The vast majority of the attention given to the Bush tax cuts has been focused on changes in top marginal rates, the treatment of capital gains income, and the estate tax.  But another, less visible component of those cuts has been gradually making itemized deductions more unfair and expensive over the last five years.  Since the vast majority of states offering itemized deductions base their rules on what is done at the federal level, this change has also resulted in state governments offering an ever-growing, regressive tax cut that they clearly cannot afford. 

In an attempt to encourage states to reverse the effects of this costly and inequitable development, the Institute on Taxation and Economic Policy (ITEP) this week released a new report, "Writing Off" Tax Giveaways, that examines five options for reforming state itemized deductions in order to reduce their cost and regressivity, with an eye toward helping states balance their budgets.

Thirty-one states and the District of Columbia currently allow itemized deductions.  The remaining states either lack an income tax entirely, or have simply chosen not to make itemized deductions a part of their income tax — as Rhode Island decided to do just this year.  In 2010, for the first time in two decades, twenty-six states plus DC will not limit these deductions for their wealthiest residents in any way, due to the federal government's repeal of the "Pease" phase-out (so named for its original Congressional sponsor).  This is an unfortunate development as itemized deductions, even with the Pease phase-out, were already most generous to the nation's wealthiest families.

"Writing Off" Tax Giveaways examines five specific reform options for each of the thirty-one states offering itemized deductions (state-specific results are available in the appendix of the report or in these convenient, state-specific fact sheets).

The most comprehensive option considered in the report is the complete repeal of itemized deductions, accompanied by a substantial increase in the standard deduction.  By pairing these two tax changes, only a very small minority of taxpayers in each state would face a tax increase under this option, while a much larger share would actually see their taxes reduced overall.  This option would raise substantial revenue with which to help states balance their budgets.

Another reform option examined by the report would place a cap on the total value of itemized deductions.  Vermont and New York already do this with some of their deductions, while Hawaii legislators attempted to enact a comprehensive cap earlier this year, only to be thwarted by Governor Linda Lingle's veto.  This proposal would increase taxes on only those few wealthy taxpayers currently claiming itemized deductions in excess of $40,000 per year (or $20,000 for single taxpayers).

Converting itemized deductions into a credit, as has been done in Wisconsin and Utah, is also analyzed by the report.  This option would reduce the "upside down" nature of itemized deductions by preventing wealthier taxpayers in states levying a graduated rate income tax from receiving more benefit per dollar of deduction than lower- and middle-income taxpayers.  Like outright repeal, this proposal would raise significant revenue, and would result in far more taxpayers seeing tax cuts than would see tax increases.

Finally, two options for phasing-out deductions for high-income earners are examined.  One option simply reinstates the federal Pease phase-out, while another analyzes the effects of a modified phase-out design.  These options would raise the least revenue of the five options examined, but should be most familiar to lawmakers because of their experience with the federal Pease provision.

Read the full report.

The vast majority of the attention given to the Bush tax cuts has been focused on changes in top marginal rates, the treatment of capital gains income, and the estate tax.  But another, less visible component of those cuts has been gradually making itemized deductions more unfair and expensive over the last five years.  Since the vast majority of states offering itemized deductions base their rules on what is done at the federal level, this change has also resulted in state governments offering an ever-growing, regressive tax cut that they clearly cannot afford. 

In an attempt to encourage states to reverse the effects of this costly and inequitable development, the Institute on Taxation and Economic Policy (ITEP) this week released a new report, "Writing Off" Tax Giveaways, that examines five options for reforming state itemized deductions in order to reduce their cost and regressivity, with an eye toward helping states balance their budgets.

Thirty-one states and the District of Columbia currently allow itemized deductions.  The remaining states either lack an income tax entirely, or have simply chosen not to make itemized deductions a part of their income tax — as Rhode Island decided to do just this year.  In 2010, for the first time in two decades, twenty-six states plus DC will not limit these deductions for their wealthiest residents in any way, due to the federal government's repeal of the "Pease" phase-out (so named for its original Congressional sponsor).  This is an unfortunate development as itemized deductions, even with the Pease phase-out, were already most generous to the nation's wealthiest families.

"Writing Off" Tax Giveaways examines five specific reform options for each of the thirty-one states offering itemized deductions (state-specific results are available in the appendix of the report or in these convenient, state-specific fact sheets).

The most comprehensive option considered in the report is the complete repeal of itemized deductions, accompanied by a substantial increase in the standard deduction.  By pairing these two tax changes, only a very small minority of taxpayers in each state would face a tax increase under this option, while a much larger share would actually see their taxes reduced overall.  This option would raise substantial revenue with which to help states balance their budgets.

Another reform option examined by the report would place a cap on the total value of itemized deductions.  Vermont and New York already do this with some of their deductions, while Hawaii legislators attempted to enact a comprehensive cap earlier this year, only to be thwarted by Governor Linda Lingle's veto.  This proposal would increase taxes on only those few wealthy taxpayers currently claiming itemized deductions in excess of $40,000 per year (or $20,000 for single taxpayers).

Converting itemized deductions into a credit, as has been done in Wisconsin and Utah, is also analyzed by the report.  This option would reduce the "upside down" nature of itemized deductions by preventing wealthier taxpayers in states levying a graduated rate income tax from receiving more benefit per dollar of deduction than lower- and middle-income taxpayers.  Like outright repeal, this proposal would raise significant revenue, and would result in far more taxpayers seeing tax cuts than would see tax increases.

Finally, two options for phasing-out deductions for high-income earners are examined.  One option simply reinstates the federal Pease phase-out, while another analyzes the effects of a modified phase-out design.  These options would raise the least revenue of the five options examined, but should be most familiar to lawmakers because of their experience with the federal Pease provision.

Read the full report.

State budget woes appear to be spurring an increasing amount of interest in re-examining state tax breaks.  The Governors of both Michigan and Idaho have taken steps to ramp up the scrutiny directed at their state’s tax breaks, while a new report out of Oklahoma and an editorial highlighting legislation in Georgia this week have urged similar actions.

In Michigan, the Detroit Free Press urged the adoption of Governor Granholm’s proposal to thoroughly analyze the merits of every tax break, and to saddle most breaks with sunset provisions that would force lawmakers to either debate and renew these breaks, or to let them expire.  This proposal would help to remedy the lack of scrutiny given to tax breaks because of their exclusion from the appropriations process.  Notably, the proposal’s use of sunsets as a mechanism for forcing review seems to resemble a law enacted in Oregon just last year.

In Georgia, the need for additional scrutiny of tax breaks is even more desperate.  Because the state lacks a tax expenditure report, Georgia lawmakers are not even aware of the full range and cost of special breaks that their tax system provides.  SB 206, which was endorsed by a Macon Telegraph editorial this week, would remedy this problem by finally requiring the creation of such a report.  The editorial rightly points out that the bill could be strengthened by requiring an analysis of each tax break’s effectiveness, but at this point, even simply producing a list of tax breaks and their costs would be a major step forward.  The Georgia Budget and Policy Institute has been pushing for the creation of such a report for many years.

Idaho governor Butch Otter has also shown some tentative interest in figuring out whether his state’s tax breaks are worth their cost.  While Governor Otter continues to hold out hope that the state’s revenues will rebound soon, he also recently directed the state’s Tax Commission to study sales tax exemptions in the event that closing some of those exemptions becomes necessary to fill the state’s budget gap next year.  If done carefully, the studies produced by the Tax Commission could provide a wealth of information on breaks that have so far received a relatively small amount of scrutiny.
    
The Oklahoma Policy Institute has also added to the progress being made on this issue with a new report outlining what should be done to scrutinize tax breaks in a systematic fashion.  Their report, titled “Let There Be Light: Making Oklahoma’s Tax Expenditures More Transparent and Accountable,” provides twelve specific recommendations for realizing this vision.  Among those recommendations are: improving the state’s existing tax expenditure report, sunsetting all tax incentives, requiring the extension of a sunsetting incentive to undergo a “performance review,” and developing a unified economic development budget.

On Tuesday, voters in Oregon made their voices heard, using the ballot box to tell their elected officials that they agreed with the legislature's decision in June of last year to raise taxes on businesses and the wealthy to help close the state’s yawning budget gap.  By a substantial margin, they approved Measure 66 – which will raise income tax rates for married filers with incomes over $250,000 – and Measure 67 – which will overhaul the state’s corporate minimum tax and create a new top corporate income tax rate.  

ITEP's distributional analyses of the plan's progressive impact, cited in analyses by the Oregon Center for Public Policy, helped to inform this important debate.

The vote marks the first time in more than 70 years that Oregon voters approved an income tax increase via the ballot, suggesting they understand the need for a balanced approach to addressing the state’s fiscal woes and setting a sound example for the many states facing similar difficulties.

With a victory of this magnitude comes a certain amount of momentum – and policymakers in Oregon have made clear that they intend to use it achieve further progressive reform.  The day after the vote, Governor Ted Kulongoski announced that his top priority for the upcoming legislative session is to put an end to “budgeting from crisis to crisis” and to change existing law so that future budget surpluses will be reserved in a rainy day fund rather than returned to corporate and individual taxpayers via so-called “kicker” rebates.

To learn more about Oregon’s unique “kicker” and the disastrous consequences it has for sound fiscal management, as well as for further perspective on the passage of Measures 66 and 67, visit the Oregon Center for Public Policy.

This coming Tuesday, January 26, Oregonians will vote on two ballot initiatives, Measure 66 and Measure 67, that will decide the fate of major tax legislation initially approved in June of last year.  

A “yes” vote will affirm the decision by legislators and Governor Ted Kulongoski to take a balanced approach to addressing the state’s gaping budget deficit. This approach will increase the taxes paid by the very wealthiest Oregonians and by the state’s largest and most profitable businesses.

As the Oregon Center for Public Policy documents, if voters fail to pass Measures 66 and 67, even deeper cuts to vital services like education and health care will have to be made.  In the words of one news account, “shuttered prisons, eliminated programs for the sick and needy, increased tuition and fewer instructors on crowded university campuses” would be just some of the ramifications if Measures 66 and 67 go down to defeat.

While passage of Measures 66 and 67 would help forestall further spending reductions and make Oregon’s tax system less regressive, it is also important to keep in mind what passage would not do.  As Joe Cortright, a senior fellow at the Brookings Institution and president of Impresa, a Portland, Oregon-based economic consulting firm explains, passage of Measures 66 and 67 would not have the “job killing” impact that some opponents have disingenuously claimed. Rather, he concludes that “Given [Oregon’s] current economic straits, cutting public services would be far worse for the economy than these modest tax changes. Oregonians who are concerned about jobs should vote yes on Measures 66 and 67.”

For more on Measures 66 and 67, visit the Oregon Center for Public Policy as well as the Vote Yes for Oregon Coalition and Tax Fairness Oregon.

Recent developments in Oregon and Massachusetts demonstrate how relying too heavily on tax breaks to accomplish policy goals can quickly cause things to get out of hand.  Policymakers in Maryland should heed these warnings when considering the Governor’s recent proposal to create new tax incentives for businesses, despite the state’s dire budgetary outlook.

In Oregon, the controversy involves the state’s Business Energy Tax Credit (BETC, or “Betsy”).  The BETC program is purportedly designed to encourage the growth of “green” energy companies in Oregon.  Under pressure from the Governor’s office, the Oregon Department of Energy is reported to have deliberately (and drastically) low-balled the cost-estimate attached to the BETC program.  This lower cost estimate allowed the program to be enacted with much less scrutiny than would otherwise have been the case.  Of course, if the program had instead been operated as a traditional spending program, its overall size would have been limited to whatever dollar amount the legislature decided it deserved during the appropriations process.

The Oregon credit has also taken heat in recent weeks for its lack of accountability – specifically, by providing benefits to businesses that have done little or anything to create jobs or improve the environment.  And moreover, because of the “transferability” of these credits, the program has also resulted in huge windfall benefits to businesses, including Walmart, that have made absolutely no attempt to promote the credit’s environmental goals.

In order to quell the outrange expressed by Oregonians at this blatant misuse of state resources, the Governor has since proposed, among other things, to cap the overall size of the BETC program and force the government to prioritize potential projects in order to bring the cost of the program beneath that cap.  It remains to be seen whether the Governor’s recommendations will be enough to salvage this so far disastrous program.

While Oregon’s recent experience with BETC provides anecdotal evidence of the danger of relying upon the tax code as a tool of economic development, evidence from Massachusetts provides an even more comprehensive picture of this problem.  The Massachusetts Budget and Policy Center’s (MBPC) recent analysis of economic development tax incentives shows that while traditional government “spending” has been forced downward by the economic recession, spending on business tax incentives has continued to rise sharply.  The 2.8% drop in FY10 appropriations, for example, contrasts sharply with a 4.2% increase in FY10 economic development tax breaks.  MBPC explains the cause of this asymmetry as follows:

“Tax expenditures are in many ways similar to direct appropriations. Both seek to achieve certain policy goals through the use of the state’s economic resources, and both have an effect on the state’s bottom line. A primary difference is that budget appropriations must be reauthorized by the Legislature each year, while tax expenditures remain in effect without the Legislature having to take action.  The effectiveness of these tax expenditures is rarely examined in any detail and very little data is available to analyze.”

In order to correct this bias in favor of special tax breaks, the MBPC proposes six reforms designed to shine a brighter light on these programs.  The first such reform, “provide information on the purpose and effectiveness of each tax expenditures,” mirrors a proposal made by CTJ just last month.

On the heels of this disappointing news from Oregon and Massachusetts comes a proposal from Maryland Governor Martin O’Malley to provide businesses with a $3,000 tax credit for each employee they hire.  While the Governor has thankfully proposed to cap the overall credit at $20 million, one can’t help but wonder whether another economic development tax break is really the best use of the state’s very scarce resources.

This week, the Institute on Taxation and Economic Policy (ITEP), in partnership with state groups in forty-one states, released the 3rd edition of “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.”  The report found that, by an overwhelming margin, most states tax their middle- and low-income families far more heavily than the wealthy.  The response has been overwhelming.

In Michigan, The Detroit Free Press hit the nail on the head: “There’s nothing even remotely fair about the state’s heaviest tax burden falling on its least wealthy earners.  It’s also horrible public policy, given the hard hit that middle and lower incomes are taking in the state’s brutal economic shift.  And it helps explain why the state is having trouble keeping up with funding needs for its most vital services.  The study provides important context for the debate about how to fix Michigan’s finances and shows how far the state really has to go before any cries of ‘unfairness’ to wealthy earners can be taken seriously.”

In addition, the Governor’s office in Michigan responded by reiterating Gov. Granholm’s support for a graduated income tax.  Currently, Michigan is among a minority of states levying a flat rate income tax.

Media in Virginia also explained the study’s importance.  The Augusta Free Press noted: “If you believe the partisan rhetoric, it’s the wealthy who bear the tax burden, and who are deserving of tax breaks to get the economy moving.  A new report by the Institute on Taxation and Economic Policy and the Virginia Organizing Project puts the rhetoric in a new light.”

In reference to Tennessee’s rank among the “Terrible Ten” most regressive state tax systems in the nation, The Commercial Appeal ran the headline: “A Terrible Decision.”  The “terrible decision” to which the Appeal is referring is the choice by Tennessee policymakers to forgo enacting a broad-based income tax by instead “[paying] the state’s bills by imposing the country’s largest combination of state and local sales taxes and maintaining the sales tax on food.”

In Texas, The Dallas Morning News ran with the story as well, explaining that “Texas’ low-income residents bear heavier tax burdens than their counterparts in all but four other states.”  The Morning News article goes on to explain the study’s finding that “the media and elected officials often refer to states such as Texas as “low-tax” states without considering who benefits the most within those states.”  Quoting the ITEP study, the Morning News then points out that “No-income-tax states like Washington, Texas and Florida do, in fact, have average to low taxes overall.  Can they also be considered low-tax states for poor families?  Far from it.”

Talk of the study has quickly spread everywhere from Florida to Nevada, and from Maryland to Montana.  Over the coming months, policymakers will need to keep the findings of Who Pays? in mind if they are to fill their states’ budget gaps with responsible and fair revenue solutions.

A new report from Citizens for Tax Justice makes the case for a “performance review” system designed to evaluate the effectiveness of special tax breaks in achieving their stated goals. While CTJ's report primarily focuses on the importance of such a system at the federal level, most of its findings are equally applicable to the states.

The special breaks littered throughout state tax codes — or “tax expenditures,” as they are frequently called — are an enormous and often overlooked part of government’s operations.  Although the primary purpose of a tax system is to raise the revenue needed to pay for public services, every state, as well as the federal government, also uses its tax system to accomplish a variety of other policy goals. Encouraging job creation, subsidizing private industry research, and promoting homeownership are just a few of the countless ends pursued via special subsidies contained in state tax codes. Rather than having anything to do with fair or efficient tax policy, these tax credits, exemptions, and other provisions are actually much more akin to government spending programs — hence the term, “tax expenditures.”

A performance review system takes the commonsense step of asking whether these provisions are doing what policymakers intended of them. Under such a system, tax credits designed to encourage research and experimentation, for example, would be regularly examined to determine the amount of new research undertaken as a result of the credits. Shockingly, the vast majority of states, and the federal government, do not currently attempt to answer fundamental questions of this sort with any type of rigorous evaluation.

Among CTJ’s findings are:

— “Procedural biases,” such as the omission of tax expenditures from the authorization and appropriations processes, allow tax expenditures to slip by with a fraction of the scrutiny given to direct spending programs. State legislative systems requiring supermajority consent to “raise taxes” (or eliminate tax expenditures) are particularly biased in this regard.

— “Political biases,” such as the erroneous belief that government can take a “hands off” approach, or reduce its overall size by offering special tax breaks, also contribute to the current lack of oversight.

— A number of states have made strides in recent years to counteract these biases through performance reviews and other, similar means. Washington State’s efforts represent the most complete attempt at tax expenditure performance review yet to be undertaken in the United States. California, Delaware, Nevada, Oregon, and Rhode Island have also made attempts — with varying degrees of success — to enhance the level of scrutiny applied to their tax expenditures.

— The bleak state budgetary outlook makes the implementation of tax expenditure review all the more urgent. States, like the federal government, can no longer afford to deplete their resources with ill-advised and ineffective tax expenditures. By implementing a tax expenditure performance review system, states can pave the way for a reduction in tax expenditures by identifying those expenditures that are ineffective.

— A formal review system could also help to reconceptualize these provisions in the minds of policymakers, the media, and the public as spending-substitutes, rather than simply as tax cuts. This would further help reduce the rampant biases in favor of tax expenditure policy.

— The precise design of a tax expenditure review system is very important. States should be sure to include all taxes, and all tax expenditures within the scope of the review. Additionally, states should exercise care in selecting the criteria to be used in the reviews — Washington State’s criteria represent a good starting point from which to build. Other key design issues include choosing the appropriate body to conduct the reviews, timing the reviews to coincide with the budgeting process, allowing similar tax expenditures to be reviewed simultaneously, and attaching some type of “action-forcing” mechanism to the reviews so that policymakers must explicitly consider the reviews’ results.

— Tax expenditure reviews are necessary, though they may not be sufficient to correct for the biases in favor of tax expenditure policy. A tax expenditure performance review system can play a vital informational role either on its own, or alongside other, more aggressive tax expenditure control techniques such as sunset provisions or caps on tax expenditures’ total value.

Read the full report.

Read the 2-page summary.

It’s official. Come this January, voters in Oregon will decide, via ballot initiative, whether to keep in place two major tax reforms – one raising the income taxes paid by wealthy Oregonians and the other increasing the taxes paid by large corporations – that were adopted in July to help close the state’s yawning budget gap. 

While the initiative’s backers (that is, the anti-tax activists favoring repeal) assert that the pair of reforms will damage Oregon’s economy, a recent report by the state’s Legislative Revenue Office finds that using spending cuts to make up for the $733 million in revenue that would be lost if the reforms were repealed would actually be worse for the state’s economic prospects. 

This conclusion is echoed in a letter signed by three dozen Oregon economists, who argue that the Legislature’s efforts to “balance budget cuts with tax increases targeted on corporations and high-income Oregonians while maximizing receipt of federal dollars to fill a $4 billion shortfall was, from an economic perspective, a prudent course of action.” 

Moreover, a study released earlier this week by the Oregon Center for Public Policy reveals that, while the recent reforms were extremely progressive in nature, they will still leave the very richest Oregonians paying less in state and local taxes, relative to their incomes, than poor and middle-income residents.

For more on the very different attitudes some affluent Oregonians have towards recent tax reforms, see this revealing piece from Oregon Public Broadcasting.

Oregon Governor Ted Kulongoski recently signed legislation requiring the "sunset" (or forced expiration) of most tax credits offered by the state.  Tax credits related to the environment, agriculture, or business will expire at the end of 2011, if new legislation is not enacted.  Education, housing, and community service related credits will cease to exist after 2013, without legislative action.  The same goes for credits dealing with medical care, child care, and families after 2015.

Of course, the plan is not necessarily to allow all these tax breaks to expire, but instead to provide the legislature with an impetus for taking a closer look at these provisions.  Ideally, after a closer look, state lawmakers will then be able to more objectively decide whether renewing them is worth the cost.

This reexamination can be thought of as an attempt to mirror the reviews that occur when agricultural, housing, education, and other types of ordinary spending programs are reconsidered during the appropriations process.  Since tax credits oftentimes are enacted with fairly specific goals, a review of their merits could be quite pointed, and potentially very useful.

This is particularly important in Oregon, where any law increasing taxes (and that includes any law repealing a tax credit) usually requires a supermajority vote of three fifths of the state house and senate. So once a tax credit is enacted, it might be around forever if it doesn't have an expiration date.

But the reform signed by the Governor does not go far enough because there are many other types of tax subsidies (subsidies provided through the state's tax system) that do not take the form of credits, and these are not affected by the new law. For example, the state's home mortgage interest deduction is arguably due for an overhaul, but this new law does not provide state legislators with any impetus to review such targeted tax deductions.

It's nice to see lawmakers acknowledge that they need to pay more attention to the money they're doling out through the tax code, but this reform could be much stronger.

Earlier this year, policymakers in Oregon enacted both temporary and permanent changes in the state’s tax system to help close an enormous budget gap and, by extension, provide funding for vital services like education, health care, and public safety.  Among the changes are an increase in the personal income tax rate on income in excess of $250,000, new limitations on the personal income tax deduction for federal taxes paid, reforms to the state’s corporate minimum tax, and an increase in the top corporate income tax rate.

Yet, due to quirks in Oregon’s legislative process, opponents of these changes have an opportunity to put them before the voters for approval via referendum.  Not surprisingly, representatives of big business and a who’s who of anti-tax organizations are attempting to take full advantage of that opportunity.  Groups such as Associated General Contractors of America, Associated Oregon Industries, and Common Sense for Oregon have all already given tens of thousands of dollars to the referendum effort, which must collect over 55,000 signatures by September 25.  If they do, then the changes will be put before the voters in January. 

While corporate interests will almost certainly go to great lengths to stop these changes from taking effect, it will ultimately be the voters who decide -- and, for now, it appears that they understand the need for additional revenue generated in a progressive fashion.  Polling conducted by Grove Insight and released by the Oregon Center for Public Policy indicates that 62 percent of likely voters would back the changes enacted by the legislature, with just 26 percent opposed.

For more on the recent changes in tax policy and on the referendum fight, visit the Defend Oregon Coalition.

While some states continue to believe that they can weather the current fiscal crisis with the budgetary equivalent of a rubber band, a paper clip, and some chewing gum -- yes, we're looking at you, Kentucky -- others, such as Pennsylvania and Oregon, recognize that the deficits spawned by the national recession should, in turn, spur them to shore up their tax codes.

In the Keystone State this past week, Governor Ed Rendell indicated that he would back an increase in the state's personal income tax rate from 3.07 to 3.57 percent. After all, as the Pittsburgh Post-Gazette observes "difficult times require tough action."

On the other side of the country, Oregon legislators gave final approval to changes in their corporate and personal income taxes that are expected to yield more than $700 million in additional revenue; those changes are expected to be signed into law by Governor Ted Kulongoski. Among the changes pending in Oregon are the creation of two new (albeit temporary) top income tax brackets with rates of 10.8 and 11 percent and increases in the state's corporate minimum tax.

For more on the need to raise additional revenue in Pennsylvania, see this statement from the Pennsylvania Budget & Policy Center and an array of other organizations.

As if the concurrent fiscal and economic crises weren't enough to handle on their own, many states also face the challenges posed by crumbling transportation infrastructure, the result of decades of neglect and underfunding. Recently, lawmakers in Oregon decided to find a way to address deteriorating bridges and overcrowded roadways, with the Legislature passing a $300 million transportation package that, by some estimates, will produce 40,000 new jobs over the next ten years.

Unfortunately, the financing mechanisms contained in the measure -- principally, a 6 cent increase in the gas tax scheduled for 2011 and increases in a variety of registration, title, and other fees -- will fall most heavily on low- and middle-income families, precisely those Oregonians bearing the brunt of the state's economic crisis.

A new report from the Oregon Center for Public Policy outlines one approach for easing the impact the transportation package will have on low-wage workers -- an increase in the state's version of the Earned Income Tax Credit. You can read the report in its entirety here.

With the start of fiscal year 2010 generally only a little more than a month away and with the overall fiscal picture continuing to look rather bleak, two more states have gotten serious about using progressive income tax increases to generate much needed revenue. In Oregon this past week, Democratic legislators -- who control both chambers of the statehouse -- unveiled a plan to raise $800 million over the FY09-11 biennium. One of the principal features of the plan is the creation of two new income tax brackets -- one for couples with incomes over $250,000 (or for single filers with incomes above $125,000) and another for filers with incomes greater than $500,000. The rates for these brackets would be 10.8 percent and 11 percent respectively. (At present, the top rate in Oregon is 9 percent). Similarly, in New Jersey, Governor Jon Corzine, in the wake of particularly poor April revenue collections, has revised his earlier budget plan. He now proposes to raise the tax rate for millionaires to 9.47 percent and to create an additional bracket for filers with incomes between $400,000 and $500,000. While the income tax aspects of the Governor's proposal have won support from progressives, his recommendation that the state suspend its current property tax rebates for everyone except the elderly and the disabled has been less favorably received.