Month: November 2013

We’ve followed the tactics of corporations in Illinois, from Motorola to CME Group, who again and again ask lawmakers for pricey handouts they claim they need to keep doing business in the state. House Majority Leader Barbara Flynn Currie has called this egregious behavior “blackmail.” She recently said, “[i]t essentially is saying, if you don’t jump to, if you don’t go do this for us we might think about going somewhere else.”  

Now the list of companies asking for handouts is growing, including: Archer Daniels Midland Company, OfficeMax, Zurich North America Insurance, Univar, and High Voltage Software. Giving individual companies special treatment is a violation of the neutrality principle and means that similarly situated companies are treated differently based on who can get the Legislature to bend to their will. Granting these singular incentives creates an environment wherein states end up competing in a “race to the bottom” and, ultimately, ordinary taxpayers pay the price through higher taxes or fewer services.

Illinois is facing an enormous budget crisis, due in part to the tax breaks for big multistate corporations that lawmakers have enacted over the years. Now is not the time for pandering to corporations at the expense of investing in the state’s future.

Iowa Senator Jack Hatch is one of three Democratic candidates running to unseat Governor Terry Branstad. If elected, the Senator intends to pursue a package of tax changes that would cost the state $415 million in Fiscal Year 2015 and $300 million in the following years. Most components of his plan are quite progressive: eliminating the flawed deduction for federal income taxes paid and asking the wealthiest Iowans to pay more overall.  But we wonder if permanently reducing tax revenues is the best approach when (for example) food insecurity in the state is rising.

Interested in how college textbooks are taxed in your state? Check out this New York Times piece which also explains why Amazon is telling its customers not to carry the textbooks they “rent” from Amazon across state lines. It’s one of the many convoluted steps the company takes in efforts to dodge its sales tax collection responsibilities.

The Kansas City Star explains in an editorial why the gas tax is a better tool for funding infrastructure than the sales tax.  As the Star notes, relying on a general sales tax to pay for roads “is a big leap away from the “user pays” world in which motorists help finance road repair and construction … [and] many drivers from outside the state who use the state’s roads would pay little if anything in sales taxes to maintain them.”  Our partner organization, the Institute on Taxation and Economic Policy (ITEP) makes a similar point in its 50-state report on the gas tax.

Nebraska’s Tax Modernization Committee, which we have been following, has moved on from taking public comment and is now back to deliberating potential changes to the Cornhusker state’s tax system.  At the suggestion of the Committee’s Chairman, members are focusing first on how they would pay for any proposed tax cuts – which could include fully exempting social security from the personal income tax and providing state aid to help reduce property taxes. While tapping into the state’s Rainy Day Fund and reserves is one option under consideration, many lawmakers wisely cautioned against using one-time money to pay for permanent tax changes. We are also happy to see that some Committee members are making tax fairness an important part of the debate. To this point, State Senator Jeremy Nordquist said, “There’s a number of options for us to address the regressivity of our state and local tax system, and that’s certainly what my goal will be.”

During a year in which far too many tax proposals have been focused on cutting taxes for the affluent, and in some cases actually raising them on the poor, Montgomery County Maryland’s decision to expand its Earned Income Tax Credit (EITC) is very welcome news.

As we noted in August, Montgomery County’s EITC is just one of two local EITCs in the country (the other is in New York City).  The credit is a powerful tool for blunting the regressivity (PDF) of Maryland’s sales and property taxes, and is an effective way to alleviate poverty, encourage work, and improve the long-term prospects of children raised in low-income families.

Unfortunately, when the Great Recession battered Montgomery County’s revenues, the County Council decided to scale back its EITC in order to help balance its budget.  Rather than matching the state EITC dollar-for-dollar, the credit dropped as low as 68.9% of the state credit in Fiscal Year 2012, and stands (PDF) at 75.5% of the state credit for Fiscal Year 2013.  Under a newly approved measure, however, that dollar-for-dollar match will gradually come back into effect by 2017.

As Councilman Hans Riemer explained, “Most of the services in the county have been restored from their cuts at the bottom of the recession. Except this one … So we are about back to where we were years ago.”  Montgomery County’s decision to continue its long-running commitment to its poorest residents is one that officials in other states and localities would be wise to emulate.