Category Archives: State & Local Finance

Tax Incentive Evaluation in 2016—in Law and Practice: Studies help states improve economic effectiveness

Source: Josh Goodman and John Hamman, The Pew Charitable Trusts, September 14, 2016

Many states have made progress in recent years toward regular, rigorous evaluations of their economic development tax incentives. In the 2016 legislative session, Alabama, Colorado, Hawaii, Virginia, and Utah enacted laws requiring regular evaluation, while several other states made progress to implement evaluation laws passed in previous years. As a result, lawmakers in numerous states will soon have evidence on the results of their incentives—information that they can use to improve the effectiveness of the programs.

Performance-Based Budgeting in the States

Source: Erica MacKellar, Legisbrief, Vol. 24 no. 35, September 2016

In an effort to ensure that tax dollars are spent more efficiently and effectively, some state legislatures are using performance-based budgeting. This strategy focuses on outcomes, requiring programs and agencies to work toward a larger purpose while meeting specific goals. There are practical challenges to this approach, however, such as defining goals and collecting data to measure performance.

2015 Annual Survey of State Government Tax Collections

Source: U.S. Census Bureau, Tip Sheet, Release Number: CB16-TPS.136, September 26, 2016

State government tax revenue increased 4.8 percent, from $875.0 billion in fiscal year 2014 to $916.5 billion in 2015 ─ the fifth consecutive increase, according to the U.S. Census Bureau’s 2015 Annual Survey of State Government Tax Collections.

Income taxes drove most of the growth, accounting for $27 billion of the $41 billion increase, from $360.1 billion to $387.2 billion, or 7.5 percent.

The 2015 Annual Survey of State Government Tax Collections provides a comprehensive look at state governments and contains statistics on the tax collections of all state governments, including receipts from compulsory fees. State governments and businesses have been using these statistics since 1951 to make policy and investment decisions.

Revenue statistics are broken down into 25 subcategories, such as motor fuel taxes, amusements taxes and hunting license taxes. Tax revenue statistics also include related penalty and interest receipts of the governments….

Detailed Table
Category Table
Flat Data File

Quarterly Summary of State and Local Government Tax Revenue for 2016: Q2

Source: U.S. Census Bureau, G16-QTAX2, September 20, 2016

Provides quarterly estimates of state and local government tax revenue at a national level, as well as detailed tax revenue data for individual states. This report produces three tables: Tables 1 and 2 include income and sales data and Table 3 provides tax collections by state. … Second quarter 2016 tax revenues for the four largest state and local government tax categories decreased 0.6 percent to $338.2 billion, from $340.4 billion in the same quarter of 2015. ….
Related:

Public universities are under threat – not just by outside reformers

Source: Brendan Cantwell, The Conversation, September 22, 2016

A new documentary, “Starving the Beast,” recently examined the state of public higher education. Directed by Austin-based award-winning documentarian Steve Mims, the film argues that a network of right-wing think tanks and educational reformers are undermining public universities. It suggests that America’s great public universities may die from a thousand cuts unless policymakers change course.

My experience as a higher education policy researcher leads me to share many of Mims’ concerns. There are many serious challenges facing public universities.

However, my research also shows more than a right wing conspiracy is to blame for the condition of public higher education today. ….

Weak Stock Market and Declines in Oil Prices Depressed State Tax Revenues: Declines in State Tax Revenues in the Second Quarter Raise a Yellow Flag for State Budgets

Source: Lucy Dadayan and Donald J. Boyd, Nelson A. Rockefeller Institute of Government, State Revenue Report, no. 104 September 2016

From the press release:
State and local government tax revenues showed continued slowdown in the first half of 2016, mostly attributable to weak performance of the stock market and steep declines in oil prices. Year-over-year growth in state and local tax was a mere 3.0 percent in the first quarter of 2016, which is a substantial slowing from the 5.4 percent average for the four previous quarters. Overall, state governments have been hit harder than localities by slowing tax revenue growth. Total state tax revenue from all sources grew by 1.6 percent and local tax revenue from major sources grew by 4.4 percent in the first quarter of 2016.

The just-released State Revenue Report (SRR) of the Nelson A. Rockefeller Institute of Government provides detailed analysis of state government tax revenues in the first quarter of 2016 and provides an overview of preliminary data for the second quarter of 2016. The report also provides state forecasts for fiscal year 2017 for personal income and sales tax collections.

According to preliminary data, state tax revenues declined by 2.1 percent in the second quarter of 2016. Declines were widespread, affecting about half of the states. Those declines came at a time when most states had already adopted 2017 budgets. They may leave many 2017 state budgets with holes to fix.

State personal income tax revenues grew 1.8 percent on a year-over-year basis in the first quarter of 2016, down from the 8.1 percent average for the four previous quarters. Overall, 16 states reported quarterly declines in personal income tax collections.

The Economic and Fiscal Consequences of Immigration

Source: Francine D. Blau and Christopher Mackie – Editors, National Academies of Sciences, Engineering, and Medicine, 2016

From the press release:
A new report from the National Academies of Sciences, Engineering, and Medicine provides a comprehensive assessment of economic and demographic trends of U.S. immigration over the past 20 years, its impact on the labor market and wages of native-born workers, and its fiscal impact at the national, state, and local levels.
 
Among the report’s key findings and conclusions:

When measured over a period of 10 years or more, the impact of immigration on the wages of native-born workers overall is very small. To the extent that negative impacts occur, they are most likely to be found for prior immigrants or native-born workers who have not completed high school—who are often the closest substitutes for immigrant workers with low skills.

There is little evidence that immigration significantly affects the overall employment levels of native-born workers. As with wage impacts, there is some evidence that recent immigrants reduce the employment rate of prior immigrants. In addition, recent research finds that immigration reduces the number of hours worked by native teens (but not their employment levels).
 
Some evidence on inflow of skilled immigrants suggests that there may be positive wage effects for some subgroups of native-born workers, and other benefits to the economy more broadly.

Immigration has an overall positive impact on long-run economic growth in the U.S.

In terms of fiscal impacts, first-generation immigrants are more costly to governments, mainly at the state and local levels, than are the native-born, in large part due to the costs of educating their children. However, as adults, the children of immigrants (the second generation) are among the strongest economic and fiscal contributors in the U.S. population, contributing more in taxes than either their parents or the rest of the native-born population.

Over the long term, the impacts of immigrants on government budgets are generally positive at the federal level but remain negative at the state and local level — but these generalizations are subject to a number of important assumptions. Immigration’s fiscal effects vary tremendously across states.

Tax-Exempt Municipal Bonds and the Financing of Professional Sports Stadiums

Source: Ted Gayer, Austin J. Drukker, Alexander K. Gold, Brookings Institution, September 2016
From the summary:

….In “Tax-exempt municipal bonds and the financing of professional sports stadiums,” Brookings Senior Fellow Ted Gayer, Austin J. Drukker, and Alexander K. Gold quantify the federal subsidies given to finance professional sports stadiums built or majorly renovated since 2000, and the total loss in federal tax revenue.

All together, the federal government has subsidized newly constructed or majorly renovated professional sports stadiums to the tune of $3.2 billion federal taxpayer dollars since 2000. But because high-income bond holders receive a windfall gain for holding municipal bonds, the resulting loss in total revenue to the federal government is even larger at $3.7 billion….

How a National Infrastructure Bank Might Work

Source: William J. Mallett, Congressional Research Service, CRS Insight, IN10572, September 15, 2016

…. Proponents of a national infrastructure bank typically see it as a way to provide low-cost, long-term loans, loan guarantees, and lines of credit on flexible terms to support infrastructure projects. Policy choices include the following:
• Infrastructure type. Some proposals focus on one type, such as transportation or energy, but most would support a wider spectrum of sectors.
• Institutional form and governance. Most current proposals would create a wholly owned government corporation governed by political appointees. But other models exist, including placing the bank inside an existing government department and creation of a government-sponsored enterprise with an independent board.
• Funding source. Under the Federal Credit Reform Act of 1990, credit assistance by the bank would be supported by an appropriation that pays the subsidy cost and administrative cost. Assuming a 10% subsidy cost, every $1 appropriated beyond the amount of administrative costs would enable the bank to lend $10 to projects. Alternatively, a bank could operate as a revolving fund, such that credit assistance and administrative costs are limited to the size of the appropriation, but funds from repaid loans could be used to make new loans. In some formulations, an infrastructure bank would raise its own capital through bond issuance. ….