Oklahoma Governor Mary Fallin’s proposal to repeal the state’s top personal income tax bracket is “gaining traction,” according to The Oklahoman.  The plan has already passed the House, and has the support of the state Chamber of Commerce. But the Oklahoma Policy Institute explains that this cut is stacked in favor of high-income residents: “the bottom 60 percent of Oklahomans would receive just 9 percent of the benefit from this tax cut, while the top 5 percent would receive 42 percent of the benefit.”  

Texas and Washington State are continuing to search for ways to make it easier to identify and repeal tax breaks that aren’t worth their cost.  The Texas Austin American-Statesman reports on a bill that “would put the tax code under the microscope, examining tax breaks in a six-year cycle similar to the Sunset process that evaluates whether state agencies are performing as intended.”  And the Washington Budget and Policy Center explains in a blog post how “all three branches of state government have taken, or are poised to take, actions that could greatly enhance transparency over the hundreds of special tax breaks on the books in Washington state.”

This Toledo Blade editorial gets it right about Ohio Governor Kasich’s plan to broaden the sales tax base to include more services: “There is merit, in theory, to expanding the sales tax to include more services. But the experience in states such as Florida — which broadened its tax base, then abandoned the effort as unworkable — suggests it should be done slowly and for the right reasons.” Broadening the sales tax base is good policy, but the Kasich plan is bad for Ohioans because overall the plan (according to an Institute on Taxation and Economic Policy analysis) increases taxes on those who can least afford it while cutting taxes for the wealthy.

ITEP is waiting for full details of Louisiana Governor BobbyJindal’s tax swap plan, but already clergy and ministers in the state are weighing in against the Governor’s plan to eliminate state income taxes and replace the revenue with a broader sales tax base and a higher rate. In this commentary, the Right Rev. Jacob W. Owensby, (bishop of the Episcopal Diocese of Western Louisiana), worries: “It is difficult to see how increased sales taxes will pass the test of fairness that we would all insist upon. Our tax system has lots of room for improvement. But relying on increased sales tax will not give us the fair system we need. Raising sales taxes will increase the burden on those who can least afford it.”

The Iowa Policy Project’s Research Director Peter Fisher is quoted in a Des Moines Register piece where he recommends that Iowa increase it Earned Income Tax Credit (EITC) as one way to help low- and middle-income children. ITEP has long championed EITCs as a vital anti-poverty tax policy.  

With Halloween just around the corner, Renee Fry of Nebraska’s Open Sky Policy Institute shares the scary news that Nebraska ranks 27th among states for its regressive tax structure. Taxes are expected to be a contentious issue this year and “fiscal guru” Fry says the state’s “tax system is taking its toll in how much Nebraskans invest in schools, roads and communities. Outdated tax codes also complicate state leaders’ ability to plan strategically.”

Here’s a familiar problem, this time from Tennessee.  Big property tax breaks for farmers are reducing local tax bases by up to 20 percent. Worse, a state report says that the break is “being used by some people who clearly aren't farmers.”  Among the so-called “farmers” benefiting from this giveaway are some of the state’s wealthiest residents, like country music stars Billy Ray Cyrus and Wynonna Judd, as well as the founder of Autozone.

With a Maryland version of the DREAM Act on the November ballot, columnist Dan Rodricks at the Baltimore Sun wants readers to be aware of  the taxes that are often paid by undocumented workers, including state income taxes, federal income taxes, Social Security taxes, sales taxes, and fees.

To celebrate the five year anniversary of the first “Rich States, Poor States,” an Arthur Laffer/ALEC publication that ranks states based on how closely their tax and budget policies adhere to conservative economic principles, the Iowa Policy Project put it to the retrospect test and found it lacking.  They write, “The ALEC Outlook Ranking fails to predict economic performance. In fact, the less a state followed ALEC’s prescriptions, the better it did in terms of job growth, and the better it did on change in poverty rate and median income.”

New York just decided to throw even more taxpayer money at filmmakers, despite ample evidence that these giveaways don’t do much for long-term job growth or economic performance.

This Topeka Capital-Journal letter-to-the-editor from a registered Republican laments that the tax plan signed into law by Governor Brownback “will increase Kansas income tax on the poor and reduce taxes predominately for the wealthy.”

On Tuesday, Tennessee Governor Bill Haslam told the House Judiciary Committee that states need to be able to collect sales taxes on internet purchases. He said plainly, “This discussion isn’t about raising taxes or adding new taxes.” Instead it’s about “collecting taxes already owed.” We couldn’t agree more.

Photo of Art Laffer via  Republican Conference Creative Commons Attribution License 2.0

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.)

This week brought news of a few more states tackling the challenge of taxing purchases made over the Internet in the same way as purchases made in “brick and mortar” stores.  Nevada and Tennessee got agreements from Amazon.com, the mother of all online retailers, to start doing its part to collect those taxes, and it looks like Massachusetts isn’t far behind.

• In Nevada, Amazon.com will begin collecting sales taxes in 2014 under a new agreement announced on Monday.  The company already has major warehouses and distribution centers in the state.  Amazon’s agreement with Nevada is similar to deals struck in California, Indiana, South Carolina, Tennessee, and Virginia.
• As in Nevada, Amazon’s deal to begin collecting sales taxes in Tennessee won’t take effect until 2014, but a lesser known part of that agreement has already taken effect.  Amazon is mailing notices to all its Tennessee customers from throughout the past year letting them know that they may owe sales tax on the items they bought from the company, even though Amazon didn’t collect those taxes for them.  Similar annual notices will be sent by February 1st in both 2013 and 2014.
• The Massachusetts Main Street Fairness Coalition is continuing its calls for the state to require that Amazon collect sales taxes, and The Boston Globe just chimed in to support the idea as well.  As the Globe explains, the company’s new offices in Massachusetts should be enough to bring the company within reach of the state’s sales tax collection laws.

Of course, these efforts are only partial solutions at best.  Amazon.com may be the world’s biggest online retailer, but they’re hardly the only one.  Nevertheless, until the federal government acts to allow all states to enforce their sales tax laws on all purchases, these piecemeal victories are the best news we can hope for.

Tennessee lawmakers are seriously considering repealing their state estate tax, in part because of a comically flawed report from supply-side economist Arthur Laffer.  The report’s bottom-line conclusion is that Tennessee would have benefited from 220,000 more jobs in 2010 if lawmakers had simply repealed the Tennessee estate tax one decade earlier.  But as the Institute on Taxation and Economic Policy (ITEP) explains in a new brief, while 220,000 jobs is certainly an impressive number, the reasoning Laffer used to arrive at that figure is far from convincing.

Laffer begins his argument by pointing to the “Laffer-ALEC State Competitiveness Index,” which is basically a wish list of fifteen conservative policies he would like to see states enact (low income taxes, low corporate taxes, low minimum wage, etc).  Tennessee ranks 8^th overall on the Laffer-ALEC Index, and if the Index has any predictive power whatsoever, that means Tennessee’s economy should be doing pretty well.  But as Laffer admits, the reality is exactly the opposite.

Tennessee’s low economic and employment growth is particularly puzzling to Laffer because in a series of prior reports, he’s argued that states without income taxes (of which Tennessee is one) are outperforming the rest of the country.  So how then does Laffer explain Tennessee’s disappointing growth?  He decides to ignore a slew of factors that affect state economies in today’s complex world, and instead place all of the blame in one place: the state estate tax.

According to Laffer’s reasoning, if Tennessee had jettisoned its estate tax one decade ago, employment and economic growth more broadly would have sped up to a rate exactly equal to the average among all states not levying an income tax.  The natural result of this would be 220,000 more jobs in 2010, as well as $36 billion in additional yearly economic output.

Laffer says he can think of “no reason to believe” that things wouldn’t have played out this way.  But as ITEP explains in its brief, differences in economic growth rates are influenced by a range of factors that don’t appear to have even crossed Laffer’s mind, like differences in natural resource endowments, educational attainment, and infrastructure quality.  The unavoidable conclusion is that Laffer’s choice of scapegoat in Tennessee had a lot more to do with his ideology than with any sort of rigorous economic analysis.

For a closer look at Laffer’s deeply flawed argument in favor of repealing Tennessee’s estate tax, be sure to read ITEP’s full brief.

Photo of Art Laffer via  Republican Conference Creative Commons Attribution License 2.0

North Carolina’s two major newspapers, the Raleigh News and Observer and Charlotte Observer, published editorials in support of the state’s estate tax in the wake of a hearing last week called to eliminate it.  From the News and Observer: “The estate tax is hardly a burden on those few inheritors who have to pay it. It is a modest but valuable asset to government revenue, and there is nothing unfair about [it]."  And, from the Charlotte Observer: “Some Republicans support abolishing the federal estate tax. They should explain why the extremely wealthy should be able to avoid paying any taxes on unrealized capital gains.”

Washington State’s special legislative session started yesterday. The media is reporting that the session will be a contentious battle over how the state should close its $1 billion budget gap. (Hint: the answer’s in the Washington State Budget and Policy Center’s proposal to tax capital gains income. )

An article from The Miami Herald reveals some ugly details surrounding the $2.5 billion in business tax cuts just passed by the Florida legislature.  As the Herald points out, “those benefiting had plenty of lobbyists … AT&T, which has 74 Florida lobbyists, spent $1.68 million on lobbying last year, more than any other company.”  Not coincidentally, AT&T and Verizon – both champion tax dodgers – were among the biggest winners.  A last-minute amendment to the legislation could give the telecommunications industry a tax break as large as $300 million.

A great op-ed in the Kansas City Star asks why Governor Brownback wants taxes in Kansas to be like Texas, reminding Kansans that Texas ranks low in everything that really matters, from high school graduation rates to household income to crime.

Dolly Parton’s Dollywood Co. and Gaylord Entertainment Co. have struck a deal with Nashville, Tennessee Mayor Karl Dean that, if approved, would result in an estimated $5.4 million in property tax breaks for their planned water and snow park.  Ben Cunningham of the Nashville Tea Party was right to point out that the plan amounts to a “giveaway” to companies that plan to move to the city anyway and that it’s time to stop “giving in to this kind of corporate extortion.”

Photo of Dolly Parton via Eva Rinaldi 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:

Note to Readers: Over the coming weeks, ITEP will highlight tax policy proposals that are gaining momentum in states across the country.  This week, we’re taking a closer look at proposals which would reduce or eliminate state inheritance and estate taxes.  If you haven’t already, be sure to read our inaugural article in the series on proposals in some states to roll back or eliminate income taxes, which are the uniquely progressive feature of our tax system.

Whether state or federal, inheritance and estate taxes play an important role in limiting concentrated wealth in America. Warren Buffett views the estate tax as key to preserving our meritocracy, and the great Justice Louis Brandeis famously warned that we could have concentrated wealth or we could have democracy, but not both.  While the federal estate tax is often the source of passionate debate, these taxes are particularly important at the state level because they help offset some of the stark regressivity built into most state tax systems.  Unfortunately, lawmakers in some states have bought into the bogus claims of the American Family Business Institute (a.k.a. nodeathtax.org), Arthur Laffer, and others in the anti-tax, anti-government movement that repealing estate and inheritance taxes will usher in an economic boom.

Nebraska – Governor Dave Heineman has proposed repealing Nebraska’s inheritance tax entirely, determined, it seems, to pile on to the tax cuts already enacted earlier in his term.  (Inheritance taxes are very similar to estate taxes, except that inheritance taxes are technically paid by the heir to the estate, rather than by the estate itself.)  Unfortunately, in addition to worsening the unfairness of the state’s tax system, the Governor’s proposal would also kick struggling localities while they’re down, since revenue from Nebraska’s inheritance tax flows to county governments.

Indiana – Senate Appropriations Chairman Luke Kenley recently made the same proposal as Nebraska’s governor: outright repeal of the inheritance tax.  Kenley has floated the idea of using sales taxes on online shopping to pay for the repeal, but while Internet sales taxes are good policy on their own, this change would amount to an extremely regressive tax swap overall.  Indiana’s inheritance tax is already limited, however, and exempts spouses of the deceased entirely, as well as the first $100,000 given to each child, stepchild, grandchild, parent, or grandparent.

Tennessee – Governor Bill Haslam’s inheritance tax proposal may be less radical than those receiving attention in Nebraska and Indiana, but not by much.  Rather than repealing the tax entirely, Haslam would like to increase the state’s already generous $1 million exemption to a whopping $5 million.  It’s surprising, to say the least, that one of Haslam’s top tax policy priorities should be slashing taxes for lucky heirs inheriting over $1 million.

North Carolina – Efforts to gut the estate tax in North Carolina haven’t gained backers as visible as those in Nebraska, Indiana, and Tennessee.  But there are rumblings that repeal could be on the agenda of some legislators, as evidenced by the vehemently anti-estate tax testimony that a joint House-Senate committee heard from the American Family Business Institute this month.

Tennessee Governor Bill Haslam recently announced that Amazon