Category Archives: Taxation

Who Are the Getters? The Federal Workforce and Low Income States Get the Most

Source: Laura Schultz, Rockefeller Institute of Government, February 1, 2019

In the recent report, Giving or Getting? New York’s Balance of Payments with the Federal Government, Rockefeller Institute evaluated how all fifty states compared in the tax revenue they sent to the federal government (receipts) and the levels of spending they received from the federal government (expenditures). Forty states had a positive balance of payments; they received more money from Washington than they sent. In our last blog post we looked at “the givers.” These states have high income levels and, as a result, pay more in payroll taxes than other states. These high tax burdens were not offset by high levels of federal spending, leading to negative balances of payments. In this post we take a closer look at the winners, the states with high balances of payments. Our analysis finds there are two categories of getters: states with large federal workforces and states with low incomes.
Table 1 shows the ten states with the highest per capita balance of payments. The ratio of expenditures to receipts tells us how much each state receives in federal spending for each dollar it sends in taxes. For every $1 Virginians pay in taxes, the residents receive twice as much in federal spending.

Here’s How U.S. Businesses Actually Used Their Tax Cuts

Source: Laura Davison, Bloomberg Businessweek, January 16, 2019

Republicans predicted a growth explosion while Democrats warned of fat-cat investors. Both sides were wrong.

On Jan. 1, 2018, the biggest, most sweeping U.S. corporate tax cut ever enacted went into effect. A year later, we’re able to see how businesses used all that extra cash.

The short answer: to buy back shares. The long answer is slightly more nuanced, but not by much.

As Albany Debates a Permanent Property Tax Cap, How Is the Cap Affecting School Budgets?

Source: Jim Malatras, Nicholas Simons, Michelle Cummings, Rockefeller Institute of Government, January 23, 2019

This is the first in a series on property taxes in New York State by the Rockefeller Institute of Government. Collaborating with other organizations, the Rockefeller Institute will take an in-depth look into various issues surrounding property taxes including their impact on local governments, case studies of how the tax cap is working in school districts, the future of education financing and its reliance on local property taxes, and property tax assessments.

To Cap or Not to Cap, That Is the Question
As Albany Debates a Permanent Property Tax Cap, How Is the Cap Affecting School Budgets?

Newly minted Democratic Majority Leader and Temporary President of the State Senate, Andrea Stewart Cousins, said the Senate would take up a bill to make the local property tax cap permanent this week. New York State has some of the nation’s highest property taxes, be it in total dollars paid (in the downstate suburbs, like Nassau and Westchester Counties) or by home value (in many upstate counties, like Orleans and Wayne). In response, the state enacted in 2011 a local property tax cap law that restricted annual property tax increases to 2 percent or the rate of inflation, whichever is less. While the tax cap has limited local property taxes, it also has an effect on the distribution of school revenue (with more money coming from progressive state income taxes) and higher passage rates for school budgets.

The property tax cap was not made permanent. It was part of a larger horse-trading deal that included strengthening and extending rent regulations on housing, primarily in New York City. As part of the original deal, the local property tax cap was scheduled to sunset after four years unless reauthorized by the state legislature and signed by the governor. The tax cap was extended once in 2015 and is once again up for renewal in 2020…..

Giving or Getting? New York’s Balance of Payments with the Federal Government

Source: Laura Schultz, Michelle Cummings, Rockefeller Institute of Government, January 8, 2019

From the summary:
In its second year of annual analysis, the Rockefeller Institute of Government has examined the distribution of Federal Budget receipts and expenditures across the United States. This report examines where Federal funds are generated and spent, the balance of payments differential that exists between states, the primary explanations for those differences, and how these gaps may change over time.

Our annual analysis is designed to aid policymakers as they continue to discuss whether there is too much redistribution or too little, and the impact of those redistribution decisions on states. The Rockefeller Institute examined detailed revenue and spending data for Federal Fiscal Year (FFY) 2016 and developed a preliminary data series for FFY 2017, paying close attention to New York….

The 401(k) Student Loan Repayment Benefit Program

Source: John G. Kilgour, Compensation & Benefits Review, OnlineFirst, Published January 7, 2019
(subscription required)

From the abstract:
In recent years, student loan repayment programs have emerged as the hot new employee benefit. However, their growth has been restricted by their lack of favored tax status. On August 17, 2018, the Internal Revenue Service issued a private letter ruling approving a proposal to create such a program within a 401(k) plan. In a deft piece of reasoning, the private letter ruling provides relief from the so-called “contingent benefit prohibition.” This article examines student loan borrowing, the private letter ruling and its likely consequences and limitations.

Trump’s Tax Cuts: The Rich Get Richer

Source: Center for Public Integrity, 2019

An in-depth look at how the Tax Cuts and Jobs Act of 2017 avoided scrutiny and made the rich richer.

The first part in our new series, “Trump’s Tax Cuts: The Rich get Richer,”  investigating the origin and impact of the 2017 tax law: 

THE TRUMP TAX LAW HAS BIG PROBLEMS. HERE’S ONE BIG REASON WHY
Source: Peter Cary, Allan Holmes, Pratheek Rebala, Center for Public Integrity, January 15, 2019

There’s no shortage of agenda items for the new Congress that’s just been seated in Washington. But lost among the anguished cries to reopen the government and enact ethics reform will be a lesser-advertised but crucial item: addressing major problems in the 2017 tax bill that President Donald Trump signed into law a year ago.

That the law needs fixing is not in dispute. Why it needs fixing is most vividly illuminated by contrasting it with another massive piece of tax legislation, the Reagan-era Tax Reform Act of 1986.

In the months leading up to passage of the 2017 tax act, Trump administration officials and Republican leaders in Congress giddily compared the scope of their bill to that very law. House Ways and Means Committee Chairman Kevin Brady, R-Texas, called their new bill, “the first action in 31 years since President Reagan’s reforms in 1986.” Then-National Economic Director Gary Cohn said the legislation represented the “most significant tax reform legislation since 1986.”

Measured by the magnitude of changes to the tax code, that is true. But in terms of how the bills were developed, deliberated and drafted by Congress — not to mention their substance — the bills could not be less alike. And therein lies an illuminating — some would say frightening — story.

2019 State Business Tax Climate Index

Source: Jared Walczak, Scott Drenkard, Joseph Bishop-Henchman, Tax Foundation, September 26, 2018

The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement…..

Who Pays: A Distributional Analysis of the Tax Systems in All 50 States

Source: Meg Wiehe, Aidan Davis, Carl Davis, Matt Gardner, Lisa Christensen Gee, Dylan Grundman, Institute on Taxation and Economic Policy (ITEP), October 2018

From the summary:
Who Pays: A Distributional Analysis of the Tax Systems in All 50 States (the sixth edition of the report) is the only distributional analysis of tax systems in all 50 states and the District of Columbia. This comprehensive report assesses tax fairness by measuring effective state and local tax rates paid by all income groups. No two state tax systems are the same; this report provides detailed analyses of the features of every state tax code. It includes state-by-state profiles that provide baseline data to help lawmakers and the public understand how current tax policies affect taxpayers at all income levels.
The report includes these main findings:

– The vast majority of state and local tax systems are inequitable and upside-down, taking a much greater share of income from low- and middle-income families than from wealthy families. The absence of a graduated personal income tax in many states and an overreliance on consumption taxes contribute to this longstanding problem.

– The lower one’s income, the higher one’s overall effective state and local tax rate. On average, the lowest-income 20 percent of taxpayers face a state and local tax rate more than 50 percent higher than the top 1 percent of households. The nationwide average effective state and local tax rate is 11.4 percent for the lowest-income 20 percent of individuals and families, 9.9 percent for the middle 20 percent, and 7.4 percent for the top 1 percent.

– Tax structures in 45 states exacerbate income inequality. Most state and local tax systems worsen income inequality by making incomes more unequal after collecting state and local taxes. Five states and the District of Columbia somewhat narrow the gap between lower- and middle- income taxpayers and upper-income taxpayers, making income slightly more equitable after collecting state and local taxes.

– In the 10 states with the most regressive tax structures (The Terrible 10), the lowest-income 20 percent pay up to six times as much of their income in taxes as their wealthy counterparts. Washington State is the most regressive, followed by Texas, Florida, South Dakota, Nevada, Tennessee, Pennsylvania, Illinois, Oklahoma, and Wyoming.

– Heavy reliance on sales and excise taxes are characteristics of the most regressive state tax systems. Six of the 10 most regressive states derive roughly half to two-thirds of their tax revenue from sales and excise taxes, compared to a national average of about one-third. Seven of these states do not levy a broad-based personal income tax while the remaining three have a personal income tax rate structure that is flat or virtually flat. A calculation of effective sales and excise tax rates finds that, on average, the lowest-income 20 percent pay 7.1 percent, the middle 20 percent pay 4.8 percent and the top 1 percent pay a comparatively meager 0.9 percent rate.

– A progressive graduated income tax is a characteristic of the least regressive state tax systems. States with the most equitable state and local tax systems derive, on average, more than one-third of their tax revenue from income taxes, which is above the national average of 27 percent. These states promote progressivity through the structure of their income taxes, including their rates (higher marginal rates for higher-income taxpayers), deductions, exemptions, and use of targeted refundable credits.

States commended as “low-tax” are often high-tax for low- and middle-income families. The 10 states with the highest taxes on the poor are Arizona, Florida, Hawaii, Illinois, Indiana, Iowa, Oklahoma, Pennsylvania, Texas, and Washington. Six of these are also among the “terrible ten” because they are not only high-tax for the poorest, they are also low-tax for their richest residents.

Related:
Data Available for Download
State-by-State Data and ITEP Tax Inequality Index Map