State Rundown 5/18: Late-Breaking Developments

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State leaders in North Carolina are crowing about an unexpected budget surplus of $400 million, but the surge in new money will likely be a one-time occurrence. Meanwhile, the state’s corporate income tax rate will continue to fall in accordance with revenue triggers included in the tax cuts passed in 2013. This fiscal year, the corporate rate will drop from 5 to 4 percent, at a cost of about $109 million. As ITEP’s Meg Wiehe noted in a recent editorial, “the truth is that, as a share of income, no matter how you slice the data, the wealthiest households got the biggest tax cut and the vast majority of the net tax cut goes to those families.”

The U.S. Supreme Court ruled Monday that one feature of Maryland’s local income tax law is unconstitutional. The case centered on the state’s collection of a “piggy-back” income tax of up to 3.2 percent on behalf of Maryland counties and Baltimore City in addition to the 5.75 percent personal income tax at the state level. Maryland offers a credit on the state personal income tax for income taxes paid to other states, but the credit does not apply to the piggy-back tax. One Maryland couple sued, saying that applying the piggy-back tax without applying a credit for income taxes paid in other states amounted to double taxation. The US Supreme Court agreed, saying the practice was a violation of the Commerce Clause as it could discourage business across state lines. The ruling will likely cost Maryland counties and localities millions in revenue.

Vermont’s legislative session ended last week with a deal to cover a $113 million shortfall that included $30 million in new revenue. Under the plan, the state sales tax of 6 percent will now apply to soft drinks and the 9 percent meals tax will apply to vending machines. The deal also caps the  most itemized deductions Vermonters can claim against their personal income tax to 2.5 times the standard deduction.

Conservative legislators in Maine shared the details of their tax plan last week. The proposal would cut the top income tax rate from 7.95 to 6.5 percent over two years and would leave the sales tax unchanged. The plan differs greatly from Gov. Paul LePage’s proposal, which would implement much bigger income tax cuts and increase the sales tax. The plan also increases state revenue sharing with localities, rather than eliminating it as the governor’s plan would. Critics of this newest plan, citing ITEP data, note that Mainers who make less than $57,000 would see their taxes increase on average, and that the income tax cuts would overwhelmingly benefit the wealthy and corporations. 


Illinois Lawmakers Need to Take Responsibility for Budget Crisis

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rauner.jpgWhen faced with crisis and a need for new revenue, our 16th president passed the first federal income tax in America’s history. But today, in the Land of Lincoln, Illinois state leaders have taken a drastically different approach. Gov. Bruce Rauner wants to address the state’s $6.1 billion budget gap with massive spending cuts to healthcare, education and other public services in a budget proposal denounced as “morally reprehensible” by critics in the state.

Meanwhile, the Illinois Supreme Court ruled last week that a 2013 pension reform law that reduced cost-of-living increases for retirees and raised the retirement age was unconstitutional. The law would have reduced Illinois’ unfunded pension liability by 20 percent; as things stand now, pension payments account for 25 cents of every dollar in the state budget. Rauner wanted to move current state employees into a plan which provides fewer benefits, adopted in 2010 for new hires, but this proposal is likely unconstitutional as well.

Illinois lawmakers were already grappling with how to solve the budget deficit – a deficit made worse by the expiration of a temporary increase in the state’s flat personal income tax rate from 3.75 percent to 5 percent. Now, they will need to find additional funding for the state’s pension system.  Needless to say, it is time for the governor and state lawmakers to solve this revenue crisis with sensible solutions, not stop-gap measures. And time is running out: May 31st, the scheduled end of the legislative session, is just around the corner.

The fact of the matter is that Illinois does not have a spending problem. It has a revenue problem. Thirteen years ago, ITEP released a report detailing tax reform options for Illinois, observing that “the state’s low reliance on a narrow-based, flat-rate income tax, its generous yet inequitable sales tax exemptions, and its disproportionate reliance on regressive local property taxes all reduce the long-term yield of the tax system—indirectly undermining the state’s ability to provide services to its citizens.”

More than a decade later, the Illinois tax system is still balanced on the backs of the poor. ITEP’s 2015 Who Pays? report ranked Illinois fifth among the nation’s most regressive tax systems. The poorest 20 percent of Illinoisans pay nearly three times more in state and local taxes as a portion of their income than the top one percent.

Friday’s court ruling has proven that lawmakers can no longer rely on gimmicks to delay the inevitable. Nor should they rely on self-defeating budget cuts that will lead Illinois away from the path to prosperity. Instead, the state’s leaders should do what a growing number of observers have urged and implement progressive tax reforms. A new report from the Fiscal Policy Center at Illinois Voices for Children outlined a host of options–from raising the income tax rate to closing corporate loopholes– that would put Illinois on sounder footing. “Governor Rauner and lawmakers have choices,” its authors note. “By selecting from a range of revenue options to close next fiscal year’s over $6 billion budget hole, they can avoid devastating cuts to services for children, families, and communities.” 

State Rundown 5/14: Helping and Hurting Working Families

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California Gov. Jerry Brown included a new state Earned Income Tax Credit (EITC) in his revised budget plan this week, responding to critics who claim he has not done enough to address poverty. Brown’s proposed EITC would provide qualifying working families in California an average credit of $460 a year, with the maximum credit for a family with three or more kids of $2,653. In order to qualify, families must earn a maximum of $13,870, about the average income of California’s bottom fifth of taxpayers but relatively low considering the median household income in California is $60,194. The governor’s proposal is much less generous than two bills under consideration in the legislature. Senate Bill 38 and Assembly Bill 43 propose EITCs with no income cutoff for eligibility. According to an ITEP analysis, SB 38 would provide an average credit of $781 to the bottom fifth of taxpayers, as well as generous credits to middle-class taxpayers. AB 43 would provide an average credit of $602 to the bottom fifth. State EITCs are one of the most successful poverty-fighting tools available to policymakers, and we hope that California adopts an EITC more in line with the legislative proposals on the table.

A Michigan representative wants to replace the state’s flat personal income tax with a progressive structure, arguing that the recent defeat of ballot measure Prop 1 shows Michigan voters reject regressive sales taxes and want the wealthy to pay their fair share. “The middle class is pretty tapped out, and obviously the working poor can’t afford to pay more,” Rep. Jim Townsend noted. “And yet we have the people in the top five percent, and specifically the top one percent, who have been doing by all accounts, extremely well.” Changing the state’s income tax structure from a flat rate to a graduated version would require a two-thirds vote of the legislature and approval by a majority of voters. Townsend’s bill is unlikely to pass the current legislature, but the people are already on board; a recent survey of Michigan voters found that 66 percent would vote for a graduated income tax.

A new report finds that voters have not punished lawmakers who support gas tax increases to fund transportation investments. The study by the American Road and Transportation Builders Association says 95 percent of Republican and 88 percent of Democratic legislators who voted to increase state gas taxes in 2013 or 2014 were reelected last cycle. Even legislators who pledged to never raise taxes were unpunished at the polls; of the 191 legislators included in the study that signed the Americans for Tax Reform (ATF) state pledge, 13 percent “ignored the ATR and supported increased revenue for transportation improvements… Only one legislator who defied the ATR and sought re-election was not returned to office.”


Following Up:
Nebraska: Lawmakers successfully overrode Gov. Pete Rickett’s veto of a 6 cent increase in the state’s gas tax over four years. The tax increase will raise an additional $25 million annually for the state and $51 million for cities and counties once fully implemented. The revenue is sorely needed, as Nebraska’s gas tax rate, adjusted to inflation, is currently at an all-time low according to ITEP data.

Kansas: Legislators in the House and Senate are gravitating toward plans to increase the sales tax to make up for the budget deficit. The plans would also implement a lower sales tax on food; Kansas is one of a few states where the full sales tax applies to food. Meanwhile, a bill to repeal Gov. Brownback’s income tax exemption for business pass-through income was approved by the House Taxation Committee. 


How to Master the Fine Art of Talking out of Both Sides of Your Mouth

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The issue of how to improve the lot of poor and moderate-income folks has traditionally been the terrain of Democrats. But earlier this year, Republican leadership decided they should get on the band wagon and start talking about income inequality, particularly as the 2016 election approaches.

This is a dramatic shift from three years ago when Democratic attempts to make income inequality a core component of the 2012 campaign elicited dismissive, tone-deaf accusations of class warfare and attacks on poor and low-income people for being “takers.”

Now, as the presidential campaign season heats up, Republican candidates are rehashing their shopworn tax-cuts-for-the-rich policies as prescriptions for addressing the growing income divide.

The Republican formula for discussing income inequality is transparent: first, talk about how the rich have gotten richer on President Obama’s watch; second, talk about how the nation needs to do more to stimulate growth to benefit the middle class; and third, trot out policy proposals that focus on big tax cuts for the rich and corporations.

New Jersey Gov. Chris Christie, speaking in New Hampshire on Tuesday to drum up support for his possible presidential run, made it laughably easy to point out the lack of sincerity in his party’s claim that it cares about the vast chasm between the super rich and everyone else.

The governor unsurprisingly said President Obama has “worsened income inequality through his policies,” but provided no specific details to back up such a bold criticism. Instead, he offered a rebooted version of Mitt Romney’s 2012 tax proposal as a remedy, as CTJ Director Bob McIntyre outlined in a blog post. Deficit-busting tax breaks for the rich and tax giveaways to corporations? Check. Less government regulation? Check. Cuts in Social Security benefits? Check.

Just as global warming is a myth to some right-wingers despite copious science proving otherwise, supply-side economics really makes sense in their alternate universe, despite real-life results and mounds of research to the contrary.

Gov. Christie is in the GOP mainstream in offering trickle-down theories as an economic panacea. Sens. Ted Cruz, Rand Paul and Marco Rubio earlier this year participated in a forum with wealthy donors in which they feigned concern about income inequality. Ted Cruz said the rich “have gotten fat and happy” on Obama’s watch. Nice sound bite. But as CTJ pointed out in a March blog post, Sen. Cruz’s fantastical tax policy proposals would make the income divide much worse by increasing taxes on everyone but the rich. He proposes a so-called “Fair Tax” that would replace all federal taxes with a hugely regressive national sales tax.

Sen. Rubio’s recipe for economic growth and reducing income inequality calls for the nation to tax cut its way to prosperity; his plan sprinkles in an increase in the child tax credit that has some commenters lauding the lawmaker for taking a different tack than other Republicans. But don’t be fooled. A linchpin of his tax plan is eliminating taxes on capital gains and dividend income, which would primarily benefit the top 1 percent of Americans.

Sen. Paul has been publicly speaking about income inequality since last fall. In April of this year before a gathering sponsored by Americans for Prosperity, the campaign arm of the billionaire Koch brothers, he implored, “We can’t be the party of the plutocrats and the rich people!” But then he said that he would give everyone a tax cut. Translation: Don’t you worry about your taxes, rich people, wink, wink. He then clarified that “poor people don’t create jobs.” He proposes a regressive flat tax that would eliminate taxes on most of the income of the wealthy (i.e., their capital gains, dividends and interest). In the Senate, he has vehemently advocated for wealthy tax cheats, single-handedly blocking a treaty that would allow the federal government to go after U.S. citizens who illegally hide their money in offshore bank accounts.

For the last six years, Tea Party and rightwing rhetoric have labeled the president a socialist determined to redistribute income to the poor. Now, with the public’s growing awareness of rising income inequality, the rightwing insists President Obama has caused this 35-year trend. Which is it? By definition you cannot be a socialist and also a shill for the wealthy.

Republican presidential candidates are trying to have it both ways. They give a nod to Americans’ concerns over mounting inequality, but then offer the same old top-heavy tax-cut proposals designed to placate the billionaires who bankroll their campaigns.

A Tale of Two Tax Proposals

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Within hours of each other today, New Jersey Gov. Chris Christie and New York Mayor Bill de Blasio along with U.S. Sen. Elizabeth Warren will propose two very different tax plans.

Christie’s plan resembles the budget-busting tax giveaway to the rich that Mitt Romney campaigned on in 2012. Like Romney, Christie proposes drastically dropping the top personal income tax rate to 28 percent from the current 39.6 percent. Also, like Romney, Christie would cut the corporate tax rate from 35 percent to only 25 percent.

Details are scarce about Christie’s plan, but here’s what we do know:

Our analysis of Romney’s plan revealed his proposed cut in the top personal tax rate would slash income taxes on families making more than a million dollars a year by an average of more than $250,000 annually. That analysis assumed that Romney would eliminate all deductions and credits for top earners, something that Christie would not do. So Christie’s plan would provide even larger personal income tax cuts to the wealthiest Americans.

Dropping the top corporate tax rate to only 25 percent would cost the Treasury about $100 billion a year and $1 trillion over a decade, according to the Joint Committee on Taxation. Most of the benefits of such a tax cut would go to — you guessed it — the highest earners.

Perhaps Christie would try to offset part of the cost of his huge corporate tax cut by closing some corporate loopholes. But probably not. The only other corporate tax changes he mentions would add still more to the deficit.

The bottom line is that Christie’s tax plan would almost certainly entail both a huge increase in the national debt and a huge increase in inequality. Yet he brazenly claims that President Obama “has worsened income inequality through his policies,” and claims his plan would narrow the income gap.

Sen. Warren and de Blasio would go in an entirely different direction, what one might call the “anti-Romney.”

Their broad proposal includes multiple tax reforms to make the tax system more progressive. They call for higher taxes on wealthy investors’ capital gains and dividends, along with a “Buffett Rule” that would make top earners pay at least 30 percent of their reported income in federal income taxes, no matter how many loopholes they enjoy.

On the corporate tax side, they would reduce the incentives that encourage multinational companies to move jobs and profits offshore by taxing companies on their worldwide income (with a credit for any foreign taxes paid). They would also apply the current million-dollar limit on what corporations can deduct for their top executives’ pay to executive pay in the form of stock options.

At the other end of the income scale, their plan would expand the earned-income tax credit for low- and moderate-income working families.

These progressive tax proposals, mostly taken from ideas put forward by President Obama, would reduce income inequality significantly. That’s quite the opposite of Chris Christie’s recycling of Mitt Romney’s tax-breaks-for-the-rich proposals.

Carly Fiorina Has Toed the Party Line on Taxes

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Former Hewlett-Packard (HP) CEO and now presidential candidate Carly Fiorina says she should be president because she knows how the economy works. She entreated those who “believe that it’s time for citizens to stand up to the political class and say enough,” to give her their support.

Soaring rhetoric fits an announcement for political office but doesn’t answer questions about where a candidate stands on important issues. Based on what we know from her time as a corporate CEO and a candidate for the U.S. Senate, Fiorina’s call for the public to stand up to the political class may be all talk. Instead, she may ally with corporate influencers.

As a U.S. Senate candidate in California in 2010, for example, Fiorina called for a lower tax rate for multinational corporations that repatriate offshore income as part of a laundry list of shortsighted tax policy proposals in her economic platform. Her support for a lower tax rate on repatriated profits is not surprising given how much it benefited her former employer.

HP used a one-time repatriation holiday during Fiorina’s tenure and likely avoided billions in taxes. In 2004, Congress passed a repatriation holiday as part of the American Jobs Creation Act. The holiday allowed companies to repatriate their offshore income at a maximum rate of 5.25 percent, rather than the 35 percent that they would normally owe (minus what they have already paid in taxes to foreign countries). The alleged idea behind the holiday was that it would spur companies to invest these earnings in their American operations and create more jobs.

Under Fiorina’s leadership, HP repatriated $14.5 billion using the repatriation holiday, meaning that it likely received billions in tax breaks compared to what it would have paid if it had been subject to the 35 percent rate. Despite receiving this generous tax break—intended to create jobs–HP cut 14,500 jobs from its workforce during the two years following the holiday. HP’s job cutting is indicative of the fact that many companies that used the repatriation holiday used these earnings to benefit wealthy shareholders by issuing dividends or buying back stock, rather than making new investments that would lead to job creation.

As CTJ has repeatedly pointed out, “repatriation holidays” incentivize corporations to hold more of their profits offshore in anticipation on Congress passing another tax reprieve. Before the 2004 holiday, HP held about $15 billion offshore, most of which it repatriated in 2005. Since then, HP has accumulated a staggering $42.9 billion in profits offshore.

We don’t know whether a new repatriation holiday will be part of Fiorina’s presidential campaign, but the idea she championed as a Senate candidate and used to her company’s advantage as a CEO has unfortunately begun to gain steam in Congress as a way to pay for much needed infrastructure spending through the Highway Trust Fund (HTF).

A better way to address the perennial funding gap in the HTF would be to increase the federal gas tax, which has not been raised since 1993, while gas prices are remain low. Fiorina has opposed this approach, writing in a February op-ed that the federal government should instead eliminate all of its investments in mass transit and other alternative transportation infrastructure.

Fiorina’s opposition to raising the gas tax and her support for a repatriation holiday are just two of her bad policy proposals. She also has called for repeal of the estate tax and previously supported full extension of the Bush tax cuts. Fiorina may have said she “understands how the economy works” and intends to “stand up to the political class,” but based on the limited amount we know about her tax policy so far she hasn’t deviated from the Republican political class’s standard agenda.

State Rundown 5/11: Deadlock and Infighting

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Kansas lawmakers continue to clash with Gov. Sam Brownback over the efficacy of his tax break on business pass-through income, this time in the House. State Rep. Mark Hutton says the measure was passed to boost the economy, and that the record shows the tax cut hasn’t paid off. His concerns echo those of Senate Pres. Susan Wagle, who pointed out that her constituents are concerned the tax break isn’t fair, since owners of businesses can avoid income taxes while their employees cannot. The Chair of the House Taxation Committee, Rep. Marvin Kleeb, has stated that lawmakers never intended that small business owners would have no income tax liability, and that changes should be considered. Meanwhile, public schools in the state continue to cut programs and shed jobs, and legislators hold out hope the governor will present a coherent strategy for dealing with the budget shortfall.

The budget negotiations in Minnesota continue, though lawmakers have reached the last full week of the regular legislative session. After Gov. Mark Dayton released his budget proposal, Conservative lawmakers in the House passed over $2 billion in unwise tax cuts. Gov. Dayton expressed his willingness to consider the House’s personal income tax exemption and a some additional exemptions for Social Security income, but held firm on his opposition to proposed business tax cuts, calling them a bait-and-switch: “You put out the favorable item, in this case middle-income tax cuts,” Dayton argued, “and then you switch that to eliminating the estate tax on millionaires and billionaires and then permanent business property tax relief that goes on and on after the middle-income tax cut falls away.” The governor, meanwhile, called for permanent investments in education in his budget, including $343 million for universal pre-kindergarten that the House and Senate budget proposals did not include. Some legislators, like Senate Majority Leader Tom Bakk, want to tie agreement on any tax cut proposals to a transportation package that raises new revenue for road construction and maintenance.


Following Up:
South Carolina: Political observers in the Palmetto State feel that Gov. Nikki Haley’s hard-line stance on road funding could prove costly. Some legislators have grumbled that the governor’s transportation plan is unrealistic and that she should work with lawmakers instead of demonizing them.

Nebraska: State senators passed a six cent increase in the state’s gasoline tax, which Gov. Pete Ricketts vetoed immediately. The gas tax bill passed just four votes shy of a veto-proof majority, and its sponsors say they are confident they can override the governor’s veto since eight senators didn’t vote at all. Gov. Ricketts wants the legislature to give his newly-appointed roads director time to come up with an alternative.

States Ending Session This Week:
Missouri (Friday)


Sweet Sixteen: States Continue to Take On Gas Tax Reform

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UPDATE: A total of eighteen states have now taken action on the gas tax since 2013.  On July 15, Washington Gov. Jay Inslee signed legislation raising the state’s gas and diesel taxes by 11.9 cents.  The increase takes effect in two stages: 7 cents on August 1, 2015 and 4.9 cents on July 1, 2016.  Similarly, on November 10, Michigan Gov. Rick Snyder signed legislation raising the state’s gasoline tax by 7.3 cents and its diesel tax by 11.3 cents, effective January 1, 2017.  These tax rates will also grow alongside inflation in the years ahead.

In just the last three months, eight states have approved increases in their gasoline taxes to fund additional spending on infrastructure maintenance and expansion.  When taken in combination with gas tax increases or reforms enacted in 2013 and 2014, a total of sixteen states have acted to improve their gas taxes in just over two years.

These increases, many of which took place in states under Republican control and with the backing of the business community, stand in stark contrast to most state tax debates that have been decidedly anti-tax in recent years.  They also differ sharply from the approach being taken in Congress, where over twenty-one years of inaction has resulted in the federal gas tax losing almost 40 percent of its purchasing power.

2015 Actions

1. Georgia: A 6.7 cent increase will take effect July 1, 2015, and future increases will occur alongside growth in inflation and vehicle fuel-efficiency.

2. Idaho: A 7 cent increase will take effect July 1, 2015.

3. Iowa: A 10 cent increase took effect March 1, 2015.

4. Kentucky: Falling gas prices nearly resulted in a 5.1 cent gas tax cut this year, but lawmakers scaled that cut down to just 1.6 cents.  The net result was a 3.5 cent increase relative to previous law.

5. Nebraska: A 6 cent increase was enacted over Gov. Pete Ricketts’ veto.  The gas tax rate will rise in 1.5 cent increments over four years, starting on January 1, 2016.

6. North Carolina: Falling gas prices were scheduled to result in a 7.9 cent gas tax cut in the years ahead, but lawmakers scaled that cut down to just 3.5 cents.  The eventual net result will be a 4.4 cent increase relative to previous law (though now there is talk of allowing further cuts to take place and hiking drivers’ license fees to make up some of the lost gas tax revenue).  Additionally, a reformed gas tax formula that takes population and energy prices into account will result in further gas tax increases in the years ahead.

7. South Dakota: A 6 cent increase took effect April 1, 2015.

8. Utah: A 4.9 cent increase will take effect January 1, 2016, and future increases will occur as a result of a new formula that considers both fuel prices and inflation.  This reform makes Utah the nineteenth state to adopt a variable-rate gas tax.

2013 and 2014 Actions

 9. Maryland (2013): The first stage of a significant gas tax reform, tying the rate to inflation and fuel prices, took effect on July 1, 2013.  So far the gas tax rate has increased by 6.8 cents.

10. Massachusetts (2013): A 3 cent increase took effect July 31, 2013.

11.  New Hampshire (2014): A 4.2 cent increase took effect July 1, 2014.

12.  Pennsylvania (2013): The first stage of a significant gas tax reform, tying the rate to fuel prices, took effect on January 1, 2014.  So far the rate has increased by 19.3 cents per gallon.

13.  Rhode Island (2014): The gas tax rate was indexed to inflation.  This will result in a 1 cent increase on July 1, 2015 and likely further increases every other year thereafter (in 2017, 2019, etc).

14.  Vermont (2013): A 5.9 cent increase and modest gas tax restructuring took effect May 1, 2013.  Since Vermont’s gas tax rate is linked to gas prices, however, the actual rate has varied since then.

15.  Virginia (2013): As part of a larger transportation funding package, lawmakers raised statewide diesel taxes effective July 1, 2013, as well as gasoline taxes in the populous Hampton Roads region.  Outside of Hampton Roads, gasoline taxes are 1.3 cents lower than they were before the reform, but a new formula included in the law will cause the tax rate to rise alongside gas prices in the years ahead.

16.  Wyoming (2013): As the first state to approve a gas tax rate increase in over 3.5 years, Wyoming’s 10 cent increase took effect July 1, 2013.

Gas Tax Debates Continue

There is little doubt that more states will join this list in the months and years ahead.  Michigan lawmakers, for example, are considering a plan that would raise the diesel tax and then index both gasoline and diesel taxes to inflation.  Unfortunately, that plan would also scrap the state’s Earned Income Tax Credit (EITC) – a vital tool for lifting families out of poverty and offsetting regressive taxes such as the gas tax.

In South Carolina, the debate is playing out in a similarly troubling way as lawmakers discuss pairing a gas tax increase with income tax cuts that, depending on the specifics, could ultimately flow overwhelmingly to high-income taxpayers.

Following years of income tax cutting, Kansas lawmakers are reportedly considering a gas tax increase to help improve the state’s financial standing.

And in Washington State, the Senate passed an 11.7 cent gas tax increase earlier this year that may still be alive as part of the state’s ongoing special sessions.

Even if these states do not act this year, it’s clear that more gas tax increases and reforms are on the way.  Twenty states have gone a decade or more without a gas tax increase, and in many of those states (Missouri and Tennessee, for example) there is a growing recognition that outdated gas tax rates will have to be addressed sooner rather than later.

State Rundown 5/8: Legislators Make Deficit Sausage

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Conservative leaders in the South Carolina Senate proposed a road funding bill Thursday that reforms the Department of Transportation (DOT), increases the gas tax and reduces income taxes – all measures that Gov. Nikki Haley insisted must be in any funding package she signs. The measure increases the gas tax by 12 cents a gallon over three years, ties the gas tax to inflation and prohibits it from rising higher than gas taxes in Georgia or North Carolina. The bill raises $400 million for roads in the short term and $800 million after five years. The bill also gives the governor near-complete control over the DOT through the power to appoint the Department’s board of directors. Income taxes would be cut across the board by one percent over five years, but would be delayed if economic growth is lower than expected. The plan is in direct contrast to the proposal passed by the Senate Finance Committee last week, which would increase gas taxes and other fees without reforming the DOT or cutting income taxes.

A new study from the Urban-Brookings Tax Policy Center blasts another hole in the myth that state tax cuts are a recipe for economic success.  After closely examining a 2008 study that claimed tax cuts could benefit state economies, the authors attempted to replicate the results and found they were “not robust” in more recent years.  Instead, the study concludes that low state income tax rates, or low taxes in general, are unrelated to economic growth across states.

Bad news in the Badger state: new revenue estimates in Wisconsin have confirmed the dismal outlook for the state’s budget, making the adoption of Gov. Scott Walker’s austerity cuts to higher education more likely. Legislators were hoping the new estimates would point to increased tax revenue, but the numbers show that Walker’s tax cuts have evaporated the state’s surplus. The Wisconsin Budget Project has pointed out that legislators have other options, among them accepting federal Medicaid dollars, halting the expansion of ineffective tax cuts, and capping a tax break for manufacturers.

Gov. Paul LePage and Maine lawmakers in favor of eliminating the state’s income tax have shifted tactics away from using negotiations over the budget to push their agenda and toward a constitutional amendment. The proposal currently before legislators would eliminate the state income tax by 2020 and requires a two-thirds majority vote in the House and Senate, as well as ratification by Maine voters. It faces a long road in the legislature. Meanwhile, the Maine Center on Economic Policy argues that eliminating the income tax would be a boon for the wealthy and would fail to promote economic growth.

Alabama legislators moved in the direction of common sense this week. First, lawmakers decided to abandon a proposal to replace the state’s currently regressive income tax structure with an even worse flat tax. At the same time, conservative legislators announced their willingness to increase taxes on cigarettes and large businesses and fees for car titling and renting in order to address a budget deficit. While the proposed fees and taxes are mostly regressive, they are a step toward a better budget. An even bigger step would be if legislators considered the plan put forward by Gov. Robert Bentley, which would increase revenues by a far larger magnitude. 


Would the Real Mike Huckabee Please Stand Up?

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Despite having a relatively moderate record on tax policy as the governor of Arkansas, Mike Huckabee has wholeheartedly embraced a radically regressive tax plan as a central plank of his presidential candidate platform.

For years, Huckabee has been one of the main proponents of the “Fair Tax,” a plan that would replace all federal taxes with a national sales tax. Citizens for Tax Justice and the congressional Joint Committee on Taxation have each found that to raise the same amount of revenue as current law, the sales tax rate would have to be about 50 percent.

A study by the Institute on Taxation and Economic Policy (ITEP) found that under the “Fair Tax,” the top 1 percent of taxpayers would receive an average annual tax cut of $225,000. Meanwhile, the plan would increase taxes by about $3,200 on average on the bottom 80 percent of taxpayers. In other words, Huckabee’s tax plan would significantly increase taxes on the overwhelming majority of Americans to pay for huge tax cuts for the very wealthiest Americans.

While Senator Ted Cruz also has endorsed a national sales tax, Huckabee has been much more outspoken in his support. Just last year he appeared in and promoted the right-wing documentary, “Unfair: Exposing the IRS,” which lauded the “Fair Tax” as the best way to reform our tax system and as a way to abolish the Internal Revenue Service (IRS). To make its case for eliminating the IRS, the film called IRS agents “jack-booted thugs” and implied that, if left unchecked, the IRS will create concentration camps in America. 

The ironic thing about Huckabee’s call to abolish the IRS is that the “Fair Tax” would hardly collect itself. Rather than having a federal revenue agency, the plan would just shift the responsibility to already strapped state governments.

Huckabee’s advocacy for this radically unfair tax plan does not comport with his relatively moderate tax record as the governor of Arkansas. Largely in response to an Arkansas court ruling declaring education funding in the state constitutionally inadequate, Huckabee sensibly worked to enact a series of tax increases to increase funding for education in his state. An analysis by Arkansas’s Department of Finance and Administration actually found that over his time as governor Huckabee increased revenue raised via taxes by $505 million.

Even though Huckabee is outspoken in his support for the radical conservative agenda on taxes through his support of the “Fair Tax,” he has still earned the continuing ire of militant anti-tax conservative groups for his deviations from their anti-tax philosophy as governor of Arkansas. In fact, the Club for Growth is already running campaign ads against Huckabee’s presidential candidacy based on his Arkansas tax record. This move by the Club for Growth reveals the extremism of this and other anti-tax groups, considering how fully Huckabee has now embraced their tax-cuts-for-the-rich agenda.