good news in the haystack of proposals by Christie is his decision to restore the state's property tax rebate. About 600,000 senior citizens and disabled individuals lost out when Christie decided to stop the rebate program last year. While details of the new proposal are still unclear, it apparently would restore credit to some of these taxpayers.

Although Christie extolled the virtues of cutting taxes for the wealthy and cutting spending during his State of the State Address, he largely failed to mention that his policies are already having devastating effects. Municipalities are finding it difficult to perform basic functions like snow removal. Massive service cuts are hitting cities like Camden, which was forced to slash half its police force.

As Charles Wowkanech, president of the New Jersey AFL-CIO put it, what Christie does not understand is that “cuts in school aid, municipal aid and property tax rebates” constitute a real “tax increase for working families.”

Ill-conceived tax ideas are coming out of statehouses and governors’ mansions at a faster rate than we’ve seen in quite a while.  Here’s a quick summary on recent proposals receiving serious consideration in Arizona, Florida, Idaho, Maine, Michigan, Minnesota, New Jersey, Ohio, and Wisconsin.

Arizona: Business tax breaks and property tax breaks are being pushed by the Arizona Chamber of Commerce, and legislative leaders are taking them seriously.  The specifics have yet to be worked out, but expect at a minimum to see tax subsidies ostensibly aimed at boosting business hiring and investment.  As the Center on Budget and Policy Priorities (CBPP) has explained, however, states cannot stimulate their economies by cutting taxes.

Florida: Newly elected Governor Rick Scott continues to insist that “the way to get the state back to work is to cut property taxes and phase-out the corporate income tax, and we’re going to get that done.”  The state’s enormous budget gap has caused Senate President Mike Haridopolos to approach the issue more cautiously, though he still claims that “if we see some opportunities for tax relief that we feel absolutely confident will create more jobs and actually grow the economy, we’re open to them.”  Haridopolos is also pushing a “Taxpayer Bill of Rights” (TABOR) proposal similar to the one that decimated Colorado’s education funding stream.

Idaho: Legislators in Idaho — including the House majority leader — are preparing to revive an idea they first proposed toward the end of last year’s session: slashing the state’s corporate income tax rate from 7.6 percent to 4.9 percent.  Idaho legislators are also discussing cutting the state’s top personal income tax rate from 7.8 percent to 4.9 percent.  Each of these changes would drastically reduce the amount of revenue available to pay for vital state services, though by proposing that these changes be phased-in gradually over the course of the next decade, legislators are hoping to avoid having to spend too much time thinking about what state services will eventually have to be cut.

Maine: State Tax Notes (subscription required) reports that the chairman of Maine’s Senate tax committee plans to make cutting the state’s personal income tax rate his top priority.  Unlike the tax reform package that Maine voters recently rejected, this cut would be paid for not by broadening the state’s tax base, but by cutting spending and hoping for strong revenue growth.  Maine’s legislators are also apparently contemplating a constitutional amendment that would require supermajority support in the legislature in order to raise taxes.  A supermajority requirement of this type would result not only in lower state services, but also in more tax loopholes.  This is because such a requirement would prevent a simple majority of legislators from eliminating a tax loophole unless they also enlarged another loophole or lowered tax rates in a way that resulted in no net revenue gain.

Michigan: House and Senate leadership on both sides of the aisle in Michigan have inexplicably come to an agreement that the state’s EITC should be cut.  It’s unclear why tax increases on low-income families have suddenly become so popular in Michigan.  If Governor Rick Snyder gets his way, some of the revenue generated by taxing low-income families will likely to be used to pay for his proposed $1.5 billion cut in state business taxes.

Minnesota: The Republican leaders of Minnesota’s state legislature made clear this week that business tax cuts will be one of their top priorities.  One Senate leader has proposed cutting the state’s corporate income tax rate in half by 2017 and freezing statewide taxes on business property.  Fortunately, Minnesota Governor Mark Dayton is likely to vigorously oppose these cuts.

New Jersey: Democratic legislators are seriously considering a move to single sales factor apportionment for their corporate income tax.  The bill has already cleared the relevant committee, and will move to the full Senate soon.  See ITEP’s policy brief criticizing the single sales factor for state corporate income taxes.

Ohio: Ohio’s House and Governor have declared repealing the state's estate tax to be a top priority.  Local governments receive a majority of the revenue generated by Ohio’s estate tax, and therefore oppose its repeal.  Ohio’s House leaders would also like to create a business tax credit for hiring new employees.

Wisconsin: Governor Scott Walker has proposed a variety of business tax breaks and, as in Maine, the creation of a supermajority requirement to raise taxes.  More bad ideas are almost certain to come from Wisconsin in the weeks ahead, as Governor Walker made clear during last year’s campaign that he supports the outright repeal of Wisconsin’s corporate income tax.

For a review of the most significant state tax actions across the country this year and a preview for what’s to come in 2011, check out ITEP’s new report, The Good, the Bad, and the Ugly: 2010 State Tax Policy Changes.

"Good" actions include progressive or reform-minded changes taken to close large state budget gaps. Eliminating personal income tax giveaways, expanding low-income credits, reinstating the estate tax, broadening the sales tax base, and reforming tax credits are all discussed.  

Among the “bad” actions state lawmakers took this year, which either worsened states’ already bleak fiscal outlook or increased taxes on middle-income households, are the repeal of needed tax increases, expanded capital gains tax breaks, and the suspension of property tax relief programs.  

“Ugly” changes raised taxes on the low-income families most affected by the economic downturn, drastically reduced state revenues in a poorly targeted manner, or stifled the ability of states and localities to raise needed revenues in the future. Reductions to low-income credits, permanently narrowing the personal income tax base, and new restrictions on the property tax fall into this category.

The report also includes a look at the state tax policy changes — good, bad, and ugly — that did not happen in 2010.  Some of the actions not taken would have significantly improved the fairness and adequacy of state tax systems, while others would have decimated state budgets and/or made state tax systems more regressive.

2011 promises to be as difficult a year as 2010 for state tax policy as lawmakers continue to grapple with historic budget shortfalls due to lagging revenues and a high demand for public services.  The report ends with a highlight of the state tax policy debates that are likely to play out across the country in the coming year.

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.