Month: April 2013

EVENT ADVISORY/PHOTO-OP FOR APRIL 15, 2013

BILLBOARD TRUCK IN WASHINGTON, DC ASKS, DO YOU PAY MORE TAXES THAN MAJOR CORPORATIONS?

 Citizens for Tax Justice Mobile Billboard to Visit Dupont, K Street, Capitol Building and National Capitol Post Office over Eight Hour Day

 Washington, DC – “Do you pay more Federal Income Taxes than Facebook, Southwest Airlines, GE, Pepco and other Giant Corporations? Yes You Do!” These words are splashed across a red, white and blue, ten by twenty foot rolling billboard that will be seen by thousands of tourists, food truck customers, pedestrians and commuters on Monday April 15th, courtesy of Citizens for Tax Justice (CTJ). CTJ’s April 11 report, “Ten Reasons We Need Corporate Tax Reform,” supports the billboard’s text that will be circulating around DC between 11 AM and 7 PM on Tax Day.

The billboard route maximizes visibility for passersby and access for news cameras, in particular at its final stop affording a visual of taxpayers visiting the Post Office. The route and schedule is divided into four parts, all times Eastern, primarily in NW DC. Some stops scheduled, others by request.

11 AM – Noon: Circling Dupont Circle and pulling off the Circle onto 19th St. NW (in front of Dupont Metro, Krispy Kreme, Front Page bar) at 11:30 for cameras and as needed.

Noon – 2 PM: Lunch at K Street Parks – Farragut Sq, McPherson Sq, Franklin Park. Route is rectangle of K Street NW to 13th Street to I (Eye) Street to 17th Street. Stops at I (Eye) near 15th/Vermont at 1:00 and 1:30 PM and as needed.

2 – 3 PM: US Capitol Building Loop – 3rd St NW/SW to Independence Avenue to 2nd St SE/NE to Constitution Ave. No stops scheduled but as needed will be on 3rd Street NW between Madison/Jefferson Streets.

3:30 – 7 PM: National Capitol Post Office, 2 Mass Ave, NE at North Capitol Street. Billboard will park kitty corner from Post Office entrance (doors on North Capitol), adjacent to Sun Trust Bank, in sight of Dubliner bar (F Street). Depending on parking, truck’s 5-minute loop passes busy tourist sites as it runs up North Capital, onto Louisiana Ave NE onto New Jersey Ave NW and back on Mass Ave NW for media availability.

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Citizens for Tax Justice (CTJ), founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation (www.ctj.org).

Idaho Senate leadership took a difficult stand on a high-profile issue in favor of good tax policy by refusing to give the Girl Scouts a special tax break on their famous cookies. Their counterparts in the Idaho House, however, weren’t nearly as principled, bowing to the pressure of some of the nation’s youngest tax policy lobbyists and voting 59-11 in favor of the special break. The Girl Scouts plan to return to the statehouse next year in hopes of convincing the Senate to support the new tax subsidy, which is like any other (PDF) subsidy.

Nevada lawmakers are debating whether they should join Maryland and Wyoming as the third state to raise its gasoline tax this year.  The Institute on Taxation and Economic Policy (ITEP) provides some important context with a new chart showing that even if the state’s gas tax were raised by 20 cents over the next 10 years (as the Senate is considering), the rate would still be below its historical average in value.

Texas business owners are pushing state lawmakers to repeal the state’s largest business tax, trotting out familiar arguments about the economic benefits of tax cuts. Fortunately, as the Austin American Statesman reports, “a $1.2 billion annual price tag … appears to have doomed the effort.”

Massachusetts House lawmakers set up a showdown with Governor Patrick over transportation funding in the Bay State with the passage of their less ambitious revenue package this week. Governor Patrick’s budget includes almost $2 billion in new revenues to boost transportation and education spending raised primarily through increasing the personal income tax. The Governor’s plan also includes a sharp reduction in the state’s sales tax. The House package, by contrast, raises just over $500 million through increases in fuel and cigarette taxes as well as a few business tax changes. Governor Patrick threatened to veto any tax package from the House or Senate that does not raise significant revenue for both transportation projects and education.

(Photo courtesy Bitterroot Star)

In a speech to the Louisiana Legislature yesterday, Governor Bobby Jindal announced that he would “park” his tax plan. There is no doubt this is a huge blow to supply-side advocates and Arthur Laffer enthusiasts who tout false claims that tax cuts will ultimately pay for themselves and increase economic development.

The Governor’s controversial plan would have repealed the state’s personal and corporate income and franchise taxes and then paid for these tax cuts by increasing the sales tax. The sales tax changes included increasing the state tax rate from 4 percent to 6.25 percent, and expanding the base of the tax to include a wide variety of previously untaxed services and goods. ITEP found that the Governor’s plan would have raised taxes on the bottom 60 percent of Louisianans, as tax swaps tend to do.

The Governor’s plan met enormous resistance “in recent weeks as business groups and advocates for the poor have assailed its effects and think tanks have questioned whether the math in the proposal adds up.” Now the Governor is backing away from his proposal and urging the legislature to send him its own bill – one that would also eliminate the personal income tax – leaving “tax reform” up to the state legislature.

The key fact to bear in mind for Louisiana is that aside from raising the sales tax, there is really no way for the state to replace nearly $3 billion in revenue that will be lost if the income tax is eliminated. Lawmakers would do better to stay away from supply-side theories and instead close corporate tax loopholes, reverse the regressivity of the state’s tax structure and invest in public infrastructure because that is what real reform looks like.

Earlier this year, Kansas Governor Sam Brownback proposed another round of personal income tax cuts (on top of those he signed into law last year that are creating a massive hole in the state’s budget). Read ITEP’s analysis of that proposal here.  Now the Kansas House and Senate have each responded with their own tax cut plans, and are expected to reconcile their differences soon.

To date, much attention has been given to the major difference between the House and Senate plans — the Senate bill includes permanently preserving a temporary sales tax rate hike while the House plan would allow the hike to expire. What the two plans have in common, however, is what should be of paramount concern to all Kansans because both plans eventually lead to the elimination of the state’s personal income tax – which would grow the hole in the state’s coffers by another $2.2 billion.  

Policymakers have not proposed a way to pay for this tax cut. Instead they are making an explicit assumption that income tax repeal will at least partially “pay for itself.” Kansas’ balanced-budget requirement means that the state will be forced to offset at least some portion of the revenue loss from income tax repeal, and it’s a sure bet that further increases in the state sales tax will be the primary remaining revenue-raising mechanism lawmakers would look to.

ITEP’s latest analysis runs some scenarios that show the impact on Kansas taxpayers of using a sales tax increase to replace various percentages of the revenue currently raised through the personal income tax.  For example, if 50 percent of the revenues were made up with sales tax hikes, the poorest 40 percent of Kansans would see a net tax increase from this change and the state sales tax rate would have to be raised from 6.3 to 9.11 percent, pushing the statewide average state/local rate up to 10.86 percent.

Read ITEP’s full report here.

Kansas is one of several states contemplating a “tax swap” of some sort, but no state can meet its fiscal needs fairly and sustainably without an income tax — especially in the absence of extraordinary natural resources (like Alaska’s oil), for example, or out-of-state consumer dollars to tax (like Nevada’s tourism).

Information is starting to trickle out of the White House about the budget proposals that the President is to release on Wednesday of next week. The proposal will be controversial because it includes cuts in Social Security and Medicare spending. Here’s what we know so far about the tax proposals in the plan.

1. It appears that President Obama will propose less in new revenue than the $975 billion called for in the budget resolution approved by the Democratic majority in the Senate. This seems very ill-advised, as we have already noted that the Senate resolution would not even raise enough revenue to pay for the level of spending that Ronald Reagan presided over. As the Washington Post explains,

The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas.

This revenue would be used to reduce the deficit.

The President’s proposal will have some additional revenue-raising proposals, “increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.” It is unclear how much those additional proposals would raise, but it appears that the total new revenue would be below what the Senate budget resolution calls for.

2. The vast majority of the President’s proposed new revenue would come from his proposal to limit the tax savings of each dollar of certain deductions and exclusions claimed by wealthy taxpayers to 28 cents. A recent CTJ report breaks down the composition of the tax expenditures limited by this proposal and how some taxpayers would be affected.

3. One of the new revenue-raising proposals from the President that would pay for new spending is a limit on individual retirement accounts (IRAs) for the wealthy that CTJ proposed in its recent working paper on revenue proposals. We noted that IRAs provide a tax subsidy to encourage retirement saving, which Congress surely never intended to allow Mitt Romney to save $87 million tax-free.  

The Washington Post reports Obama’s plan would

… also seek to generate revenue by limiting how much wealthy individuals can accrue in their tax-retirement accounts. Such accounts would be capped at $3 million in 2013 dollars — which officials say is enough to finance a $205,000 a year income.  

We’ll have more analysis as we learn more.

Two new analyses from Citizens for Tax Justice demonstrate that the richest Americans still are not shouldering a disproportionate share of taxes and that the poor are still not avoiding them, despite stories that are commonly told every year around Tax Day.

The first is Who Pays Taxes in America in 2013?, a fact sheet we release each year. It examines all the taxes paid by Americans (all federal, state and local taxes) and finds that people in all income groups do pay taxes (despite claims to the contrary by Mitt Romney and others) and that the tax system overall is just barely progressive.

The second analysis is our six-page report called New Tax Laws in Effect in 2013 Have Modest Progressive Impact. This goes into more detail and explains that the tax code has not changed in 2013 despite recent headlines about unprecedented taxes on the rich.

For example, Americans in all income groups are paying more than they would pay if Congress had just extended the tax laws in effect in 2012, but the share of taxes paid by the top one percent has risen only slightly. The richest one percent, who will receive 21.9 percent of America’s income in 2013, will pay 24 percent of all the taxes in 2013. If, instead of enacting the “fiscal cliff” deal that allowed some tax cuts for the rich to expire, Congress had just extended the 2012 tax laws, then the richest one percent would pay 23.1 percent of all the taxes in 2013.

In other words, the “fiscal cliff” deal made our tax system slightly – not dramatically –more progressive.

Since January, we’ve brought you updates as best we could about Louisiana Governor Bobby Jindal’s controversial tax swap plan, but details remained elusive. Finally, late last week, the Governor released enough information – including a newly calculated, bigger sales tax rate increase – and the Institute on Taxation and Economic Policy (ITEP) was able to complete a full analysis of the Governor’s tax plan. The centerpiece of the Jindal plan is the outright repeal of the state’s personal and corporate income and franchise taxes. These tax cuts would be paid for primarily by increasing the state sales tax rate from 4 percent to 6.25 percent, and expanding the base of the tax to include a wide variety of previously untaxed services and goods.

ITEP’s analysis shows that, if fully implemented in 2013, the plan would increase taxes on the poorest sixty percent of Louisianans overall, while providing large tax cuts for the best-off Louisiana taxpayers. In fact, ITEP found that the poorest 20 percent of Louisianans would see a net tax increase averaging $283, or 2.4 percent of their income, while the very best-off Louisianans would see a tax cut averaging almost $30,000, or 2.5 percent of this group’s total income.

Louisiana Department of Revenue (DOR) Executive Counsel Tim Barfield continues to insist that all Louisianians will be better off under the Governor’s plan. But, as ITEP’s report points out, DOR’s estimates are flawed: they only include the impact of taxes paid directly by individuals and they ignore the impact of taxes paid initially by businesses. This approach presents an incomplete picture of how the Jindal plan would affect Louisianans, though, because a substantial share of the current sales tax, and the large majority of the expanded sales tax base the Governor proposes, would be paid initially by businesses. Economists generally agree that these business sales taxes are ultimately passed on to consumers in the form of higher prices.

Louisianans themselves aren’t buying the Governor’s numbers either. His tax swap plan has the support of only 27 percent of Louisianans – and that was before he upped the sales tax increase even further.

Read ITEP’s full analysis of Govenor Jindal’s tax plan here.