Category Archives: Taxation

Quarterly Summary of State and Local Government Tax Revenue: 2010 4th Quarter

Source: U.S. Census Bureau, G10-QTAX4, March 29, 2011

From the press release:
2010 4th Quarter Summary of State and Local Government Tax Revenue
Tax revenues grew in the fourth quarter, marking the fifth straight quarter of positive growth. Corporate income tax revenue, general sales tax revenue and individual income tax revenue increased, while property tax revenue declined. The decline in property tax revenue is the first decline since the first quarter of 2010.

This summary shows quarterly tax revenue data on property, sales, license, income and other taxes. Data are shown for individual state governments as well as national-level estimates of total state and local taxes, including 12-month calculations. This quarterly survey has been conducted continuously since 1962.

How State Tax Policy Responds to Economic Recessions

Source: Ron Snell, National Conference of State Legislatures, NCSL Fiscal Brief, January 5, 2011

From the summary:
This report examines state tax policy in response to national recessions and recoveries from 1988 to the present. It tracks changes in three major state taxes, the personal income tax (PIT), the general sales tax (GST) and the corporate income tax (CIT) as the United States has cycled through recession and recovery. This introduction explains state budget and tax practices that provide the background for the discussion that follows. Three subsequent sections examine state practices regarding the PIT, GST and CIT in the course of the business cycle. An appendix addresses methodological issues.

This report includes:
* A general introduction of how state tax policy responds to economic recessions.
* Why year-end balances fall before the beginning and after the end of a recession.
* Personal income tax policy changes and recessions.
* General sales tax policy changes and recessions.
* Corporate income tax policy changes and recessions.
* A discussion of methodology.

Racing to the Bottom?: The Impact of Intrastate Competition on Tax Abatement Generosity in Ohio

Source: Mark K. Cassell and Robert C. Turner, State and Local Government Review, Vol. 42 no. 3, December 2010
(subscription required)

From the abstract:
Does intrajurisdictional tax competition lead local governments to offer larger tax abatements to firms? The authors build upon the traditional literature that models tax abatements as a negotiation between individual governments and firms by including systemic political and economic trends affecting the bargaining power of local governments and businesses. The authors use a longitudinal data set from 1983 to 2004 with detailed information on the 4,408 individual tax abatements negotiated between local governments and firms to examine how tax abatement generosity varies in response to the relative bargaining position of governments and firms. They find that as Ohio has increased the number of local governments able to offer tax abatements, local governments have offered larger abatements to firms.

Increasing Volatility in Tax Systems: A Growing Budget Problem for States

Source: Donald J. Boyd and Robert B. Ward, Nelson A. Rockefeller Institute of Government, Observations, March 2011

States will decide in the coming weeks how to spend roughly three-quarters of a trillion dollars from their taxes on personal income, sales and other activities. It’s a big number. That means even relatively small errors in revenue forecasts can make a substantial difference for state and local government budgets, and the services they support.

Shifting the Burden for Vital Public Services: Walmart’s Tax Avoidance Schemes

Source: Philip Mattera, Good Jobs First, February 2011

When Walmart seeks to add to its portfolio of more than 3,000 big‐box outlets in the United States, it invariably argues that the project will be a major economic benefit, generating a vast new stream of tax revenue. Actually, research shows the company will go to great lengths to limit the size of that revenue stream. Walmart is obsessed with cutting costs, and tax payments are one of its favorite targets. The company doesn’t just reduce its tax outlays; in hundreds of places it has sought taxpayer funds to finance its expansion and thus expand its market share.

For every kind of tax that a retail company would normally pay or remit to support public service, Walmart has engineered an aggressive scheme to pay less and keep more.

– It has extracted more than $1.2 billion in property tax abatements, sales tax rebates, infrastructure and site improvements, and other economic development subsidies from state and local governments around the country. In recent years the subsidies amounted to roughly $70 million annually.

– Using gimmicks such as deducting rent payments made to itself (through a captive real estate investment trust), it avoids an estimated $300 million a year in state corporate income tax payments.

– Using an army of lawyers and consultants, it systematically challenges property tax assessments to chip away at its property tax bills, costing local governments several million dollars a year in lost revenues and legal expenses.

– And it takes advantage – to the tune of about $60 million a year – of those states that fail to cap the “vendor discounts” they provide to large retailers for collecting sales taxes from their customers.

States Can Avert New Revenue Loss by Decoupling From Federal Expensing Provision

Source: Ashali Singham and Nicholas Johnson, Center on Budget and Policy Priorities, March 1, 2011

A recent change in federal tax law regarding business investment in machinery and equipment could be very costly for many states — at a time when they can least afford it. Nineteen states are on track to lose $5.3 billion in state corporate and individual income tax revenues during the current and next two state fiscal years: some will lose revenue unless their legislatures act to prevent it, while others will lose revenue if they follow their previous practice of altering their tax codes to conform to such federal changes. Another 26 states and the District of Columbia could lose $10.1 billion in state revenue if they break from their previous practice and conform to the federal change.

Tax Expenditure of the Week

Source: Seth Hanlon, Center for American Progress, January 12, 2011

The Center for American Progress has long called for greater scrutiny of “tax expenditures.” These are special exemptions, credits, and deductions littering the tax code that add up to $1.1 trillion annually. Subjecting these dozens of tax breaks to greater scrutiny is part of our broader focus on making government work better and achieving better results for the American people, which is the goal of CAP’s “Doing What Works” project.

To that end, our new “Tax Expenditure of the Week” series aims to explain the often-confusing constellation of tax breaks in a way the average taxpayer can understand. Every Wednesday we will focus on one tax expenditure, explaining what it is, what purpose it is intended to serve, and whether it is effective toward that purpose. We will also review any applicable reform proposals.

See also:

* Tax Expenditure of the Week: Tax-Free Retirement Savings
* Tax Expenditure of the Week: Tax-Free Health Insurance
* Tax Expenditure of the Week: The Mortgage Interest Deduction
* Tax Expenditure of the Week: State and Local Tax Deduction

Sales Tax Revenues

Source: Lucy Dadayan and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Report, no. 82, February 2011

After the deepest recession since the Great Depression, most states are now on the gradual road to tax revenue recovery, according to this Rockefeller Institute report. Final third-quarter and early fourth-quarter data signal an upward trend. Yet several indicators suggest broad state fiscal conditions remain fragile.
See also:
Press release

Small Business Tax Credits

Source: Amanda Cassidy, Health Affairs, Health Policy Brief, January 14, 2011

From the Robert Wood Johnson Foundation summary:
The Affordable Care Act offers incentives so that more of these companies will help provide their employees with health insurance.

Small businesses, on average, pay up to 18 percent more in health care premiums than do large firms for the same health insurance coverage. Insurers charge smaller companies higher administrative costs for health coverage, since they typically assess whether each person in such a “small group” is insurable based on his or her individual medical history. The consequence is that employees of America’s small businesses are considerably more likely to be uninsured than their counterparts working at larger organizations.

This brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) examines the Affordable Care Act’s coverage provisions aimed at addressing some of the factors leading to this disparity. One such provision is a tax credit targeted to small businesses. Starting this year, employers with 10 or fewer full-time employees that have average wages of up to $25,000 are eligible for the maximum credit of 35 percent of the amount the company contributes toward its employees health insurance premiums, with the credit applied to the employer’s tax liability for the year. Companies eligible for the credit employ 16.6 million workers, with experts estimating that businesses employing 3.4 million of them (about 20 percent) will take the credit between 2010 and 2013. The federal government has notified 4 million companies that they may be eligible for the credit.