State News Quick Hits: Myth of the Tax-Fleeing Millionaire, and More

In 2011, Michigan lawmakers enacted a huge “tax swap” that cut taxes dramatically for businesses and raised them on individuals – especially lower-income and elderly families. Given that many of these changes went into effect at the beginning of 2012, and that many Michiganders are just now beginning to file their 2012 tax forms, the Associated Press provides a rundown of the ways in which the tax bills of typical Michiganders will look different from previous years. Our partner organization, the Institute on Taxation and Economic Policy (ITEP), estimated (PDF) that changes in the personal income tax would result in tax increases of $100 for a poor family, $300 for a middle income family and $7 from a rich one.

South Carolina is considering jumping onto a bandwagon heading the wrong way: supplementing the state’s transportation revenues by taking money away from schools and other state services. If enacted, the plan under consideration would raid $80 million from the state’s general fund every year and use it for roads instead. ITEP estimated, however, that South Carolina could raise more than $400 million for transportation every year just by updating its stagnant gasoline and diesel taxes to catch up to over two decades of inflation.

There’s some good news on the gas tax issue in Iowa. This week, an ad hoc transportation lobby will rally to support the “It’s Time for a Dime” campaign. These builders, farmers and contractors are urging lawmakers to raise the state’s gas tax to pay for needed infrastructure repairs. The Institute on Taxation and Economic Policy’s (ITEP) Building a Better Gas Tax concludes that Iowa hasn’t raised its gas tax in over two decades and has lost 43 percent of its value since the last increase.

In case you missed it, here’s a great read from the New York Times about how we shouldn’t be so quick to assume that millionaires are ready to pack up their bags and move at the slightest increase in their tax bills. In “The Myth of the Rich Who Flee From Taxes,” the Times cites ITEP’s work on the Maryland millionaire tax: “a study by the Institute on Taxation and Economic Policy, a nonprofit research group in Washington, found that nearly all the decline in millionaires was the result of a drop in incomes largely attributable to the stock market plunge and recession, and not to migration — “down and not out,” as the study put it.”