Category Archives: Taxation

How Mississippi turned $3.5 million into $80 million

Source: Niraj Chokshi, Washington Post, September 5, 2013

By virtually any standard, a nearly 23-fold return on an investment in a year is really good. It’s so good, in fact, that it’s almost unbelievable. But in Mississippi that’s exactly what legislators got.

When appropriators there gave the state’s tax-collection agency an extra $3.5 million in funding for the fiscal year that ended in June, they asked that the agency aim to collect $10 million more in back taxes than it had the year before. The agency, the Mississippi Department of Revenue, said it would try and ultimately achieved the goal. Eight times. The state collected $190.3 million in back taxes last fiscal year, an $80.9 million increase over the year before, playing a role in what turned out to be a surprisingly large overall haul…

…The $3.5 million in extra funding, which went to paying for 44 new auditors and collection agents, wasn’t the only driver of revenue growth, Frierson said. An improved state economy and the so-called ‘April Surprise’—the selling of assets late last year in anticipation of higher federal tax rates this year—played key roles. But the ability to better collect back taxes certainly helped….

Chairman’s Report: State Business Incentives

Source: Jennifer Burnett, Council of State Governments, 2013

From the summary:
Each year, states spend billions of dollars on tax and financial incentives with the hope of spurring job growth. Research suggests incentives have increased in both frequency of use and size over the past 40 years, with some deals worth over $1 billion each. In addition, some states are using incentives to engage in a bidding war with other states, offering increasingly lucrative deals for existing companies to relocate from one state to another.

Despite the big price tag, state policymakers are often in the dark about what those incentives actually cost and how well they are working to achieve the state’s economic development goals. These concerns led to the creation of a national working group on economic development, led by 2012 CSG Chair Kansas Sen. Jay Emler as part of his Chair’s Initiative. This report is the culmination of the work of that group and provides a background into the current use of business incentives by states, as well as key observations of the group.

States Ponder Costs, Benefits Of Film Incentives

Source: Julie Rose, NPR, September 24, 2013

… About 40 states offer some sort of incentive to lure Hollywood productions to their precincts. But some have begun to wonder if they’re getting their money’s worth. …. In a number of states, including North Carolina, film companies get far more money from the state’s coffers than they actually pay in sales and payroll taxes. …. Studies by think tanks across the political spectrum say states could get more bang for their buck with a general tax cut. And lawmakers in many states are taking note….
See also:
Paying For Film, Part 1: What We’re Getting
Source: Julie Rose, WFAE, August 28, 2013

Paying For Film, Part 2: What We’re Spending
Source: Julie Rose, WFAE, August 29, 2013

Paying For Film, Part 3: How NC Compares
Source: Julie Rose, WFAE, August 29, 2013

State-by-State Film & Television Economic Contribution
Source: Motion Picture Association of America, 2013

The production and distribution of films and television programs is one of the nation’s most valuable cultural and economic resources. The industry is a major private sector employer across the nation, with salaries above the national average. The industry is a nationwide network of tens of thousands of small businesses, located in every state in the country, the majority of which employ ten people or fewer. The industry is heavily reliant on vendors in other industries all over the country. Each year, film and television production activity takes place in all 50 states, the District of Columbia and Puerto Rico….

State Film Incentives – State Legislation
Source: SAG-AFTRA, 2013

Important note: It is important to remember that due to legislature schedules, funding allotments and changes in state revenues, state incentive information is subject to change rapidly.

Add It Up: The Average American Family Pays $6,000 a Year in Subsidies to Big Business

Source: Paul Buchheit, Common Dreams, September 23, 2013

$6,000.

That’s over and above our payments to the big companies for energy and food and housing and health care and all our tech devices. It’s $6,000 that no family would have to pay if we truly lived in a competitive but well-regulated free-market economy.

The $6,000 figure is an average, which means that low-income families are paying less. But it also means that families (households) making over $72,000 are paying more than $6,000 to the corporations.

1. $870 for Direct Subsidies and Grants to Companies…
2. $696 for Business Incentives at the State, County, and City Levels…
3. $722 for Interest Rate Subsidies for Banks…
4. $350 for Retirement Fund Bank Fees…
5. $1,268 for Overpriced Medications…
6. $870 for Corporate Tax Subsidies…
7. $1,231 for Revenue Losses from Corporate Tax Havens…

A Federal Gas Tax for the Future

Source: Institute on Taxation and Economic Policy, September 2013

From the press release:
On October 1, the federal gas tax will mark exactly twenty years stuck at the rate of 18.4 cents per gallon. Against a backdrop of chronic infrastructure underfunding and federal budget crises, a new report from the Institute on Taxation and Economic Policy (ITEP) marks this anniversary and explains exactly why gas tax revenues are falling short. “A Federal Gas Tax for the Future” concludes that just 22 percent of the current gas tax revenue shortfall can be attributed to rising vehicle fuel-efficiency taking a bite out of gasoline purchases. The other 78 percent of lost gas tax revenues are due to inflation: inevitable growth in the cost of asphalt, machinery, and other construction inputs with which our twenty-year-old gas tax has not kept pace.
See also:
Summary

Is the Affordable Care Act Different from Romneycare? A Labor Economics Perspective

Source: Casey B. Mulligan, National Bureau of Economic Research, NBER Working Paper No. 19366, August 2013
(subscription required)

From the abstract:
Measured in percentage points, the Affordable Care Act will, by 2015, add about twelve times more to average marginal labor income tax rates nationwide than the Massachusetts health reform added to average rates in Massachusetts following its 2006 statewide health reform. The rate impacts are different between the two laws for several reasons, especially that: the populations subject to the two laws are different, the Affordable Care Act’s employer penalty is an order of magnitude greater, before either reform Massachusetts had already been offering more means-tested and employment-tested health insurance assistance than other states had, and the subsidized health insurance plans created by the Massachusetts reform were less substitutable for employer-provided insurance than are the subsidized plans to be created nationwide next year.

Average Marginal Labor Income Tax Rates under the Affordable Care Act

Source: Casey B. Mulligan, National Bureau of Economic Research, NBER Working Paper No. 19365, August 2013
(subscription required)

From the abstract:
The Affordable Care Act includes four significant, permanent, implicit unemployment assistance programs, plus various implicit subsidies for underemployment. Every sector of the economy, and about half of nonelderly adults, is directly affected by at least one of those provisions. This paper calculates the ACA’s impact on the average reward to working among nonelderly household heads and spouses. The law increases marginal tax rates by an average of five percentage points (of employee compensation), on top of the marginal tax rates that were already present before the it went into effect. The ACA’s addition to labor tax wedges is roughly equivalent to doubling both employer and employee payroll tax rates for half of the population.

State Budget & Tax Actions: Preliminary Report | August 2013

Source: National Conference of State Legislatures

State fiscal conditions continued to improve in fiscal year (FY) 2013. General fund revenue growth was notably strong and outpaced projections in most states. At the same time, expenditures were generally on target. The combination of these factors enabled many states to shore up reserves and support supplemental expenditures. Overall, the fiscal situation was solid in almost every state in FY 2013. In addition to revenue growth, one of the more notable developments in 2013 was the number of states that considered tax reform, as substantial changes in income taxes, sales taxes and transportation funding mechanisms dominated 2013 state tax discussions. Despite the improved fiscal situation, lawmakers remain cautious about the budget outlook for FY 2014. Officials are uncertain about the sustainability of the stronger revenue growth rates experienced in FY 2013 and expect revenue collections to slow. Additionally, spending needs are likely to outpace revenue projections as growing Medicaid costs and a protracted economic recovery continue to pressure state budgets. As a result, state year-end balances are projected to fall by the close of FY 2014.

Offshore Shell Games: The Use of Offshore Tax Havens by the Top 100 Publicly Traded Companies

Source: U.S. Public Interest Research Group, July 31, 2013

Many large U.S.-based multinational corporations avoid paying U.S. taxes by using accounting tricks to make profits made in America appear to be generated in offshore tax havens – countries with minimal or no taxes. By booking profits to subsidiaries registered in tax havens, multinational corporations are able to avoid an estimated $90 billion in federal income taxes each year. These subsidiaries are often shell companies with few, if any employees, and which engage in little to no real business activity. Loopholes in the tax code make it legal to book profits offshore, but tax haven abusers force other Americans to shoulder their tax burden. Every dollar in taxes that corporations avoid by using tax havens must be balanced by other Americans paying higher taxes, coping with cuts to government programs, or increasing the federal debt. This study reveals that tax haven use is ubiquitous among the largest 100 publicly traded companies as measured by revenue. 82 of the top 100 publicly traded U.S. companies operate subsidiaries in tax haven jurisdictions, as of 2012.

State and Local Tax Deductions

Source: Yuri Shadunsky, Urban Institute, July 1, 2013

From the abstract:
Federal taxpayers choose between itemizing deductions and claiming the standard deduction. Itemizers can claim deductions for state and local income and property taxes paid. (Through 2013, taxpayers may deduct state and local sales taxes paid in lieu of income taxes.) In 2011, 46.6 million taxpayers claimed the deduction for state and local taxes paid, deducting almost $470 billion from their tax returns.