Tax Justice Digest stories about Vermont
For nine states -- Arkansas, Hawaii, Montana, New Mexico, North Dakota, Rhode Island, South Carolina, Vermont, and Wisconsin -- one straightforward approach would be to repeal the substantial tax breaks that they now provide for income from capital gains. In tax year 2008 alone, these nine states are expected to lose a total of $663 million due to such misguided policies, with individual losses ranging from $10 million to $285 million per state. A new ITEP report explains that repealing these tax preferences would help states reduce their large and growing budgetary gaps, enhance the equity of their current tax systems, and remove the economic inefficiencies arising from such favorable treatment.
This report explains what capital gains are, how they are treated for tax purposes, and who typically receives them. It also details the consequences of providing preferential tax treatment for capital gains income for states' budgets, taxpayers, and economies in nine key states. Lastly, it responds to claims about both the relationship between capital gains preferences and economic growth and the role capital gains taxation plays in state revenue volatility. (Appendices to the report provide detailed state-by-state estimates of the impact of repealing capital gains tax preferences.)
Read the report.
As we’ve argued in past Digest articles, there are good reasons for relying on gas tax revenues to fund transportation – at least when an effort is made to offset the tax’s stark regressivity. To the extent that the gas tax falls most heavily on those people who drive the furthest distances, or who drive the heaviest vehicles, there are certainly some advantages to the gas tax. But when the people driving the furthest distances are doing so because they can’t afford to live near their places of work, for example, that advantage becomes much less appealing. In this light, recent news regarding the funding of transportation has been both good and bad. While states are seemingly beginning to come around to the idea that gas taxes will need to be raised to provide an adequate transportation infrastructure, interest in offsetting the tax’s regressivity has yet to pick up steam.
Support for increasing the gas tax has gained some notable momentum in New Hampshire and Massachusetts as of late, and in Oregon, the Governor even included a small gas tax hike in his recent budget proposal.
Unfortunately, while there has been an increasing acceptance of the fact that existing gas tax revenues are inadequate in many states, little notice has been given to the idea of offsetting the stark regressivity of gas tax hikes with low-income refundable credits. This idea was recently made a reality in
Vermont is among the states considering replacements for its property tax, but like much about the Green Mountain State, legislators there take a very different approach than their counterparts elsewhere around the country. According to the Burlington Free Press, members of the House Ways and Means Committee have agreed to review a bill later this month that would repeal the existing residential property tax that is earmarked for education and replace it with an income tax dedicated to the same purpose. Municipal property levies and the statewide property levy for non-residents would be unaffected.
Anyone compiling a list of similarities between Hawai'i and the Cayman islands can now add "aspiring tax haven" to "sparkling beaches" and "mild climate." Late last month, Hawai'i Governor Linda Lingle signed into law a measure that will cap the premiums tax paid by so-called captive insurance companies in the hope of luring more of those companies to the Aloha State. (A captive insurance company is a subsidiary of a larger company that insures that larger company's property or employee benefits.)
Using tax policy to try to influence business location decisions is questionable enough on its own, but it's especially troubling in this case, since captive insurers can enable major corporations to avoid millions of dollars in federal taxes annually.
As reported earlier this year, Wells Fargo, by establishing a captive insurer in Vermont, will receive "…tax breaks totaling at least hundreds of millions of dollars over the next 30 to 40 years…"; ADM, Heinz, Alcoa, and Sun Microsystems may already be following suit. So, policymakers in Hawai'i may think that they're bringing more jobs to their shores, but what they're really doing is using scarce tax dollars to make federal taxes scarcer still.
Vermont is one of a growing number of states that have moved away from a purely local property tax toward a statewide tax that shares revenue between poor and wealthy taxing districts. This is a good move for those seeking to make the property tax a more equitable funding source. But property taxes are as unpopular in Vermont as in many other states, and a number of anti-tax lawmakers are proposing to repeal the statewide tax-- with no replacement funding source. The Vermont League of Cities, taking a slightly more responsible tack, announced this week that it also favors repeal of the statewide property tax, but endorses replacing at least some of the lost revenue with an increase in the personal income tax. Meanwhile, the property tax debate has spilled over into the gubernatorial election, with incumbent Governor Jim Douglas proposing a cap on local budget growth. A helpful overview of the Vermont property tax debate is here.
