Today ITEP released three new updates of important Policy Briefs that explain timely tax topics in just two pages each. These are part of a series of Policy Briefs designed to provide a quick introduction to all the basic tax ideas that are important to understanding current policy debates:
• Tax Expenditures: Spending by Another Name
• Cigaratte Taxes: Issues and Options
• Uncertain Benefits, Hidden Costs: the Perils of State-Sponsored Gambling
October 14, 2011 01:57 PM | Permalink | 
If the following actions were taken, much of the inequity in our tax system, which is part of what’s driving the Occupy Wall Street and other affiliated protests, would be eliminated.
Photo of Occupy Wall Street via Eye Wash Creative Commons Attribution License 2.0
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October 14, 2011 01:32 PM | Permalink |
The National Priorities Project, working in partnership with Citizens for Tax Justice, has unveiled a new website that presents a running tally of the cost of the Bush tax cuts for the richest five percent, who now receive almost half of the total tax cuts.
Visit costoftaxcuts.com
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The National Priorities Project, working in partnership with Citizens for Tax Justice, has unveiled a new website that presents a running tally of the cost of the Bush tax cuts for the richest five percent, who now receive almost half of the total tax cuts. The cost is also broken down for the richest one percent and the next richest 4 percent.
As the Joint Select Committee on Deficit Reduction (aka “Super Committee”) considers drastic cuts in public investments and services that working people depend on, the amount of revenue lost due to tax cuts for the rich cannot be ignored. As CTJ has said for years, we will never have the revenue necessary to invest in the American people until these tax cuts are allowed to expire.
See the website: www.costoftaxcuts.com
Opposition to broad-based tax increases has caused state lawmakers 
to look, with increasing urgency, for additional revenue-raising opportunities outside of the income, sales and property taxes that form the backbone of most state tax systems. One of the most popular alternatives to those major revenue sources is state-sponsored gambling. But gambling revenues are rarely as lucrative, or as long-lasting, as supporters claim.
A recent Las Vegas Sun article, Nevada’s tax income from gaming well below other markets, shows clearly that gambling revenues aren’t a dependable revenue stream. For many years, Nevada enjoyed a bit of a monopoly on the gaming market, but in recent years others states have begun to adopt their own forms of legalized gambling. Not surprisingly, “gaming latecomers have lured potential customers away from Nevada, and are now surpassing the Silver State in the tax dollars they generate for the state and local governments that sanctioned them.”
Nevada’s loss of gaming revenues is particularly dangerous because the state levies no corporate or personal income tax and is disproportionately reliant on gambling as a funding source.
Nevada’s tax structure problems don’t start or end with gambling, but it’s clear that as gambling revenues decline it’s going to become even more imperative that lawmakers come together to push for real tax reform that likely involves the implementation of a corporate and personal income tax.
For more on the perils of state sponsored gambling read ITEP’s policy brief on the issue.
Photo of slot machines via Raging Wire Creative Commons Attribution License 2.0
Tennessee Governor Bill Haslam recently announced that Amazon has agreed to begin collecting sales taxes in Tennessee starting in 2014. The former Governor had told Amazon during backroom negotiations that it would not have to collect sales tax at all, despite the company’s plans to establish a “physical presence” in the state through the opening of multiple distribution centers. This is Amazon’s third such agreement with a state. Here’s our quick take.
Governor Haslam is absolutely right in saying that “this isn’t a new tax; this tax was already due. This was just a question of Amazon collecting it themselves.” Tennessee residents have always been required to pay tax on purchases made over the Internet, but that law is essentially unenforceable without the cooperation of retailers.
Traditional “brick and mortar” retailers in the Volunteer State have a legitimate complaint when it comes to the two-plus year lag-time before Amazon must begin collecting sales taxes. Amazon’s exemption from Tennessee’s sales tax laws is extremely poor policy and really should end the moment the company begins operating the distribution centers it plans to build.
This is by no means a comprehensive solution to online sales tax evasion in Tennessee. According to Governor Haslam, Amazon accounts for about ten percent of retail sales currently escaping taxation. Other online and catalog vendors that make up the other 90 percent will continue to dodge their sales tax collection responsibilities for the time being.
This development in Tennessee should hasten a national solution in the form of federal legislation. A state’s ability to enforce its sales tax laws cannot come down to its particular negotiating skills and leverage.
Until that federal solution is reached, states do have options. Tennessee’s ability to force Amazon to collect sales tax hinged on the company’s decision to build distribution facilities in the state – therefore giving the company sufficient presence to fall within reach of Tennessee’s tax collectors. But states, where Amazon lacks a distribution center, can also take steps to require tax collection by enacting what’s known as an “Amazon law” – a provision requiring companies partnering with existing in-state businesses to collect sales tax.
On September 26, the Office of the Inspector General for the City of Chicago released its annual budget options report to guide city officials as they debate how to close the city’s $1.2 billion budget deficit. The recommendations are extensive (this year’s report is 136 pages long, more than 80 pages longer than last year’s), and contain some suggestions sure to be controversial, including instituting a city income tax and a commuter tax.
One promising recommendation, that the city broaden its sales tax base, is 
similar to a plan Mayor Rahm Emanuel proposed earlier this year. It was quickly dubbed the “Rahm Tax.” The mayor’s plan would have imposed a sales tax on those services that he deemed “luxury items,” including limo services, tanning parlors and pet grooming.
The current sales tax base in Illinois is strikingly narrow. A report released by the Federation of Tax Administrators shows Illinois taxing only seventeen out of 168 possible services; only Oregon, New Hampshire, Alaska, and Colorado tax fewer services.
The obvious advantage to multiplying the goods and services subject to tax is that a state (or city) can actually lower its overall sales tax rate and still generate the same amount of revenue. Those items purchased by all of us, at fairly consistent rates (think school supplies, shampoo, and shoes), are already subject to a sales tax. Meanwhile, services – from limo rides to gym memberships to interior design – are not. So while taxpayers might initially balk at the idea of “new taxes,” everyone is better off if the tax burden is more broadly shared.
At 9.75 percent, Chicago’s sales tax rate is one of the highest in the country, so extending it to services is not insignificant. However, the prospect of more equity in the system, coupled with the potential to eventually reduce the overall rate, should actually make this an appealing option for Windy City residents.
Photo of Rahm Emanuel via Adam Fagen Creative Commons Attribution License 2.0
October 6, 2011 05:32 PM | Permalink |
Only one-fifth of one percent of U.S. taxpayers would pay the surcharge proposed by Senate Majority Leader Harry Reid to offset the costs of President Obama’s jobs bill. These figures show that in the majority of states only one-tenth of a percent of taxpayers would pay the surcharge in 2013. Only in one state would the share of taxpayers paying the surcharge exceed one percent.
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Senator Chuck Schumer of New York today said he is hesitant to support President Obama’s tax proposals because, “There are people making 250, 300 [thousand dollars] in many of our states who are not rich.”
Actually, Citizens for Tax Justice calculated that married couples with income between $250,000 and $300,000 would get to keep 99 percent of their Bush tax cuts, on average, under the tax plan promoted by President Obama last year.
That plan, which the President continues to tout, would extend the Bush income tax cuts for the first $250,000 of income a married couple receives, or the first $200,000 of income an unmarried taxpayer receives.
This means that a married couple making $250,100 would pay higher taxes on just one-hundred dollars of income at most. President Obama’s plan would continue the tax cuts for income even beyond $250,000/$200,000 for many taxpayers once deductions and other breaks are factored in.
As a result, CTJ found that three quarters of all couples in the $250,000 to $300,000 income range would continue to enjoy all of their Bush income tax cuts if President Obama’s plan was in effect in 2011.
Another report from CTJ explains that 84 percent of the revenue savings under the President’s tax plan would come from taxpayers with incomes exceeding $1 million. The report also explains that married couples with income above $250,000 and unmarried taxpayers with income above $200,000 are the richest 2.6 percent of Americans. Even in Senator Schumer’s state of New York, only 3.5 percent of taxpayers have incomes exceeding the $250,000/$200,000 threshold. If they can’t afford to pay higher taxes, who can?
Some of the taxpayers Senator Schumer is worried about would actually pay less under President Obama’s plan. For example, a childless married couple making $250,000 in wages and taking the standard deduction in 2011 would pay $935 less in income taxes if President Obama’s plan was in effect.
President Obama’s tax plan would allow the tax rates for the top two income tax brackets to revert to what they were at the end of the Clinton years. The President’s plan would also adjust the income tax brackets so that a married couple with income below $250,000 (or an unmarried taxpayer with income below $200,000) cannot possibly be affected by the top two income tax rates.
This adjustment in the tax brackets would result in a tax cut for some taxpayers, including the $935 tax cut for the married couple in the example above.
Here’s the technical explanation. There are six income tax brackets. The President’s plan pushes up the level of income you must have before you’re affected by the fifth bracket. That would mean that a portion of income that is currently taxed in the fifth income tax bracket would be taxed instead in the fourth income tax bracket, which has a lower tax rate. (Interested wonks can go to page 128 of the President’s budget blueprint that explains this arcane adjustment.)
And just in case anyone is concerned that the taxpayers described by Senator Schumer are small business people who will lay off all their employees in response to even the slightest possibility of higher tax bills, see CTJ’s report, The Bush Tax Cuts and Small Business.
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show star Snooki of “Jersey Shore” has found herself at the center of two important tax policy debates. The first was last year when Snooki criticized President Barack Obama for the