Category Archives: Taxation

Flood of Bad Tax Ideas Coming from the States

Source: Citizens for Tax Justice, January 14, 2011

Ill-conceived tax ideas are coming out of statehouses and governors’ mansions at a faster rate than we’ve seen in quite a while. Here’s a quick summary on recent proposals receiving serious consideration in Arizona, Florida, Idaho, Maine, Michigan, Minnesota, New Jersey, Ohio, and Wisconsin.

Too Many Loopholes: How to Turn Property Tax Exemptions into Revenue for Local Governments

Source: Dennis Collier and Jack Norman, Institute for Wisconsin’s Future (IWF), January 2011

From the press release:
State government gives too many property owners a pass on paying a fare share of property taxes, depriving local communities of several hundred million dollars a year in revenue.

Some properties are totally exempt from the property tax, including large nonprofit hospitals and expensive senior housing complexes. Some properties are undervalued, such as land being held for speculation that is wrongly classed as farmland and billboards assessed for the wood, steel and plastic they are made of but not the expensive message space that is rented to advertisers. Owners of all these properties depend on the vital services that property taxes fund, but do not pay or pay less than their share for those services.

Tax Commission Co-chairs Right to Prioritize Analysis of Tax Expenditures

Source: C. Eugene Steuerle, Robert Friedman, Urban Institute, November 29, 2010

The American Dream has long meant the opportunity to buy a home, save for retirement, go to college, start a business and build an economic future for oneself and one’s family. Small wonder that the federal government plans to spend $4 trillion during the coming decade to try to help us invest in our future. But, as noted by the co-chairs of the National Commission on Fiscal Responsibility and Reform, we’re pursuing this shared dream in ways that have become wasteful, regressive and ineffective. We recommend rebalancing our budget. We could cut the national debt by $500 billion or more over a decade, provide more effective subsidies for middle- and low-income families, boost private saving and reduce the demands on our welfare system. We could be on our way to a true “save and invest” economy.

First, some numbers. In 2009, the federal government spent nearly $400 billion to encourage saving and investing by American families, mostly through the tax code. A recent report, Upside Down: The $400 Billion Federal Asset-Building Budget, from CFED and the Annie E. Casey Foundation shows that current subsidies range from $95,000 for the top 1 percent of households to less than $5 for those at the bottom. Urban-Brookings Tax Policy Center research shows that many subsidies rise in value as wealth and tax rates increase. That basically insures that the poorest fifth of the population won’t even qualify for many of them.

SHOW US THE SUBSIDIES: An Evaluation of State Government Online Disclosure of Economic Development Subsidies

Source: Philip Mattera, Thomas Cafcas, Leigh McIlvaine, Caitlin Lacy, Elizabeth Williams and Sarah Gutschow, Good Jobs First, December 2010

From the press release:
Online disclosure of the names of companies receiving state and local tax breaks, cash grants and other subsidies for job creation is becoming the norm around the country, but there is wide variation in the quality of the reporting and about a dozen states are still keeping taxpayers in the dark, according to a report published today by Good Jobs First, a non-profit, non-partisan research center based in Washington, DC.

In addition to the report, entitled Show Us the Subsidies, Good Jobs First also released two new online tools relating to state government economic development practices: Subsidy Tracker, a searchable database that brings together subsidy recipient information from numerous state governments; and Accountable USA, a set of webpages on each of the 50 states and the District of Columbia summarizing their track record on subsidies.
See also:
Table of links to state disclosure websites
Online appendices

Payments in Lieu of Taxes – Balancing Municipal and Nonprofit Interests

Source: Daphne A. Kenyon, and Adam H. Langley, Lincoln Institute of Land Policy, Policy Focus Report, November 2010

From the summary:
Charitable nonprofit organizations, including private universities, nonprofit hospitals, museums, soup kitchens, churches, and retirement homes, are exempt from property taxation in all 50 states. At the same time, these nonprofits impose a cost on municipalities by consuming public services, such as police protection and roads. Payments in lieu of taxes (PILOTs) are payments made voluntarily by these nonprofits as a substitute for property taxes.

In recent years, municipal revenue pressures have led to heightened interest in PILOTs, and over the last decade they have been used in at least 117 municipalities in at least 18 states. Large cities collecting PILOTs include Baltimore, Boston, Philadelphia, and Pittsburgh. Boston has one of the longest standing and the most revenue productive PILOT program in the United States.

PILOTs are a tool to address two problems with the property tax exemption provided to nonprofits. First, the exemption is poorly targeted, since it mainly benefits nonprofits with the most valuable property holdings, rather than those providing the greatest public benefit. Second, a geographic mismatch often exists between the costs and benefits of the property tax exemption, since the cost of the exemption in terms of forgone tax revenue is borne by the municipality in which a nonprofit is located, but the public benefits provided by the nonprofit often extend to the rest of the state or even the whole nation.

State Tax Revenues Rebound Further, Growing For Third Straight Quarter

Source: Lucy Dadayan and Donald Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Flash Report, November 30, 2010

States’ tax revenues rose for a third consecutive quarter, continuing the reversal of a downward trend that has devastated state budgets, according to preliminary data in a new report from the Rockefeller Institute of Government. States’ overall tax collections increased by 3.9 percent nationwide in the third quarter of 2010, compared to the same period a year earlier, based on data from 48 states. Despite the improved collections in July-September 2010, however, revenues remain significantly below peak levels and are still weak in a number of states, the report shows.
See also:
Press release

Measuring the Public Benefits From Taxes

Source: David Cay Johnston, Tax.com, October 20, 2010

Who benefits from the taxes we pay seldom gets examined, but two reports on the redistributive effects of taxes and transfers shed some revealing light on this issue. One report deals with the United States and the other with Canada.

In America, taxes and transfers have a significant impact on income inequality, which has been rising since 1980, according to a report by Thomas L. Hungerford of the Congressional Research Service. You can see the report here.
See also:
Canada’s Quiet Bargain: The Benefits of Public Spending
Source: Hugh Mackenzie, Richard Shillington, Canadian Centre for Policy Alternatives, April 2009

States’ Tax Revenues Show Gradual Recovery

Source: Lucy Dadayan and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Report, no. 81, October 2010

From the press release:
The second quarter of 2010 represented the second period in a row that states reported overall gains in tax collections — following five straight quarters of decline — according to a new study by the Rockefeller Institute of Government.

Overall state tax revenues grew by 2.3 percent in the second quarter of 2010, according to the Institute’s latest State Revenue Report. Thirty-four states reported gains in revenue during the second quarter, with 12 showing double-digit growth.

Budget Deficits and Demand for Government: How Starve the Beast Policies Feed the Machine

Source: Joseph Daniel Ura, Erica Socker, September 28, 2010

From the abstract:
The notion of “starving the beast”‘ has been an important justification for fiscal programs emphasizing revenue reductions since the mid-1970s. While the idea of restraining government spending by limiting government revenues has an intuitive appeal, there is convincing evidence the reducing federal tax rates without coordinated reductions in federal spending actually produces long-term growth in spending. This perverse result is explained by a theory of “fiscal illusion.” By deferring the costs of government services and benefits through deficit financing, starve the beast policies have the effect of lowering the perceived price of government in the minds of many citizens. We assess the principal behavioral prediction of the fiscal illusion strategy. Incorporating estimates of the effects of federal deficits into a standard substantive model of Stimson’s mood index, we find strong support for a subjective price-driven theory of demand for government. In particular, we find that the size of the federal budget deficit is significantly associated with greater demand for government services and benefits.