Special Issue: Reforming State and Local Tax Systems

Source: Public Finance Review, Volume: 45, Number: 4, July 2017
(subscription required)

From the introduction:
State tax reform is fundamentally different than federal tax reform. States are continually modifying their taxes to meet revenue challenges and to cope with the changing structure of the national and regional economy. Most state tax reforms are modest affairs and not major rewrites of the tax codes. Reforms must consider the existing institutional structure of the state, state economic policies, and current state politics. Nonetheless, there are some common themes in reforms across the states, including an expansion of the sales tax base to include services and a broadening of the base for income taxation.

Articles include:
What Drives State Tax Reforms?
James Alm, Trey Dronyk-Trosper, Steven M. Sheffrin

State tax reform is fundamentally different than federal tax reform. States are continually modifying their taxes to meet revenue challenges and to cope with the changing structure of the national and regional economy. Most state tax reforms are modest affairs and not major rewrites of the tax codes. Reforms must consider the existing institutional structure of the state, state economic policies, and current state politics. Nonetheless, there are some common themes in reforms across the states, including an expansion of the sales tax base to include services and a broadening of the base for income taxation.


Personal Income Tax Revenue Growth and Volatility: Lessons and Insights from Utah Tax Reform

Gary C. Cornia, R. Bruce Johnson, Ray D. Nelson

In order to reduce the volatility of the personal income tax in Utah, review and reform efforts recommended a simple flat tax that disallowed all deductions or exemptions. Among the reasons for the recommended flat tax was the argument that it would result in a more stable year-over-year tax revenue stream. This was especially important for education financing. The tax system that was finally adopted retained exemptions and deductions through a tax credit. Using a series of simulations based on twenty-one years of tax returns, we establish that by retaining exemptions and deductions, tax reform efforts failed to appreciably reduce the volatility of personal income tax revenues. These simulations also show that the initially proposed flat income tax with no exemptions or deductions would have decreased volatility at the cost of reducing the growth rate. This study contributes insights, caveats, methodology, and potential alternatives for future individual income tax reforms by focusing on the growth and volatility of three different tax systems.

Reducing Property Taxes on Homeowners: An Analysis Using Computable General Equilibrium and Microsimulation Models
Andrew Feltenstein, Mark Rider, David L. Sjoquist, John V. Winters

We consider a proposal that reduces by half the taxes on homesteaded properties and replaces the lost revenue by increasing the base and rate of the state sales tax. We develop a computable general equilibrium (CGE) model and a microsimulation model (MSM) to analyze the economic and welfare effects of such a proposal if adopted in Georgia. The results from the CGE model suggest that the proposed reforms have a substantial negative effect in percentage terms on Georgia’s economy. The MSM suggests that such a policy has no effect on the distribution of consumption by income class but increases the percentage of owner-occupied housing relative to rental housing by 20 percent in the aggregate.

Does Perception of Gas Tax Paid Influence Support for Funding Highway Improvements?
Ronald C. Fisher, Robert W. Wassmer

The issue for this research is whether perception of the rate and amount of fuel taxes paid by an individual influences his or her support for funding highway improvements from any source of revenue. A survey of likely California and Michigan voters demonstrates that they often overestimate the rate of their state’s gasoline excise tax and the subsequent amount they are likely to pay for this tax in a month. Regression analyses show that voter misperceptions concerning the magnitude of state fuel taxes affect their views regarding an increase in funding to support highway investment proposals. A reasonable policy implication is that the adoption of proposals to generate additional funds for highway investment is more likely if accompanied by a campaign identifying the existing rate of the state’s gasoline excise tax and the relatively small amount of this tax paid by the state’s typical driver.

State Export Promotion and Firm-level Employment
Andrew J. Cassey, Spencer Cohen

Most US states have export promotion programs, but it is unknown if these programs create long-term employment, which is often the policy’s stated goal. We merge administrative export promotion and employment data from Washington State to test the effect of firm-level export promotion on firm-level employment using the differences-in-differences estimator. We believe we are the first to have US state data at this level of detail. We find firm participation in an export assistance program increases firm-level employment fleetingly, but not in subsequent periods. Thus, we do not find a statistically significant impact to long-term employment from program participation.

Protecting the Vulnerable or Ripe for Reform? State Income Tax Breaks for the Elderly—Then and Now
Ben Brewer, Karen Smith Conway, Jonathan C. Rork

State governments have a long history of providing income tax relief to their elderly constituents. Our research investigates the current distributional and revenue effects of these tax breaks, as well as the economic status of the elderly, and explores how these measures have changed since 1990. Using data from the 1990 Integrated Public Use Microdata Series and the 2013 American Community Survey, combined with the TAXSIM calculator, we calculate current state income tax liabilities and revenues and simulate the effects of removing all age-related tax breaks. Our analyses reveal that the economic well-being of the elderly has grown substantially relative to the nonelderly and that state tax breaks primarily benefit the middle- and upper-income elderly. Revenue costs of these tax breaks have also grown substantially, and their modest and mixed effects on income equality, measured by changes in the Gini, cast doubt on equity as a justification.

Agencies Could Learn a Lot From Tennessee’s Shift to Pay for Performance

Source: Howard Risher, Gov Exec, June 28, 2017

Federal agencies will certainly not be the first public employer to switch to pay for performance. Among the earliest were Florida in 1968 and Wisconsin and Utah in 1969. Over the next four decades, reports show another 20 states adopted the policy although almost half cover less than 10 percent of the workforce. Unfortunately, their experience has not been documented or assessed recently.

The most recent may be Tennessee, and by all standards it’s demonstrated one of most successful transitions. The statute Tennessee Excellence, Accountability and Management (TEAM) Act was signed in April 2012, although significantly the first payouts didn’t occur until 2016…..

‘Giving Help and Not Asking for It’: Inside the Mental Health of First Responders

Source: Katherine Barrett & Richard Greene, Governing, July 7, 2017

Teaching cops, firefighters and prison workers to recognize and know how to handle people with mental illness is a big part of the efforts to reduce suffering and death at the hands of law enforcement. Less talked about is the mental health of the cops, firefighters and prison workers themselves. ….

Lack of Paid Sick Leave Reduces Use of Preventive Health Care Services

Source: Karen Rosenberg, AJN – American Journal of Nursing, Volume 117 – Issue 7, July 2017
(subscription required)

From the abstract:
According to this study:
* Workers without paid sick leave are significantly less likely to undergo recommended annual health screenings compared with those who have paid sick leave.
* Lack of paid sick leave is a barrier to accessing health care services, even when preventive screenings are free.

State and Local Government Contributions to Statewide Pension Plans: FY 15

Source: National Association of State Retirement Administrators (NASRA), Issue Brief, June 2017

From the introduction:
Pension benefits for employees of state and local governments are paid from trusts to which public employees and their employers contribute during employees’ working years. Timely contributions are vital to the proper funding and sustainability of these plans: failing to pay required contributions results in higher future costs, due largely to the foregone investment earnings that the contributions would have generated.

Nationally, contributions made by state and local governments to pension trust funds in recent years account for just less than five percent of all spending. Pension spending levels, however, vary widely among states and are actuarially sufficient for some pension plans and insufficient for others. Unlike employees, who must always contribute the amount prescribed in statute or by plan rules, some public employers—states, cities, etc.—have discretion to set the contributions they make to public pension plans. This disparity in contribution governance arrangements is one factor leading to a wide range of experience among public employers concerning required contributions. Overall, the experience for FY 15 reflects an improved effort among state and local governments to make actuarially determined pension contributions, and a decline in the rate of growth of pension costs.

This brief describes how contributions are determined; the recent public employer contribution experience; and trends in employer contributions over time.

Lots of Employees Get Misclassified as Contractors. Here’s Why It Matters

Source: David Weil, Harvard Business Review, July 5, 2017

…. The debate over the misclassification of employees — treating them as independent contractors instead of employees — pervades the modern fissured workplace. …. Though its form varies, the impacts of misclassification are almost always the same: the underpayment of wages, absence of benefits, and increased exposure to a variety of risks. And when misclassification is adopted as a business strategy by some companies, it quickly undermines other, more responsible employers who face costs disadvantages arising from compliance with labor standards and responsibilities. ….

Organizing in Red America

Source: Dissent Magazine, Summer 2017

Articles include:
Left in the Middle
Michael Kazin

….The good news is that a left does exist in Red America—and, amid the failures of the Trump administration, appears to be growing. Its adherents may share, in whole or in part, the cultural proclivities of the more numerous conservatives who live there. But they are arguing and organizing for many of the same demands as are their counterparts in places like New York City and Los Angeles; they are also busy defending the same people at risk from Trump and his allies in Congress and their own states. In this special section of Dissent, you will learn about some of those activists and a few of the politicians who share their goals…..

Working Too Hard for Too Little: An Interview with Senator Sherrod Brown
Michael Kazin

….This spring, the senator issued a lengthy document, “Working Too Hard for Too Little: A Plan for Restoring the Value of Work in America,” which lays out a set of innovative ideas about how to raise wages, make jobs more secure, and compel employers to adhere to decent standards on the job. In late April, Michael Kazin interviewed the senator in his office on Capitol Hill…..

Mississippi Autoworkers Mobilize
Michelle Chen

The workers at the Nissan plant in Canton, Mississippi, had high hopes when the state-of-the-art factory complex moved in fourteen years ago to a small, majority black town where more than a quarter of residents live in poverty and decent jobs are scarce. …. After fourteen years at the plant, he says, “People are hurting inside of my factory.” His fellow coworkers have been concerned by what they see as increasingly unstable working conditions and general deterioration in benefits and safety protections. A few years ago they campaigned to organize with the United Auto Workers (UAW). Since then, he says, the workers have faced growing hostility from management for seeking to unionize, which only confirms its disrespect for a community that’s invested decades of public funding and faith in Nissan’s promise of stable manufacturing careers. ….

Birmingham’s Fight For a Living Wage
Scott Douglas

The election of Donald Trump has turned our attention to the politics of white working-class people, particularly in the states that voted for him last fall. But progressives should not ignore the activism of the black working class in many of those same red states. ….

The Next Operation Dixie
Sarah Jaffe

The election of Donald Trump has led to a lot of soul-searching on the left. In particular, the narrative since the election has focused on Trump’s appeal to working people, and whether this reflects an inherent racism among the so-called “white working class” or a failure of liberals and the left to speak to their economic concerns.

While the divide between “red” and “blue” states is often overstated (just ask the Republican governors of Massachusetts and Illinois), the Deep South has always lagged behind in union organizing. The failure of the CIO’s “Operation Dixie” in the late 1940s and concerted campaigns to divide black workers from white workers in law and on the shop floor left southern workers with fewer rights, lower wages, and, without unions to press their case, with less political representation. Yet there have always been exceptions, unions and organizations that have fought against great odds to build power for workers in the South, and with the accession of Trump, they can offer us advice for how to move forward when workers’ rights are under attack and racism being fomented from the highest levels of government. Dissent’s Sarah Jaffe spoke with three labor organizers from the South about their experiences and what can be learned from their successes….

Standing With Immigrants in Nebraska
Julie Greene

…. Many states have been transformed by immigration in recent decades, but some are better prepared than others to cope with the crisis. Take my home state of Nebraska. A solidly red state that has not voted for a Democratic presidential nominee in more than half a century, Nebraska has nonetheless seen the flowering of a pro-immigrant political culture. Over the past six years, activists across the state built a coalition that has made it possible to confront the harsh words and actions of the Trump administration head on. Examining what they did and how they did it can offer lessons for activists beyond the Great Plains. ….

Bringing Power to the People: The Unlikely Case for Utility Populism
Kate Aronoff

One glaring omission in the postmortem handwringing about the 2016 election is the fact that most poor people in America—of all races and genders—simply didn’t vote. They were prevented from doing so by a number of structural barriers—voting restrictions, second and third jobs, far-flung polling locations—as well as a lack of excitement about two parties they saw as having abandoned them.

Enter: twenty-first-century electric cooperatives, a perhaps unlikely player in the contest for power between progressives and conservatives in the heart of so-called Trump country in rural America.

If there’s one thing poor, rural communities tend to have in common, it’s where they get their power—not political power, but actual electricity. Over 900 rural electric cooperatives (RECs)—owned and operated by their members—stretch through forty-seven states, serving 42 million ratepayers and 11 percent of the country’s demand for electricity. They also serve 93 percent of the country’s “persistent poverty counties,” 85 percent of which lie in non-metropolitan areas. REC service areas encompass everything from isolated farm homes to mountain hollers to small cities, with the highest concentrations in the South, the Midwest, and the Great Plains. And they might just offer an opportunity to curb the right and the climate crisis alike…..

Millennials and the Future of Work

Source: Finance & Development: A Quarterly Publication of the International Monetary Fund, Volume 54 Number 2, June 2017

Millennials are increasingly looking to find their way in the sharing economy.

Articles include:
An Uncertain Future
by: Maureen Burke
Along with exciting new possibilities, millennials face a whole different set of obstacles

The Future of Work
by: Arun Sundararajan
The digital economy will sharply erode the traditional employer-employee relationship

Straight Talk: The Voice of Youth
by: Christine Lagar
Adapt, adjust, and never stop learning

Pension Shock
by: Mauricio Soto
Young adults in advanced economies must take steps to increase their retirement income security

Education for Life
by: Nagwa Riad
Labor markets are changing, and millennials must prepare and adjust

Playing Catch-up
by: Lisa Dettling and Joanne W. Hsu
Youth today are not building wealth the way their parents did

In Their Own Words
by: Niccole Braynen-Kimani and Maria Jovanović
Millennials reflect on the key challenges facing their generation

Wage Discrimination: Behind the Numbers

Source: Jocelyn Frye and Kaitlin Holmes, Center for American Progress, July 5, 2017

Equal pay is often framed in the public debate as being solely a women’s issue. But a close look at the data reveals that wage discrimination is a problem experienced by many different groups, including women, men, older workers, and workers with disabilities.

A review of Equal Employment Opportunity Commission (EEOC) charge filings data—both public and unpublished—helps paint a diverse and nuanced picture of wage discrimination claims. Having a clearer, more accurate understanding of wage discrimination is essential in identifying the breadth of the challenges facing workers and the most effective solutions in response to the needs of workers.

The majority of wage discrimination charges alleging discrimination based on gender are filed by women. But a portion of gender-based wage discrimination charges are also filed by men. A review of unpublished EEOC data from the past four fiscal years shows that men filed, on average, 15 percent of gender-based wage discrimination charges…..

The Financial Impact of the American Health Care Act’s Medicaid Provisions on Safety-Net Hospitals

Source: Allen Dobson, Joan DaVanzo, Randy Haught, Commonwealth Fund, June 2017

From the abstract:
Issue: Safety-net hospitals play a vital role in our health care system, delivering significant care to Medicaid, uninsured, and other vulnerable patients. The American Health Care Act (AHCA) would make changes to Medicaid that would substantially reduce federal funding, resulting in potential adverse effects on safety-net hospitals and the populations they serve.

Goal: Examine how the AHCA Medicaid provisions, which the Congressional Budget Office estimates will reduce federal Medicaid spending by $834 billion over 10 years, will affect the financial status of safety-net hospitals.

Methods: The Dobson | DaVanzo Hospital Finance Simulation Model uses Medicare Hospital Cost Report data for 2015 and assumptions regarding how states will respond to the AHCA Medicaid provisions to estimate the financial impact on safety-net hospitals.

Key Findings: Beginning in 2020 the financial status of safety-net hospitals will deteriorate as Medicaid coverage is reduced and the per-capita spending limits proposed in the AHCA grow. By 2026 total margins will drop to 0.5 percent compared with estimates under current law of 2.9 percent—representing an 83 percent reduction in net income for safety-net hospitals. Small rural safety-net hospitals and safety-net hospitals treating the largest proportion of low-income patients would be hurt the most.
Related:
Technical Appendix
Chartpack (pdf)
Chartpack (ppt)