Tax Justice Digest stories about Texas
Gross Receipts Tax Is Not a Cure-All for the States
Over the past few years, both
IL Gov Won't Raise Taxes on People, Just Taxes That Are Passed onto People
Despite Illinois Governor Rod Blagojevich coming before the Illinois House in a rare all-day hearing to promote his plan for implementing a gross receipts tax (GRT) his proposal was unanimously defeated by the Illinois House in a 107-0 vote. The Governor's proposal barely passed the Senate Executive Committee. Analyses by the Center on Budget and Policy Priorities and the Institute on Taxation and Economic Policy suggest that gross receipts taxes are generally passed on by businesses to consumers. The Governor, however, said in his address to the House, "I will not raise taxes on people. I won't do it today. I won't do it tomorrow. I won't do it next week, next month, next year." Ironically, the Governor also said that he would oppose any income or sales tax hike because "It's regressive, and people already are paying to much" but many experts think that the GRT is regressive and hits low- and middle-income people hardest.
Eliminating Revenue Source + No Plan to Replace Revenue = Government Shutdown
Since voting last year to repeal the state's Single Business Tax (SBT), which is set to expire on December 31,
Ignore Those Lobbyists Boring Holes into the Gross Receipts Tax
Part of the allure of gross receipts taxes - to hear proponents like Governor Blagojevich tell it, anyway - is that they don't have many of the same loopholes as corporate income taxes and will expand the base of economic activity and economic actors subject to taxation. The reality may prove quite different, however. Gross receipts type taxes have scarcely settled onto the pages of law books in Texas and Ohio, yet businesses in both states have already begun clamoring for - and will soon start receiving - concessions and special treatment. In Texas, the House of Representatives last week approved a bill that would double the exemption for small businesses under the margins tax, would lower the taxes paid by multistate financial services companies under the tax, and would attempt to prevent Sprint Nextel from passing the tax along to its customers.
At first glance, it looks like the holy grail of state governance: a way to raise more revenue without raising taxes. The idea of selling off or leasing state assets, such as the state lottery, is now under discussion in Illinois, Indiana, Minnesota, New Jersey, and Texas. It is easy to see the idea's appeal: Texas Governor Perry predicts that the sale of his state's lottery would generate at least $15 billion, for example, while Indiana Governor Daniels expects that state's lottery to carry a price tag of over $1 billion, all without a single tax increase. However, there is a catch. While the boost to revenue is substantial, it is a one-time gain, and it comes at the cost of the yearly revenue contributions these assets would provide far into the future. While the seemingly painless financial gain offered by this privatization schemes is tempting, in the long run these sales would only diminish state coffers.
Worse still, lowering the cap would leave less money avaible for both local and state governments. The effect would be particularly severe in small towns that do not generate much sales tax revenue, and must rely on property taxes to fund local services. The Metropolitan Organization has come up with a better solution: a property tax "circuit breaker". Circuit breakers, which help protect the most vulnerable from high property tax bills without gutting state coffers, are already in place in thirty-five states. Texans should urge Governor Perry to adopt this solution.
New Jersey continues to struggle with property tax reform. A task force has signaled that it will call for a July special legislative session to deal with the state's growing homeowner property taxes. One lawmaker has proposed paying for major homeowner tax cuts with an income tax hike, while others think consolidating school districts is a necessary first step.
Meanwhile, Texas lawmakers are wrapping their special session up after finally figuring out a way to cut school property taxes -- but a lot of people are unhappy with the outcome. The new law reduces school property tax rates across the board, and pays for this major tax cut with three major sources: the state's short-term budget surplus, a cigarette tax hike, and a revamp of the state's major business tax. The Texas Center for Public Policy Priorities sensibly points out that since the budget surplus part of this equation will eventually disappear, once these changes are fully phased in, this "tax swap" will create a $10.5 billion hole in the state's biennial budget.
