News Release: Treasury Anti-Inversion Regulations a Victory for American Taxpayers

October 14, 2016 02:06 PM | | Bookmark and Share

The final earnings stripping regulations released Thursday by the U.S. Treasury Department de-incentivizes corporate inversions and makes it more difficult for corporations to avoid taxes by loading their U.S. subsidiaries with debt. Following is a statement by Robert S. McIntyre, director of Citizens for Tax Justice:

 “While these new regulations are a welcome step forward, the problem of offshore tax avoidance still looms large. It removes one tool for tax avoidance, but corporations still have a vast arsenal. A recent CTJ study found that multinational companies are now holding $2.5 trillion offshore, which allows them to avoid a stunning $718 billion in U.S. taxes.

“These new regulations are a reminder that while executive action can play an important role in cracking down on offshore tax avoidance, only legislative action can put a full stop to offshore tax avoidance. To that end, Congress should further crack down on earnings stripping by passing the Corporate Fair Share Tax Act or related legislation that would limit the ability of corporations to use debt financing to artificially shift profits offshore.”


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On Revenues and Referenda: Missouri Voters Could Ban Sales Tax Modernization

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One of the measures facing Missouri voters this fall is Amendment 4, which would modify the state constitution to prohibit future expansions of state or local sales taxes to “any service or transaction” not already included in the tax base.

This amendment would severely restrict Missouri’s ability to adjust its sales tax in the future to adapt to economic changes. As we have written elsewhere, expanding the sales tax base to include consumer services is a reform needed to bring state tax codes into better alignment with the 21st century economy, improve the sustainability of sales tax revenues and the many vital services they fund, reduce upward pressure on sales tax rates and other taxes, and remove arbitrary and unfair distinctions in what’s taxed and what’s not. Banning such expansions would prevent any of these benefits from being realized in Missouri.

Most state sales taxes, including Missouri’s, apply to purchases of physical goods but not to most services. And in most cases this is simply because sales tax codes were created in the 1930s when services were neither a large part of the economy nor feasibly tracked and taxed. But while the economy has shifted substantially over time – services were 67 percent of household consumption in 2015 and technology has made it much easier to apply and enforce taxes on services – most state sales taxes have not kept up with the times. A 2007 Federation of Tax Administrators survey identified 168 services taxed in at least one state. Missouri’s sales tax came in as even more outdated than most, taxing only 26 of those services, fewer than all but 12 states.

And the stakes are not low. Sales and similar taxes are crucial revenue streams for states and local governments, making up nearly half of state tax collections nationwide in Fiscal Year 2014-2015, and 43 percent in Missouri specifically. But as currently constituted, they are an unsustainable revenue source. As the economy shifts and sales taxes like Missouri’s remain stuck in the past, state and local revenues and the services they pay for can suffer. In the words of the Missouri Municipal League, which opposes Amendment 4, its approval “could lead to a significant reduction in vital local services, such as police, fire, street maintenance, parks and more.”

To avoid such service cuts without expanding sales taxes to services, the only options are raising sales tax rates or increasing other taxes or fees. At the state level this generally means upward pressure on personal and corporate income taxes, while at the local level the only significant revenue option other than sales taxes is usually the highly unpopular property tax.

Sales taxes, including those on services, are regressive or weigh more heavily on lower-income families than those higher up the income scale. This is a crucial consideration and a strong reason to avoid relying too heavily on sales taxes, but that can be mitigated with targeted credits like the Earned Income Tax Credit and other means that benefit those lower-income families, or by using revenue gained from expanding the sales tax base to reduce the sales tax rate. It is harder to mitigate the fact that taxing goods while exempting services arbitrarily favors the consumers and providers of services over similarly situated people who just happen to purchase or sell goods. And when shrinking tax bases force sales tax rates higher, the wedge between these two groups is driven wider, exacerbating the unfairness as well as any economic distortion it may cause.

Constitutionally banning sales tax modernization in Missouri would prevent the state from matching its sales tax to the economic realities in 2016, much less keeping up with economic changes and technological advances that are yet to come. If the amendment passes, other states should consider it a cautionary tale rather than an example to follow.

Tax Justice Digest: Little Scrutiny over a Tax Scheme Outrage, Clinton’s Tax Plan, and State Ballot Measures

In the Tax Justice Digest we recap the latest reports, blog posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Here’s a rundown of what we’ve been working on lately.

An Outrage That Deserves Closer Scrutiny
Through a complex system of state tax subsidies, 10 states are funneling public dollars to private and religious schools and making a mockery of charitable contributions by allowing taxpayers to turn a profit when they donate to private K-12 scholarship funds. Read ITEP analyst Carl Davis’s blog about this practice, or read ITEP’s comprehensive report (State Tax Subsidies for Private K-12 Education).

Hillary Clinton’s Tax Plan Would Raise $1.46 Trillion over a Decade
On Monday, Hillary Clinton’s campaign announced an expansion to the Child Tax Credit. A new analysis of her overall tax plan finds that it would raise federal revenues by $1.46 trillion over the next decade while providing a small tax cut on average to the bottom 95 percent of American taxpayers. The analysis also shows that those in the top 5 percent would see a significant tax increase. Read the analysis. 

OTHER STATE NEWS


New Jersey’s Tax Deal Will Increase Taxes for Middle-Income New Jerseyans
New Jersey made national headlines after lawmakers announced the state will increase its gas tax by 23 cents a gallon. But there is a lot more in the tax package. In a recent blog post, ITEP analyst Dylan Grundman explains income tax cuts would deliver the biggest benefit to upper-income New Jersey residents, while lower-middle and middle-income families’ taxes would increase. Read more

On Revenues and Referenda
In Oregon, opponents and proponents are waging aggressive campaigns on ballot Measure 97, which would increase the state’s corporate minimum tax for businesses with annual Oregon sales over $25 million. If residents vote “yes”, the measure is expected to generate $3 billion a year. Read more

And in Oklahoma, SQ 779 is a constitutional amendment that would raise the state sales and use tax by 1 percentage point. Of the total revenue generated by the new tax, 60 percent would go to providing a salary increase of at least $5,000 for every public school teacher. Read the Oklahoma Policy Institute’s take on this amendment.

The ITEP Weekly State Rundown
This week the rundown highlights news confirming that Kansas’s years of tax cutting have been heavily tilted toward the rich, more lagging revenues in states including Arkansas, Texas and Minnesota, new problems for New Jersey’s budget, and a major new taxpayer boondoggle in Nevada. Read the State Rundown


If you have any feedback on the Digest or tax stories you’re watching that we should check out too, please email me rphillips@itep.org 

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For frequent updates find us on Twitter (CTJ/ITEP), Facebook (CTJ/ITEP), and at the Tax Justice blog.

State Rundown 10/12: Lagging Revenues, Taxpayer Boondoggles, and Yet More Kansas Tax News

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This week we are bringing you news confirming that Kansas’ years of tax cutting have been heavily tilted toward the rich, more lagging revenues in states including Arkansas, Texas and Minnesota, new problems for New Jersey’s budget, and a major new taxpayer boondoggle in Nevada. Thanks for reading the Rundown!

— Meg Wiehe, ITEP State Policy Director, @megwiehe

  • In Kansas, the Brownback tax cuts are under fire on several fronts. Revenue estimates weren’t defective before the tax cuts. The tax numbers are in and it’s confirmed ITEP’s findings that the bulk of Brownback’s cuts helped the wealthy while increasing taxes for those with low-incomes. And new information shows that the governor and majority of lawmakers personally stand to benefit from the tax exemption for business pass-through income.
  • Arkansas revenues are down for the third month in a row, but this isn’t stopping Gov. Asa Hutchinson from talking tax cuts. He is expected to release an income tax cut proposal the day after the election. Other lawmakers appear more hesitant in light of unmet revenue expectations.
  • Tax collections are also down in Texas and Minnesota the first quarter of fiscal year 2017. As state budgets struggle, local governments are also feeling the pressure due to decreased revenue sharing.
  • The Joplin Globe takes a close look at Amendment 4, on which Missouri voters will decide this November. The amendment would constitutionally prevent the state from modernizing its sales tax to include the growing service sector.
  • As we wrote last week regarding the tax deal in New Jersey, work can recommence on the state’s infrastructure but much remains to be done to repair and improve its tax code. Moody’s Investors Service shares our concerns, pointing out that the large and regressive tax-cut package passed along with the gas tax fix “will worsen the state’s existing budget challenge.”
  • Lawmakers in Pennsylvania aim to rework the state’s gambling tax after a state Supreme Court decision, ruling that the way casinos are taxed for local impact assessments is unconstitutional, drastically cut local aid.
  • Lawmakers are in special session in Nevada to decide on whether to subsidize a new stadium for the NFL Raiders. The Senate has approved the measure with more than the required supermajority, despite persistent evidence that it’s a major rip-off for taxpayers.

What We’re Reading…

  • A new study reinforces the need for tax policy and other public policy solutions to the vast and widening inequality we face. The report, using previously unavailable data on inequality and social mobility over multiple generations, reaches a disheartening conclusion: “Whatever you thought, it’s worse.” The Washington Post Wonkblog summarizes the findings here.
  • Jeffery Sachs also discusses facing up to income inequality in a weekly series.
  • The World Health Organization makes the case for taxing sugar sweetened beverages, urging countries to enact the tax to fight obesity and cut health care costs. Meanwhile, big soda is under scrutiny for using corporate philanthropy as a strategy to stop soda tax measures.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.

On Revenues and Referenda: Will Oregon Require More from Large Businesses?

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Perhaps one of the most debated ballot measures this fall is Oregon’s Measure 97. Multiple economic analyses are circulating, millions of dollars are being spent campaigning, rotary clubs and chambers of commerce are discussing, teachers are canvasing, editorial boards and current and former state governors are weighing in, and polls are fluctuating

Measure 97 would increase the state’s corporate minimum tax for businesses with annual Oregon sales over $25 million. Under current law, corporations pay the greater of a minimum tax on sales (ranging from $150 to $100,000) or a tax on profits (6.6 percent on profits up to $1 million and 7.6 percent on profits above $1 million). Measure 97 would eliminate the $100,000 cap on the corporate minimum tax and apply a 2.5 percent rate to sales above $25 million.

If passed, Measure 97 could generate $3 billion in new revenue each year—almost a third of the state’s current budget. The new revenue is earmarked for education, health care, and services for senior citizens, although the legislature would have the authority to appropriate it for other purposes. Gov. Kate Brown, who supports the measure, released a plan earlier this year indicating her priorities for new spending: more vocational and technical education; expanding the state’s Earned Income Tax Credit; and reforming business taxes by creating new deductions and closing existing loopholes.

With rising costs currently projected to outpace new revenue, if Measure 97 is defeated, Oregon will face the challenge of cutting $1.35 billion in services from the 2017-2019 budget or raising additional revenue elsewhere.

Proponents argue that the measure would help stabilize the state budget and reduce the risk of budget cuts, thereby allowing for increased investments in education, more accessible health care, and in-home services for seniors. They emphasize that only one quarter of one percent of businesses registered in Oregon would be affected—primarily large and out-of-state corporations not currently paying their fair share (even businesses that don’t turn a profit benefit from infrastructure and state funded services and should contribute accordingly).

Opponents stress the unprecedented size of the tax increase in absolute terms (though the economy of course is bigger today), estimated decreases in private jobs, and the regressive nature of the tax as some portion of the increase is projected to be passed on to consumers and would account for a larger share of incomes among those with low-wages. (Though note that the economic analysis by the Legislative Research Office indicates that the impact of the tax on private job growth is small, as are the changes in incidence.)

If voters can manage to wade through it all, their choice ultimately comes down to questions of values and trust. Do they want to take significant steps towards stabilizing their budget? Do they trust that new revenues would be used to shore up important public investments? Do they believe profitable businesses that benefit from being headquartered in Oregon and having access to markets in the state should be contributing more? Do they believe the prospect of regressive effects or private job dampening are outweighed by the ability to reduce class sizes, access to technical education, and provide greater security for seniors? We look forward to finding out.

For more information on Measure 97, see the Oregon Center for Public Policy’s FAQ blog post.

On Revenues and Referenda: Oklahoma Question 779, Guest Blog Post

This post originally appeared on OKPolicy.org and is reposted here with permission.

The Gist

SQ 779 is a constitutional amendment that would raise the state sales and use tax by one percentage point. Of the total revenue generated by the new tax, 60 percent would go to providing a salary increase of at least $5,000 for every public school teacher. The remaining funds would be divided between public schools (9.5 percent), higher education (19.25 percent), career and technology education (3.25 percent), and early childhood education (8 percent). The State Board of Equalization would be required to certify that revenues from the new tax are not being used to supplant existing funds.

Background Information

The ballot initiative is responding to concerns among educators, parents, and others about teacher salaries and education funding.

Average compensation for Oklahoma teachers has fallen to 49th in the nation, and school districts are struggling to recruit and retain enough qualified teachers. Since 2008, Oklahoma has cut state support for the school aid formula by more than $170 million, and funding for higher education and career tech has also been cut.

This year about 1,500 teaching positions and 1,300 support worker positions have been lost to budget cuts in Oklahoma schools, yet schools still report about 1,000 unfilled teaching positions. Hundreds more positions are being filled by emergency certified teachers who do not meet the state’s legal qualifications to be a classroom teacher.

SQ 779 was placed on the 2016 ballot through a successful initiative petition effort that gathered over 300,000 signatures, more than double the required number (123,725). An effort to block the initiative as a violation of the single-subject rule of the state Constitution was rejected by the Oklahoma Supreme Court.

If approved, the new sales tax would take effect July 1, 2017 and is projected to raise $615 million in its first full year.

Supporters Say…

  • Since lawmakers have made large cuts to education funding and repeatedly failed to approve a teacher pay raise, there is no other solution to the education funding crisis than passing a ballot initiative that includes a dedicated revenue source.
  • Higher teacher salaries are needed to stop the flow of teachers to other states and other professions and to ensure a high-quality education for Oklahoma children. Low-income students are being harmed most by heavy teacher turnover and would benefit most from teachers being paid competitive salaries.
  • The ballot measure includes strong constitutional safeguards to make sure the dollars will be spent as intended.
  • In addition to the $5,000 pay raise for teachers, the measure would provide funds for such worthwhile purposes as improving reading, increasing high school graduation rates, creating a merit pay system, improving college affordability, and strengthening early childhood education.

Opponents Say…

  • While teachers deserve a raise, there are ways to fund a pay raise without raising taxes and without committing to more spending on higher education and career tech.
  • The sales tax is regressive, which means that the tax increase will affect low- and moderate-income households more than wealthier households.
  • Oklahoma already has one of the highest combined state and local sales tax rates in the nation. A one percentage point increase will give Oklahoma the nation’s highest sales tax rate and push the rate above 10 percent in some areas. Cities, which are heavily reliant on the sales tax, will be hindered in their capacity to raise the sales tax for municipal priorities.
  • Even with the measure’s language preventing money from SQ 779 supplanting other funding, there is nothing to prevent the Legislature from enacting further tax cuts that will offset this increase.

Ballot Language

This measure adds a new Article to the Oklahoma Constitution. The new Article creates a limited purpose fund to improve public education. It levies a one cent sales and use tax to provide revenue for the fund. It allocates funds for specific institutions and purposes related to the improvement of public education, such as increasing teacher salaries, addressing teacher shortages, programs to improve reading in early grades, to increase high school graduation rates, college and career readiness, and college affordability, improving higher education and career and technology education, and increasing access to voluntary early learning opportunities for low-income and at-risk children. It requires an annual audit of school districts’ use of monies from the fund. It prohibits school districts’ use of these funds for administrative salaries. It provides for an increase in teacher salaries. It requires that monies from the fund not supplant or replace other education funding. The Article takes effects on the July 1 after its passage.


Links to Other Resources

Text of Measure and Background Information: Ballotpedia

Text of Initiative Petition, Legal Challenges: Secretary of State

Supporters and Opponents

Oklahoma’s Children, Our Future: Yes on SQ 779 Website

Oklahoma State School Boards Association SQ 779 Information

Vote No on SQ 779 Facebook page

Other OK Policy Information

“Our statement on the proposed initiative to fund education with 1 cent sales tax increase”: OK Policy

“The progressive case for State Question 779”: David Blatt, Journal Record

In The Media

“City of Edmond Formally Opposes Sales Tax Increase to Pay for Education”:  KOSU

“We have a moral responsibility to our children”: Rev. Ray Owens, Tulsa World

“‘Watch-Out’ Video: The Arguments For, Against the Education Sales Tax”: Oklahoma Watch

“Opponent says education tax proposal aims to return Oklahoma to its ‘Dark Ages’”: Tulsa World

Private School Tax Subsidies Blur the Line Between Charitable Gift and Money Laundering

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This post from October 2016 was updated on February 23, 2017.

When is a charitable contribution not a “donation” at all? If a taxpayer manages to turn a profit on the deal, has anything altruistic actually occurred? The clear answer is no. But an ITEP report reveals that the federal government does not always agree, at least with regard to certain gifts to private K-12 scholarship funds. Released late last year, the report’s findings may gain renewed public interest because the newly confirmed Education Secretary, Betsy DeVos, is a proponent of using public dollars for private school education and President Trump, according to reports, is considering a policy that would funnel federal dollars to private schools via federal income tax credits.

Tax incentives for charitable giving are common in the United States. More than 30 states, for example, allow a write-off for charitable donations that reduces the cost of giving by roughly 5 to 10 percent, depending on the state. A growing group of states, however, are using their tax codes to supercharge their charitable donation incentive for contributions to private K-12 scholarship funds.

In 17 states, tax credits for donations to private school scholarship funds reduce the cost of a donation by 50 percent or more. Even more remarkable is that in five states, tax credits equal to 100 percent of the donation are actually designed to wipe out the entire cost of donating to these schools. When a 100 percent tax credit is made available, the state is effectively bankrolling the entire donation at no true cost to the taxpayer that allegedly “donated” the funds. In essence, many of these policies have more in common with money-laundering schemes than they do with actual philanthropy.

But this may not even be the most unbelievable part of the arrangement. As explained in our report, certain high-income taxpayers can turn a profit by claiming a federal charitable deduction for so-called “donations” that were already reimbursed by the state. In other words, the IRS allows private school donors to enjoy a charitable deduction even when there was no charitable intent or effect behind their actions.

There are currently ten states (Alabama, Arizona, Georgia, Louisiana, Montana, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Virginia) where such profit-making schemes are possible. That list could soon grow, however, if states such as Arkansas, Idaho, Kentucky, Minnesota, Missouri, and Nebraska decide to move forward with similar credits currently under discussion.

These and other state tax subsidies collectively funnel more than $1 billion in public funding toward private schools every year. As our report explains, these subsidies function much like school voucher programs and have even been referred to as “neovouchers.” Relative to traditional vouchers, however, the lack of transparency in tax subsidy programs makes them better suited for skirting public opposition or even circumventing constitutional obstacles that sometimes stand in the way of spending public dollars on private schools. 

Read the report for more information on how high-income taxpayers are using neovouchers to turn a profit, and on the dubious educational benefits and general lack of accountability inherent in such programs.

The Distributional and Revenue Impact of Hillary Clinton’s Tax Plan

October 11, 2016 04:29 PM | | Bookmark and Share

Read this report in PDF.

A new Citizens for Tax Justice (CTJ) analysis of the tax plan proposed by presidential candidate Hillary Clinton as of October, including recently proposed changes to the child tax credit, finds that the plan would raise federal revenues by $1.46 trillion over the next decade while providing a small tax cut on average to the bottom 95 percent of American taxpayers. The analysis also shows that those in the top 5 percent would see a significant tax increase.

Revenue Impact

Clinton’s tax proposal would increase federal revenues by $1.46 trillion over the next decade. The plan would raise $850 billion overall from the personal income tax, which includes a $1.055 trillion revenue increase coupled with the $209 billion cost of her proposals to increase the child tax credit. In addition, the plan would increase revenue from the corporate income tax by $128 billion and increase revenue from the estate tax by another $483 billion.

Distributional Impact

The Clinton plan would cut taxes overall for each income group except the top 5 percent. Individuals in the lowest 20 percent would see the greatest gain, an increase in after tax income of 1.1 percent.

Without the child tax credit proposals, the effect of Clinton’s proposed tax changes on low- and middle-income families essentially would be zero. The inclusion of these child tax credit enhancements is the key reason the vast majority of taxpayers would receive a tax cut.

The top 5 percent would see their taxes go up significantly. On average, taxes for the top 1 percent of would increase by $50,556, while those in the 96th to 99th percentile would see their annual federal taxes increase by $1,343 on average. Under Clinton’s plan, the top 1 percent would receive 90 percent of the tax increase.

Understanding the Impact of the Child Tax Credit Changes

Clinton’s plan to enhance the child tax credits has three key components: it would double the maximum tax credit from $1,000 to $2,000 for each child up to age 4, lower the threshold for refundability from $3,000 to $0 and increase the phase-in rate from 15 percent to 45 percent for families with young children. Two of these provisions, the lower threshold and increased phase-in rate, would be highly progressive, with about three-quarters of the benefits of the lower threshold going to the bottom 20 percent and about 70 percent of the benefits of the increased phase-in rate going just to the bottom 20 percent of taxpayers. The provision to double the maximum credit would largely go to middle-income families. 

Proposed Policy Changes in the Clinton Plan

  • Personal income “surtax” of 4 percent on federal adjusted gross income (AGI) exceeding $5,000,000 ($2,500,000 for married filing separately).
  • Create a “Buffett rule”-style minimum tax, a 30 percent minimum tax applying to taxpayers with AGI exceeding $1,000,000.
  • Create a new variable-rate structure, based on holding periods, for long-term capital gains for high-income families, increasing tax rates on some (but not all) gains. Carried interest would no longer be eligible for special low capital gains tax rates.
  • Cap the value of various tax breaks, including itemized deductions, at 28 percent.
  • Expand the base of the Net Investment Income Tax (NIIT), enacted as part of President Obama’s health care reforms, to include income from “pass through” businesses.
  • Restructure the federal estate tax, with new higher tax brackets and rates up to 65 percent for the largest estates.
  • End the “stepped up basis” estate tax break by taxing capital gains at death, with unspecified middle-income and small business exclusions.
  • Enhance the child tax credit by doubling the max tax credit from $1,000 to $2,000 for each young child up to and including age 4, lowering the threshold for refundability from $3,000 to $0 and increasing the phase-in rate from 15 percent to 45 percent for families with young children.
  • End tax breaks for oil and gas companies, including the deduction for percentage depletion for oil wells, the domestic manufacturing deduction for oil companies and the expensing of intangible drilling costs.
  • Reduce corporate inversions by enacting an exit tax on unrepatriated funds for expatriating companies, limiting companies’ ability to claim foreign status after a merger and restricting deductions for excessive interest. 

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A Closer Look: New Jersey’s Tax Deal Increases Overall Taxes on Middle-Income New Jerseyans

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With the announcement that New Jersey leaders have finally struck a deal to modernize the state’s badly outdated gas tax, work can soon finally resume to repair and maintain the state’s roads and bridges.

Unfortunately, as a New Jersey Policy Perspective (NJPP) report reveals, the deal leaves the state’s tax code in need of major repairs. Lawmakers approved a package that slashes about as much revenue as it raises while shifting taxes from the state’s wealthiest individuals to lower-income families.

The gas tax increase, which amounts to 23 cents per gallon, raises an estimated $1.2 to $1.4 billion per year. But the final package includes major tax cuts that add up to nearly as much. The package ultimately eliminates the estate tax, cuts the sales tax by 3/8 of a cent, expands an existing tax break for upper-middle-income retirees (though this expansion was reportedly scaled back Wednesday in committee), creates a new exemption for veterans, and increases the Earned Income Tax Credit for low- and middle-income working families.

An Institute on Taxation and Economic Policy analysis summarized in the NJPP report shows that, even without the estate tax cut that affects only about 3,500 of the wealthiest families each year, the package is regressive, raising taxes most on lower-middle- and middle-income New Jerseyans with incomes between $25,000 and $79,000.

And overall, if approved by the legislature Friday as expected, the package will cut about as much revenue out of the General Fund as it raises for the Transportation Trust Fund (TTF). This means that New Jersey lawmakers are effectively paying for transportation infrastructure with money taken from other areas of the budget such as schools, health care, and public servants’ pensions.

You wouldn’t tear down a school building to fill potholes with the rubble, but by shifting taxes from the General Fund (and higher-income New Jerseyans) to the TTF (and lower-income New Jerseyans), New Jersey leaders are damaging one part of their tax code to prop up another. Read the full NJPP report here.

State Rundown 10/5: NJ’s rotten tax deal, KS Hides Bad Economic News, and Bayou State Tax Reform

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This week we are bringing you news of a rotten tax deal in New Jersey, revelations in Kansas, a search for a sound and politically feasible tax reform package in Louisiana, and more state tax happenings. Thanks for reading the Rundown!

— Meg Wiehe, ITEP State Policy Director, @megwiehe

  • New Jersey‘s roads department can soon get back to work as leaders have finally struck a deal to update the state’s badly outdated gas tax. But the final deal is a bad one for the people of New Jersey, as the net result of the package is a tax shift that is both regressive and damaging to important state priorities like schools and the state’s pension shortfall. Check the Tax Justice blog for more on the development in coming days. Check out this blog post from ITEP’s Dylan Grundman for a deeper dive into this no good, very bad deal.
  • It’s been another newsworthy week in Kansas. Economic reports showing quarter after quarter of poor performance have been obscured and then scrapped. Revenues for the first quarter of FY 2017 miss the mark. And Gov. Brownback hints at a course reversal on tax policy in anticipation of a state Supreme Court ruling that could require hundreds of millions of new dollars to adequately fund public education.
  • Louisiana‘s Task Force on Structural Changes in Budget and Tax Policy has delayed the release of recommendations for reform until November as it works to find the intersection between sound policy and political feasibility, rarely an easy task.
  • The California Legislative Analyst’s Office released a new report of the state’s first film credit program. Similar to other film tax credit studies, findings include that the program had minimal impact on the economy, led to negative net revenue, and subsidized an otherwise profitable industry.
  • Expect to see tax proposals debated this coming legislative session in Idaho to increase the gas tax, in Indiana to raise the cigarette tax, in New York to increase the child care tax credit, and in Texas to cap property tax growth.

What We’re Reading…

  • The Pew Charitable Trusts reports on persistent budget pressures leading some cities and states to consider expanding taxes to previously exempt non-profits.
  • Voluntary tax agreements between Airbnb and cities are under scrutiny as concerns rise regarding tax avoidance and unfair regulatory advantage.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.