Category Archives: Taxation

The Role of Expressive Versus Instrumental Preferences in U.S. Attitudes Toward Taxation and Redistribution

Source: Kirk J. Stark, University of California, Los Angeles (UCLA) – School of Law, Law-Econ Research Paper No. 15-18, 2015
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From the abstract:
Polling data suggest that Americans are concerned about rising economic inequality, yet the same polls reveal popular opposition to redistributive tax policies that would help mitigate inequality. Numerous commentators have drawn attention to this paradox, attempting to explain why voters would support policies contrary to their pecuniary interests. In this article, Professor Kirk Stark connects the debate over U.S. tax attitudes with research on the role of expressive preferences in electoral choice. An expressive account of political behavior emphasizes the low likelihood that any one voter’s views will influence policy outcomes and thus locates her cost-benefit calculus in the expression itself rather than its effect on policy outcomes. Expressive considerations include the reputational consequences of taking sides in popular debates, especially as those consequences bear on the voter’s effort to portray herself to the people that matter in her life — her family, friends, co-workers, and most of all, herself. The author explains how an expressive account resolves the supposed “paradox” of popular opposition to redistributive tax policies and discusses the implications of this view for U.S. tax politics.

How Republican Approaches to Social Spending Increase Income Inequality in the United States

Source: Christopher Faricy, Scholars Strategy Network, Key Findings, November 2015

From the summary:
Political parties in control of government can modify social spending in ways that either increase or decrease inequality in America. According to the conventional wisdom, social spending goes up when Democrats are elected to office, leading to reduced inequality. But this is only part of the story, because it ignores alternative kinds of social expenditures and the role of the Republican Party and other conservatives in shaping social policy. Republicans, it turns out, also tend to increase federal social spending – on policies that benefit the privileged.

Both political parties, not just Democrats, have incentives to increase federal social spending because many Americans, including most Republican voters, demand that the federal government play an active role in the provision of social benefits and services. For the GOP, the challenge is how to meet such expectations in ways that align with an avowed small-government philosophy. The solution for many Republicans has been to create and expand tax subsidies (also called tax expenditures) for social spending by businesses, individuals, and other private interests, while cutting back on direct public spending. Good examples include tax breaks received by employers who provide private health insurance plans and tax exclusions to citizens who donate to charities and nonprofits. Such tax reductions amount to transfers of resources to the rich largely at the expense of tax revenues that could pay for broad-based public social benefits that help the middle and working classes. With few exceptions, income inequalities increase as a result of such transfers….

NYC Lets Luxury Building Owners Stiff Workers and Still Get a Tax Break

Source: Cezary Podkul and Marcelo Rochabrun, ProPublica, December 30, 2015

City regulators haven’t enforced a 2007 law that requires doormen, janitors and other service workers at taxpayer-subsidized apartment buildings to be paid wages comparable to union rates.
The Rent Racket
Source: ProPublica, 2015
ProPublica is exploring New York City’s broken rent stabilization system, the tax breaks that underpin it, the regulators who look the other way and the tenants who suffer as a result.

Local Government Finance as Integrated System: The Uneasy Case for Using Special Districts in Real Estate Finance (A Response to Odinet’s Super-Liens to the Rescue? A Case Against Special Districts in Real Estate Finance)

Source: Darien Shanske, Washington and Lee Law Review Online, Vol. 72 No. 191, 2015

From the abstract:
Local governments have long used special financing districts to build infrastructure. If a local project, say building a pocket park, is likely to increase the values of properties very close to the park, then why should those properties not pay for the park in the first place? Though efficient and fair in many cases, the use of these districts can also be problematic. For instance, it seems likely that wealthier residents, with higher property values to leverage, are especially likely to use these districts effectively. It has also been the case that developers have used these districts speculatively, which had serious repercussions during the last recession. Christopher Odinet develops an additional, and important, critique of these districts. Odinet observes that these districts obtain a lien on benefiting properties, and that this lien takes priority over the liens of conventional lenders. Odinet then argues that this super-priority should only be honored if the district has served some substantial public purpose.

In this short Response, I agree with Odinet that these districts are problematic, but wonder whether his solution is the best one. This is because traditional lenders will generally know about these districts before lending. Furthermore, his solution only kicks in if there is an event of default, which is unusual, and thus this solution does not do much to counter the run of the mill socio-economic stratification that these districts often enable. I argue that an ex ante approach limiting the use of these districts therefore seems preferable. I conclude with the argument that, despite all their flaws, these districts should not be abolished outright. Local government finance is a dynamic system and the absence of any tool, even one prone to abuse, can have severe consequences, as illustrated by the recent history of California.

Regulating Marijuana: A Year and a Half In

Source: Karmen Hanson, Legisbrief, Vol. 23 no. 37, October 2015

Since voters in Colorado and Washington passed referenda to legalize and regulate marijuana and cannabis products for adult recreational use in 2012, policymakers and others have been tracking their progress. Lawmakers have learned many lessons from at least 18 months of legal sales and regulations.
Regulating Marijuana: Taxes, Banking and Federal Laws
Source: Karmen Hanson, Legisbrief, Vol. 23 no. 43, November 2015

The ACA Excise Tax will Promote Cost Shift to Workers not Cost-Effectiveness

Source: Laurel Lucia, UC Berkeley Center for Labor Research and Education blog, December 2, 2015

Beginning in 2018 the Affordable Care Act will implement an excise tax on “high cost” job-based health insurance—single plans with yearly premiums exceeding $10,200 and family plans with premiums exceeding $27,500. Congress is currently considering several bills, authored by Democrats and Republicans alike, that would repeal the tax. This blog post is the second in a series in which I discuss the likely consequences of the excise tax policy. (See first post: The ACA Excise Tax Targets Where You Live and Other Factors More than Benefit Levels.)

The excise tax on high cost job-based health plans is typically described as a “Cadillac tax,” but this is misleading. The premise behind the excise tax is that it will rein in overly generous job-based health plans; the evidence indicates, though, that the tax is poorly targeted because premiums depend more on where you live, the health of your co-workers, and your company’s size than on generosity of benefits. It is those factors, not plan richness, that will be more likely to determine whether the health benefits you get through your job are taxed.

State Expenditure Report (Fiscal 2013-2015 Data)

Source: National Association of State Budget Officers, 2015

Highlights include:
– In fiscal 2015, total state spending increased at its fastest rate since 1992, primarily due to growth in federal Medicaid funds resulting from the Affordable Care Act (ACA).
– Spending from states’ own funds moderately grew in fiscal 2015, while federal funds to states rapidly increased due to the ACA.
– Medicaid represented over half of all federal funds to states in fiscal 2015.
– State revenue growth accelerated in fiscal 2015, although it was hampered somewhat by the decline in oil prices.

From the summary:
Total State Spending in Fiscal 2015 Increased at Its Fastest Rate Since 1992, Driven by Federal Medicaid Growth

Estimated total state spending (including general funds, other state funds, bonds, and federal funds) sharply increased in fiscal 2015. The year-over-year percentage growth rate of 7.8 percent was the highest rate since fiscal 1992. The rise in total state spending resulted from a combination of a rapid increase in federal funds to states, and modest growth in states’ own fund sources. The acceleration of federal funds to states in fiscal 2015 was almost solely due to states receiving significantly more federal Medicaid dollars as part of the first full-year of Medicaid expansion under the Affordable Care Act (ACA).

Why U.S. States Need Pension Waiver Credits

Source: Randall K. Johnson, Mississippi College School of Law Research Paper No. 2015-03 September 29, 2015
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From the abstract:
This article identifies a novel approach to public pension reform. It does its work in, at least, four ways. First, the article encourages better use of public sector resources by calling for the elimination of public pension inefficiencies. Next, it explains how to reduce public pension inefficiencies, at least on a prospective basis, by moving away from defined-benefit pension plans. The article also describes a way to move beyond defined-benefit pension plans, which calls for the creation of a new tax expenditure program (Pension Waiver Credits). Lastly, it explains how to implement this new tax expenditure program: so as to optimize the use of public sector resources.

Another Strong Tax Quarter for the States, But Less Promising Forecasts for Fiscal 2016

Source: Lucy Dadayan and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Report, no. 101, November 2015

State tax revenues grew by 6.8 percent in the second quarter of 2015, the final quarter of the fiscal year for 46 states, according to the most recent State Revenue Report of the Rockefeller Institute. Personal income tax growth was robust at 14.2 percent, which was driven by strong payments with final returns up 20.0 percent and estimated taxes up 18.2 percent. This trend is not expected to continue, as this year’s revenue figures were bolstered by the strong stock market of 2014. States expect fiscal year 2016 to be weaker than 2015, largely because of an anticipated slowdown in income tax revenue.
Press release

State of State Business Incentives 2015

Source: Council for Community and Economic Research (C2ER), 2015

From the blog post:
C2ER recently completed its annual update of the State Business Incentives Database. As part of the database review process, C2ER researched every U.S. state and territory to ascertain information on what programs have been created, repealed or altered during each state’s most recent legislative sessions. Based on this research, combined with extensive outreach to representatives in every state and territory, the Database now reflects the present status of the more than 1,900 state business incentives in operation around the country.

The State of State Business Incentives 2015 report summarizes the findings from this review. Most striking is the overall growth in the number of state business incentive programs. Since the new millennium, the overall number of state incentive programs targeted to businesses has more than doubled, from less than one thousand in 1999 to nearly two thousand today. The report takes a closer look at the different types and purposes of business incentive programs administered by states and how state incentive portfolios have changed over the past few years in response to recent economic trends, with notable examples of recent state incentive activity.