Category Archives: Taxation

Paying the State Use Tax: Is a “Nudge” Enough?

Source: John E. Anderson, Public Finance Review, Vol 45 Issue 2, 2017
(subscription required)

From the abstract:
To improve use tax compliance, twenty-seven states have added a line to their income tax returns where taxpayers can report taxable sales. This article reports results of a behavioral study of a postcard “nudge” sent to income tax filers in one of those states, Nebraska, to encourage self-reporting of liability. The research question is whether the informational nudge was sufficient to alter self-reporting behavior. Data indicate that the nudge more than doubled the likelihood of use tax reporting and nearly doubled the amount of revenue collected, but the rate of use tax reporting remains extremely low. Probit models reveal that use tax reporting rises with income at a decreasing rate. Selection models are also estimated because of positive selection bias in the selection of the treatment group. Taken together, the results indicate that an informational nudge is not likely to be sufficient to substantially change use tax reporting behavior.

State Taxation and the Reallocation of Business Activity: Evidence from Establishment-Level Data

Source: Xavier Giroud, Joshua D. Rauh, US Census Bureau Center for Economic Studies Paper No. CES-WP-17-02, January 11, 2017

From the abstract:
Using Census microdata on multi-state firms, we estimate the impact of state taxes on business activity. For C corporations, employment and the number of establishments have corporate tax elasticities of -0.4, and do not vary with changes in personal tax rates. Pass-through entity activities show tax elasticities of -0.2 to -0.3 with respect to personal tax rates, and are invariant with respect to corporate tax rates. Reallocation of productive resources to other states drives around half the effect. Capital shows similar patterns but is 36% less elastic than labor. The responses are strongest for firms in tradable and footloose industries.

FedWeb.com

Source: Federal Budget Group LLC, 2017

….This website is dedicated to providing policymakers, the media, and the general public timely and reliable information that is strictly nonpartisan, rigorously factual, and explained in plain English. On the pages of this website, you will find: a chronology of key developments in fiscal, spending, tax and economic policy; up-to-the-minute real-time numbers on the the economy and monetary policy; links to the Budget of the United States and other budget docs; an overview of Federal spending and nonpartisan explanations of federal programs including Social Security, Medicare and Medicaid, the Affordable Care Act, and other Mandatory spending programs; Defense Discretionary Spending, and Non-Defense Discretionary programs; Deficits and Debt projections; explanation of the Federal Debt Ceiling; and CBO Deficit Reduction Options; details on taxes, tax reform and tax expenditures; fact-checking on current spending and tax issues; a plain English explanation of the congressional budget process and links to State budgets; and FedWeb blogs (sign-up above) that drill-down on key issues…..

Fairness Matters: A Chart Book on Who Pays State and Local Taxes

Source: Institute on Taxation and Economic Policy (ITEP), 2017

From the overview:
There is significant room for improvement in state and local tax codes. Income tax laws are filled with top-heavy exemptions and deductions. Sales tax bases are too narrow and need updating. And overall tax collections are often inadequate in the short-run and unsustainable in the long-run. In this light, the growing interest in tax reform among state lawmakers across the country is welcome news.

Too often, however, would-be tax reformers have proposed policy changes that would worsen one of the most undesirable features of state and local tax systems: their lopsided impact on taxpayers at varying income levels. Nationwide, the bottom 20 percent of earners pay 10.9 percent of their income in state and local taxes each year. Middle-income families pay a slightly lower 9.4 percent average rate. But the top 1 percent of earners pay just 5.4 percent of their income in such taxes. This is the definition of regressive, upside-down tax policy.

State and local tax systems add to the nation’s growing income inequality problem when they capture a greater share of income from low- or moderate-income taxpayers. Further, state tax systems that ask the most of families with the least are not well-suited to generate the revenues needed to fund schools, health care, infrastructure, and other public services that are crucial to building thriving communities. This problem is particularly acute in the long run since regressive tax systems depend more heavily on low-income families that face stagnating incomes while taxing the superrich, whose wealth and incomes continue to grow, at lower rates.

As the information in this chart book helps illustrate, it does not have to be this way. States vary considerably in the fairness of their tax codes, and pursuing policies adopted by states with the least regressive tax systems is a proven strategy for reducing tax inequity.

Resistance Manual

Source: Stay Woke, 2017

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Evidence from states shows why Trump’s brand of Carrier-style dealmaking won’t work

Source: Joshua Jansa, The Conversation, January 9, 2017

In late November, President-elect Donald Trump announced that he had reached a deal with Carrier to keep about 800 manufacturing jobs in Indiana from moving to Mexico. After the announcement, we learned that the Indiana Economic Development Corporation would give US$7 million in tax credits and grants to Carrier’s parent company in exchange for keeping the jobs in the state.

Trump proudly praised the agreement as a “great deal for workers” and said that it was part of a larger approach to keep jobs at home, saying “this is the way it’s going to be.”

Having the chief executive of the United States negotiate individualized deals with corporations is certainly a new approach to economic policy nationally, though it is not without precedent. In fact, state governments have been negotiating targeted incentives with corporations for decades.

My research focuses on why states use incentives to attract and retain investment from corporations and whether they are effective. My work, as well as that of many others, shows that these deals do not create the jobs and economic growth they are purported to…..

Quarterly Summary of State and Local Government Tax Revenues for 2016: Q3

Source: U.S. Census Bureau, G16-QTAX3, December 20, 2016

Third quarter 2016 tax revenues for the four largest state and local government tax categories increased 2.2 percent to $294.2 billion, from $287.9 billion in the same quarter of 2015. …. The estimated total for third quarter 2016 state and local property tax revenue grew 3.2 percent to $105.7 billion (±2.5 billion). This is not statistically different from the $102.4 billion (±2.6 billion) collected in the same quarter of 2015 (see Figure 2). Local governments collected $101.9 billion of total property tax revenue in the third quarter of 2016. ….

State Expenditure Report (Fiscal 2014-2016)

Source: National Association of State Budget Officers, 2016

Overview:
This annual report examines spending in the functional areas of state budgets: elementary and secondary education, higher education, public assistance, Medicaid, corrections, transportation, and all other. It also includes data on the State Children’s Health Insurance Program and on revenue sources in state general funds.

– The total state spending growth rate slowed in fiscal 2016, following a 10-year high in fiscal 2015.
– Medicaid continued to increase as a share of total state spending, while K-12 remained the largest category from state funds.
– Transportation led the way in spending growth from state funds in both fiscal 2015 and fiscal 2016, while Medicaid experienced the largest gains from all funds.
– Revenue growth slowed considerably in fiscal 2016 as states saw weaker collections from sales, personal income, and corporate income taxes.
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SPOTLIGHT: Aging States

Source: Capitol Ideas, November/December 2016

Articles include:
FUNDING LONG-TERM CARE
Facing a wave of aging baby boomers, many states are trying to make it easier for seniors to stay in their homes—as many prefer—instead of moving into more costly nursing homes. With high stakes for state budgets, many states are undertaking long-term planning to pay for long-term care.

TOP STATES FOR RETIREMENT
What is the best state for retirement? It’s a popular question among baby boomers, who increasingly seek more livable communities that will allow them to age in place. How are states responding? Drawing from an AARP scorecard on state long-term services and supports, here’s a look at top states for retirement and aging.

IMPROVING SENIOR MOBILITY
For many seniors, staying active in their golden years depends on staying mobile. But in many states and communities, transportation systems haven’t been developed with seniors or individuals with disabilities in mind. That’s changing as states are taking steps to improve transportation mobility for older adults.

ENDING ELDER ABUSE
Elder financial abuse costs older Americans $2.9 billion per year, but the harm to seniors caused by fraud often extends far beyond the checkbook. Oregon Attorney General Ellen Rosenblum shares key steps her state has taken to strengthen elder abuse prevention and response.

TAXING RETIREES
When state leaders discuss the fiscal challenges of an aging population, the focus is often on costs for senior services. However, as CSG Senior Fellows Katherine Barrett and Richard Greene point out, declining tax revenues are also a concern.