Author: tarek

The Colorado Fiscal Policy Institute’s #proudtopay Twitter campaign gives people a chance to voice their support for the public services made possible by paying taxes.

Wade Gibson from Connecticut Voices for Children reminds us in this op-ed that taxes do a lot of good – even making Easter travel easier.

Michigan League for Human Services president, Gilda Jacobs, writes in The Detroit News about how public services benefit her personally, and why she’s proud to pay the taxes that fund those services.

Together NC, North Carolina’s broad revenue coalition, wants you to spend some time today watching two videos: “A Day without Government” and another highlighting Russell, the public investment super hound.

There are at least ten reasons to like Ohio’s income tax. Read Policy Matters Ohio’s reasons here.

Oregon Center on Public Policy tells The Forgotten Tax Day Story here.

Pennsylvania Budget and Policy Center has a whole tax day resource page including a petition to tell Pennsylvania lawmakers to close corporate tax loopholes and end special tax breaks before making harmful budget cuts.

Voices for Utah Children follows Sam the Eagle as he flies around the state highlighting the services taxes pay for.

The Wisconsin Budget Project answers the simple question “Who Pays Taxes?” in Wisconsin with an equally simple response (using ITEP data).

• Paying Taxes to the Boss explains how 2,700 companies in 16 states are pocketing their workers’ state income tax payments rather than handing them over to the government.  Good Jobs First examines this entirely legal tax giveaway in a recent report.
• Here’s an important op-ed about the consequences of a bill moving in the Minnesota legislature that would eventually eliminate state business property taxes – at a cost of $7 billion the state can’t afford.  Wayne Cox from Minnesotans for Tax Justice writes that the bill is “sort of like a family that doesn’t know how it is going to pay its bills and decides the solution is to quit one of its jobs.”
• Anti-tax activists were trying to exploit Missouri’s broken ballot initiative process, but now a judge has dealt an enormous blow to advocates of a disastrous plan to eliminate that state’s income tax; this radical scheme now has a slim chance of getting on the November ballot.
• This is a smart article from an Indiana paper describing a phenomena we’ve talked about before – fewer gambling revenues are generated when neighboring states open casinos and compete for the same customers.
• The Birmingham News cites a recent report from the Institute on Taxation and Economic Policy (ITEP) to help explain how the short-sighted design of Alabama’s gas tax has contributed to the state’s transportation funding problems.  The state’s Transportation Director sums it up: “we have both a financing mechanism and a gauge that is 20 years old … It doesn’t work and that is obvious.”

Senate Minority Blocks Even Minimal Tax Reform, Preserves Lower Effective Tax Rates for Millionaire Investors

Today, a minority of Senators demonstrated that they will filibuster even the most minimal step towards tax fairness.

The legislation, proposed by Senator Sheldon Whitehouse, would implement the Buffett Rule. It would not affect anyone except taxpayers who have incomes exceeding $1 million and yet manage to pay a smaller portion of their income in taxes than do many people who work for wages and salaries. Even the very basic step of requiring these millionaires to pay at least 30 percent of their income in income and payroll taxes proved too much for the Senate minority, which successfully filibustered this bill.

This legislation should be just the very beginning of the far more sweeping reforms that our tax system desperately needs. The main reason some millionaires pay low effective tax rates is that investment income is taxed at lower rates than other income under the federal personal income tax and is currently not touched at all by federal payroll taxes. The Buffett Rule would limit this tax preference for investment income for millionaires.

But ultimately Congress must go much further than the Buffett Rule. The way to truly make our tax system simpler and more efficient would be to completely repeal the personal income tax preference for investment income and tax all income at the same rates. This would raise over half a trillion dollars over a decade. Eighty percent of the resulting tax increase would be paid by the richest one percent of Americans, and 90 percent of the tax increase would be paid by the richest five percent of Americans. While the Wall Street Journal can be expected to call this tax reform “socialism” or “class warfare,” it was a major part of the tax reform signed into law by President Ronald Reagan in 1986.

Today we find that even the smallest step back to this Reagan-era policy is unacceptable for the Senate minority, who filibustered the Buffett Rule and apparently can be counted on to block anything resembling fair tax reform.

When CTJ analyzed Herman Cain’s 9-9-9 tax plan last year, we concluded it would cut taxes for the richest one percent by $210,000 on average and raise taxes for the bottom three-fifths of Americans by $2,000, on average if in effect in 2011. This did not surprise us, since the 9-9-9 plan incorporates elements of a “flat tax” and a national sales tax (often misleadingly called a “Fair Tax”) which are both far more regressive than our current tax system. We also concluded that the 9-9-9 plan would collect $340 billion less than our existing tax system in 2011 alone. What does surprise us is that people are still talking about the former pizza CEO’s tax plan, which is the focus of a two-day “Patriot Summit” that Cain is hosting today in Washington.

Today, Cain’s Revolution on the Hill will  roll out “the 9-9-9 educational campaign that will sweep the country in the Summer of 2012.” 

Flat tax and national sales tax plans vary, but they all would leave investment income – most of which goes to the richest Americans – untaxed. The “flat tax,” which is promoted by Dick Armey’s FreedomWorks, does not consist of one flat tax rate but actually two tax rates when you include the zero percent rate for investment income.

The national sales tax, which is promoted by the organization FairTax.org, is a straight-forward consumption tax, and this is likely to have the greatest impact on lower-income families who have no choice but to put all of their income towards consumption. (The other national, broad-based consumption tax you hear a lot about is a value-added tax, or VAT).

Cain is not the only presidential candidate to propose these types of radical changes to our tax system. Texas Governor Rick Perry flirted with both the flat tax and a national sales tax. Both Perry and Newt Gingrich eventually settled on a “flat tax” that would, like other flat tax proposals, exempt investment income from tax.

Watch this space for a look at other flat or fair tax proposals that surface during this election year.

• A letter in the Tulsa World highlights the work done by the Institute on Taxation and Economic Policy (ITEP) to expose the flaws in Arthur Laffer’s recent “research” on the economic benefits of income tax repeal.  The letter also reports on similar critiques of Laffer’s work that were made by a number of prominent economists speaking at an event hosted by the Oklahoma Policy Institute.  Our favorite?  Ken Olson at Oklahoma State University explains that Laffer’s work “does not constitute economic analysis in any real sense. As a consequence, its suggestions should be ignored as economics.”

• Opponents of progressive taxation often point to Texas as evidence that shunning the personal income tax can lead to economic growth.  But the Center on Budget and Policy Priorities (CBPP) explains that Texas’ success is due to factors largely outside the control of state lawmakers, like natural resources, immigration, trade, and the availability of plenty of land for development.  It’s a point that should be obvious, but it’s also one that we’ve found ourselves having to remind people of quite frequently as of late

Millions of Americans will spend part of this upcoming weekend trying to navigate tax preparation software or filling out the actual paper forms to file their income tax returns before the Tuesday deadline. For those wishing they could pay less tax, outlined below are some tax planning ideas taken from a review of presidential candidate Mitt Romney’s tax returns.

Read the report.

Arthur Laffer and the American Legislative Exchange Council (ALEC) have just released the 5th edition of their Rich States, Poor States report.  If you’ve fallen behind on your Laffer reading, Rich States, Poor States is mostly a collection of Laffer’s other reports from throughout the year, copy-pasted into one convenient location.

The centerpiece of this “new” report is the “ALEC-Laffer State Economic Competitiveness Index,” which is essentially a 15-item wish list of policies that Laffer and ALEC would like to see enacted in every state.  Over half the items in the Index are related to low or regressive taxes, while the others are mostly related to labor issues.

As we’ve pointed out before, the most laughable thing about the Index is the way it claims to provide a look at the important “policy variables” under the control of state lawmakers, but then ignores the ones that actually matter. For instance, few people would argue that good schools or basic infrastructure (power, transit, roads) are unimportant to states’ economic performance.  But the ALEC-Laffer rankings give states no credit for either of these outcomes. On the contrary, adequately funding any public service actually reduces states’ rankings since Laffer assumes that tax revenue is detrimental to economic growth (all research from ITEP and academic economists to the contrary).

Rich States, Poor States also attempts to rebut recent research from the Institute on Taxation and Economic Policy (ITEP) that we’d be remiss not to mention here.  According to ALEC and Laffer, “In its latest study, ITEP reaches a pro-tax conclusion by deliberately manipulating the data. It focuses on per-capita income instead of absolute income, which hides the economic losses of high tax states.”

ITEP explains in detail its reasons for using per-capita income growth as a measure of state economic performance in the report cited by Laffer. Indeed, while Rich States, Poor States is perhaps best known for the 15-item wish list, every edition of the report (first published in 2008) has also contained a section ranking states based on their actual, measurable economic performance.  And that ranking has always been based on what Laffer calls “three important variables:” absolute domestic migration, non-farm payroll employment, and per-capita personal income growth.

What’s more, ever since the first edition, Rich States, Poor States has included a set of state-specific fact sheets at the end of the report, the top of each being – that’s right – a graph of the state’s per-capita personal income growth.

The fact that this variable appears in the evidence-based section of Rich States, Poor States suggests they think it’s a reliable variable; the fact that Laffer et al characterize the variable as manipulative in the fiction-based portion of their report suggests that if there’s any deliberate manipulation going on, it’s being done by these so-called experts.

Photo of Art Laffer via  Republican Conference Creative Commons Attribution License 2.0

For years we’ve been hearing how half of all Americans don’t pay taxes –but our numbers say otherwise. So we set out to find even one American that didn’t pay any tax and, amazingly, we did! He is unique, and he is Garth.

Click on Garth below to learn more about how he does it:

States are spending untold billions on special tax breaks that are supposed to steer business to behave in ways that lead to economic growth.  We’re generally skeptical of these types of so-called incentives, and have long argued that they receive far too little scrutiny.  A new report from the Pew Center on the States thoroughly documents just how little most states are doing to figure out if ordinary taxpayers are getting their money’s worth from these deals.

Pew’s Evidence Counts reveals that 25 states and the District of Columbia have done nothing even remotely rigorous in the last five years to determine if even a single one of their business tax incentives is working.  Moreover, while Pew identifies 13 states “leading the way” in evaluating their tax breaks, they also note that “no state regularly and rigorously tests whether [tax incentives] are working and ensures lawmakers consider this information when deciding whether to use them, how much to spend, and who should get them.”

After looking at evaluation practices in all 50 states, Pew identified some of the same smart states that CTJ and the Institute on Taxation and Economic Policy (ITEP) have been urging others to emulate.  Washington State, for example, is highlighted for undertaking comprehensive and transparent evaluations of all its tax breaks, while Oregon is credited for using sunset provisions to force lawmakers to regularly reconsider tax incentives that might otherwise continue for years without a second thought.

The Pew report urges lawmakers and analysts to ask the right questions when evaluating their incentives.  Did the incentive simply reward behavior that would have occurred anyway?  Were in-state businesses put at a competitive disadvantage by not receiving the tax break?  Did a significant portion of the incentive’s benefit flow outside the state?  Could the money have been put to a more productive use elsewhere in the budget?

As Pew explains, “states have to ask the right questions to get the right answers.”  But so far, most states don’t bother to ask.

For more on Pew’s findings, and to see how your state stacks up, be sure to read Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth.

Our three-minute movie in which an ordinary guy makes a shocking discovery. “Are you telling me,” he says, “that unless I’m General Electric or Mitt Romney I have to pay more taxes than Warren Buffett?!”

Watch it at the CTJ YouTube Channel