Tax Justice Digest stories about New York
The Institute on Taxation and Economic Policy (ITEP) submitted testimony discussing the contradictory and potentially harmful incentives created by several corporate giveaways. One was enacted by the state less than five years ago (the "single sales factor" for manufacturing companies). Another, the "cancellation of debt income" or "CODI," was foisted on the states by this year's stimulus bill. The CODI provision, which created a new break for corporations in the federal tax code, was ranked by CTJ as one of the worst six provisions in the stimulus bill passed out of the Senate and unfortunately it was included in the final law that was enacted. Because most state corporate income taxes are linked to the federal corporate income tax, this new giveaway reduces state revenue as well as federal revenue.
The Fiscal Policy Institute also presented testimony on sensible loophole-closing options. The Center on Budget and Policy Priorities released a new paper this week that explains the CODI provisions and identifies the many states that could raise additional revenues by decoupling from this provision.
Critics of progressive income tax increases like to suggest that such changes will only spur the wealthy to pack up and head to more tax-friendly climes like, say, Wyoming or South Dakota. Yet, as ITEP observed earlier this week, at least three of the states that turned to income tax increases during the last fiscal crisis (
Under
these circumstances, the best way to eliminate state budget deficits is
through tax increases on upper-income individuals and families, as such
changes would reduce consumer demand the least. Three states in the
northeast --
In the Nutmeg State, budget deficits are projected to total $8.7 billion over the next two years. In response, the Assembly's Finance Committee approved legislation that, among other changes, would add four new income tax brackets, with rates ranging from 6 percent to 7.95 percent, all affecting married Connecticuters with incomes over $250,000 annually (and single taxpayers with incomes above $132,500).
Finally, in the
Gov. Doyle's budget includes two main progressive reforms. First, the income tax rate on income over $300,000 per year would be raised by one percentage point. Second, the state's unusual exemption of 60% of capital gains income would be lowered to 40%. While a 40% exemption is still unnecessary and regressive, this change would be a major first step toward taxing those who live off their wealth at a rate more similar to those who work for a living. Both of these changes would primarily affect the upper-income individuals most capable of making it through this economic storm.
More good news for tax fairness advocates comes from a recent poll of New York State voters conducted by Quinnipiac University. As the poll shows, it turns out that progressive solutions make sense not just on policy grounds, but on political grounds as well. The poll found that nearly 80% of New York voters support raising the income tax on income over one million dollars. That number falls only slightly when New Yorkers are asked if they support raising income taxes on income over $500,000. Additionally, proposals to raise tax rates on income over $250,000 enjoy well over 50% support in New York. Click here for the complete poll results.
Finally, in addition to the progressive reforms described above, the Wisconsin governor is also pushing a proposal to institute combined reporting of corporate income. Enacting such a proposal is an absolutely vital part of maintaining the viability of any state's corporate income tax.
Even
though the conference committee significantly scaled back state aid
relative to the House version of the bill, states can still expect some
pretty significant assistance in the near future. Unfortunately, those
states are also facing even more significant budget gaps, which are
likely to continue to grow larger in the coming months. To make up the
difference, states will have to take responsibility for finding ways to
close their budget gaps.
Policymakers in
In particular, the bill would impose a tax rate of 10.3 percent on
those taxpayers with incomes in excess of $1 million. In other words,
faced with a mammoth fiscal and economic crisis, legislators in
For more on the steps needed to tackle
Progressive tax reform may also be on the horizon for Illinois. Much hope accompanies newly elected Illinois Senate President John Cullerton. Cullerton replaces retiring Senate President Emil Jones who often stood with Governor Rod Blagojevich against constructive tax changes to solve Illinois' budget woes. Senator Cullerton recently hinted that needed tax hikes may be in the state's future, alluding to the fact that all options to solve the state's infamous budget shortfall are on the table.
The news out of New York in recent weeks hasn’t been especially encouraging for those concerned about the impact of the recent economic downturn on vulnerable lower-income families. Unfortunately, that trend seems to be continuing, as New York Governor David Patterson proposed a budget this week devoid of the type of progressive tax increases the state needs to responsibly make it through the current recession. This is despite the fact that just days earlier, over 100 economists joined the New York-based Fiscal Policy Institute in calling for tax hikes on high-income earners as a way to avoid painful cuts in the state services lower- and middle-income families rely upon. All told, the Governor’s budget relies about twice as heavily on spending cuts as it does on tax and fee increases.
On the revenues side of the budget, the proposal lacks broad-based increases and instead takes a more piece-meal approach. While this is far less than ideal, it is worth noting that some of those piece-meal items are certainly worthy of being included in the final budget deal. An expansion of the sales tax to include more services, limitations on the deductions claimed by wealthy families, and a scaling back of some of the state’s “broken” tax breaks for businesses are among the revenue raisers included. The Governor’s budget also includes a new “luxury tax” on items such as yachts, jewelry, and furs. While such a tax would most likely be progressive, it’s hard to see what advantages it brings over simply enhancing the progressivity of the state’s income tax.
To enjoy an interesting and heated sub-plot, check out this New York Times piece on the tax on “unhealthy” beverages that the Governor has included in his budget plan. Despite insistence that the idea is motivated by concern over the public health ramifications of these drinks, it’s hard to take seriously such claims when New York is facing a budget deficit. More meaningful, broad-based tax reform would be a preferable route to addressing the budgetary issues.
Of course, not every idea floated during these tough fiscal times is worth adoption or even consideration. Some are just downright bad. Take
Similarly, North Dakota Governor John Hoeven, as part of his budget plan for the 2009-2011 biennium, has proposed cutting property taxes by $300 million and income taxes by $100 million. Fiscal circumstances in North Dakota are, to be sure, markedly different than those in New York; after all, the Peace Garden State is one of the few expected to experience a budget surplus by the end of the current fiscal year. Yet, as the Grand Forks Herald recently warned, “oil prices already have plunged, threatening the energy boom that has dramatically boosted the state’s surplus,” suggesting that state legislators should proceed slowly and carefully. Caution certainly seems to be what the voters of
Legislators in
Four of the nation’s most populous states, together home to more than one out of every four Americans, are facing serious budget problems. Important new developments occurred in each of those states this week, the theme of which is perhaps best conveyed through California Republican Mike Villines’ question: “How many times can we say no to taxes?” State residents will soon learn that this is really saying "no" to keeping alive public services like education, transportation and health care that families depend on.
See the following posts on the budget situations in California, Florida, New York, and Virginia.
