Tag: TaxJusticeBlog

Some U.S. lawmakers on Tuesday used a pair of hearings in the Senate Finance Committee and the House Ways and Means Committee to showboat for corporate special interests and oppose a growing worldwide movement to crack down on international tax avoidance.

Last month, leaders of the 20 largest economies in the world approved an action plan developed by the Organisation for Economic Co-operation and Development (OECD) that, if implemented, could help ensure that multinational corporations pay their fair share in taxes. Rather than embracing the OECD’s ideas, some lawmakers claimed that the plan would actually harm the U.S. tax base. During the House hearing, Rep. Mike Kelly (R-PA) alleged that countries are looking to pick the pocket of U.S. companies.

In reality, the U.S. government and the American public have the most to gain by enacting the OECD measures and leading the way in cracking down on corporate tax avoidance schemes. A recent report by international tax expert Kimberly Clausing found that the U.S. loses more revenue than any other country to offshore corporate tax avoidance. By her count, the U.S. lost $93.8 billion in revenue in 2012, representing about a third of all the revenue lost to international corporate tax avoidance. Similarly, a joint report by CTJ and U.S. PIRG found that members of the Fortune 500 were avoiding a stunning $620 billion in taxes by holding $2.1 trillion in earnings offshore.

The OECD action plan was born out of the dire budget constraints that governments faced after the international financial crisis. Following the crisis, activists and lawmakers throughout the world became outraged by the low tax rates many multinational corporations were paying at the same time that low-income individuals continued to face harsh austerity measures. The G-20 charged the OECD with developing a framework for international cooperation between countries to stop the “base erosion and profit shifting” (aka BEPS) that allow corporations to avoid paying taxes.

After a two-year process of research and discussion, the OECD released the details of a 15 point BEPS action plan in early October. Some of the best proposed measures in the action plan include action 2’s measures targeting hybrid mismatch arrangements, action 4’s proposal to limit excessive interest deductions and action 13’s proposal for country-by-country reporting of profits and tax information. While action 13 is a good step forward in that it would require country-by-country reporting of information to governments, this provision should be made substantially stronger in the future by requiring that companies make this information publically available.

Showing their backward approach to these issues, some lawmakers have argued that the best solution to offshore tax avoidance is to enlarge the existing loopholes and to enact massive new ones. For example, House Tax Policy Subcommittee Chairman Charles Boustany (R-LA) has called for the U.S. to move to a territorial tax system and a patent box. These measures would result in the loss of hundreds of billions of dollars in tax revenue and result in an unprecedented erosion in the U.S. corporate tax base.

The OECD plan represents a growing consensus on international tax avoidance, and the U.S. should certainly support it. But Congress does not need the international community to act now to stop tax avoidance by U.S. multinationals and raise much needed revenue.

The best way to shut down offshore shenanigans once and for all would be for Congress to end the deferral of U.S. taxes on foreign profits by requiring that companies pay the same tax rate at the same time on their foreign and domestic profits. Barring that, Congress could pass the Stop Tax Haven Abuse Act, which takes aim at a number of the worse gaps in the offshore tax system. Given that countries throughout the world are acting to curb offshore tax avoidance, now is the perfect time for the U.S. to keep pace. 

On Monday, Pfizer and Allergan announced that they have reached an agreement to pursue the largest corporate inversion in history, a move which may allow Pfizer to avoid paying billions in taxes by pretending to be a foreign corporation.

The announcement came just days after the Treasury Department released a new series of regulations to curb corporate inversions. While the new regulations are helpful, Pfizer’s planned inversion is a stark reminder that to stop the flow of inversions, congressional, not just executive, action is required.

Pfizer’s move to invert is the latest in its long history of aggressive tax avoidance. As detailed in a recent report by Citizens for Tax Justice (CTJ), Pfizer is holding at least $74 billion in cash offshore to avoid taxes and discloses having 151 subsidiaries in known tax havens. Further, a new report by Americans for Tax Fairness on Pfizer’s tax dodging found that the company may have an additional $74 billion in earnings offshore, meaning that the company may be holding as much as $148 billion offshore. Unfortunately, the U.S. tax code enables corporations like Pfizer to pursue a business strategy of reducing taxes to as little as possible to boost their bottom line.   

While some lawmakers say that nothing short of full corporate tax reform is required to stop corporate inversions, the reality is that Congress could stop inversions tomorrow with a pair of simple pieces of legislation. First, Congress could pass the aptly named “Stop Inversions Act of 2015,” which would not allow companies to claim to be foreign if the company continues to be managed and controlled in the United States or if a majority of the “new company” is still owned by the former shareholders of the original American company. Second, Congress could pass legislation like Rep. Mark Pocan’s “The Corporate Fair Share Tax Act” or the “Stop Tax Haven Abuse Act,” both of which would curb the main advantage of inverting, the ability to strip earnings out of the United States and into lower tax jurisdictions.

Until Congress passes legislation to prevent corporate inversions, Pfizer and other bad corporate actors will continue to exploit U.S. laws to avoid paying their fair share in taxes.

If recent history is any guide, U.S. consumers will do more online shopping during next week’s “Cyber Monday” sales event than on any other day in history.  E-commerce is now a $300 billion business that has been growing by roughly 15 percent each year.  While most of its popularity comes from its convenience, the tax evasion opportunities made possible by the Internet (and a gridlocked U.S. Congress) have also helped tilt the playing field in favor of e-retailers.

For years, making purchases online was an easy way to avoid paying sales tax since most e-retailers refuse to collect the taxes owed by out-of-state customers.  When that happens, shoppers are supposed to pay sales taxes directly to the states in which they live, but such requirements are unenforceable and few shoppers actually pay the tax.  The result is a massive hole in state sales tax bases that has made raising state revenue for education, infrastructure, and countless other public services more difficult.

Recently, however, tax-free online shopping has become slightly less universal as the nation’s largest online seller—Amazon.com—has expanded its physical distribution network in a way that has brought it within reach of a growing number of state tax authorities.

In fact, this holiday season will be the first in which Amazon will be collecting sales tax in a majority of states.  As recently as 2011, Amazon collected sales tax from its customers in just five states: Kansas, Kentucky, New York, North Dakota, and its home state of Washington.  With the Oct.1 addition of Michigan to its tax collection list, that number now stands at twenty six states—home to 81 percent of the country’s population.

Our new, 20-second animated map provides an overview of how Amazon’s sales tax collection practices have evolved since the company’s first online sale in 1995:

Amazon’s (often grudging) expansion in the scope of its sales tax collection represents a modest step toward a more rational sales tax.  Taxing items that are purchased at traditional retail outlets while effectively exempting those bought over the Internet is unfair and unsustainable, especially as more and more consumers shift their purchases from brick and mortar retailers to online.

But despite the progress being made, there are still many cases in which e-retailers and traditional retailers are not competing on a level playing field.  Countless online retailers continue to skirt sales tax collection requirements in most states.  And even Amazon, despite its demonstrated ability to collect sales tax from most of its customers, is not collecting tax in 20 states and the District of Columbia (this count excludes the four states that levy neither state nor local sales taxes).  The result is that while most shoppers see sales tax tacked onto their Amazon purchases, about 17 percent of shoppers can still use Amazon.com as a means of evading (knowingly or not) their state’s sales taxes, and thereby reducing funding for education and other services in the process.

While most shoppers see sales tax tacked onto their Amazon purchases, about 17 percent of shoppers can still use Amazon.com as a means of evading (knowingly or not) their state’s sales tax.

While Amazon has arguably softened its opposition to sales tax collection in some instances, in others it has continued to pursue an aggressive avoidance strategy.  Specifically, the company has severed ties with businesses located in half a dozen states (Arkansas, Colorado, Maine, Missouri, Rhode Island, and Vermont) as a means of sidestepping laws that would have otherwise required sales tax collection, or additional reporting, on Amazon’s part.  As our animated map shows, the company also previously used this tactic in California, Connecticut, Illinois, Minnesota, and North Carolina before eventually reversing course and collecting sales tax, as well as in Hawaii where business relationships were terminated for a few weeks in a successful effort to pressure former Gov. Linda Lingle to veto an Internet sales tax enforcement measure.

Ultimately, a comprehensive solution will have to come from the U.S. Congress.  The federal government has the authority to require e-retailers to collect sales taxes in all of the states and localities where their customers are located.  In 2013, the Senate passed and President Obama supported legislation that would have done exactly that, but the House failed to act.  As of now it is unclear when Congress will take up the issue again, but until that happens, sales tax collection in the rapidly growing e-commerce sector will remain an indefensible patchwork.

Oklahoma officials want an independent review of business incentives that cost the state more than $355 million each year. A new law that took effect at the beginning of this month established an Incentive Evaluation Commission charged with looking at tax credits, deductions, expenditures, rebates, grants and loans intended to promote business relocation and expansion. Under the law, each business incentive will be reviewed every four years. Currently, just two incentives – the Investment/New Jobs Tax Credit and the Quality Jobs Program – account for over $180 million in lost revenue for the state, and have failed to meet rosy job creation projections. State Auditor Inspector Gary Jones is cautiously optimistic about the independent review process, saying, “Some of these things ought to be eliminated….The problem is, you’re leaving so much to people whose jobs depend on campaign contributions.”

Gov. Bobby Jindal, who recently abandoned his bid for the presidency, returns to a state in budget turmoil. Louisiana’s budget officials predict the state faces a deficit of $370 million after downgrading their projections for 2015-2016 fiscal year revenue. The shortfall is due to freefalling oil and gas prices as well as anemic business tax collections. The state must also contend with a $117 million deficit from last fiscal year that has yet to be addressed. This mid-year deficit is the eighth time in Jindal’s eight years in office that revenue has come in under projections. There will likely be cuts to critical services. Both of the candidates vying to replace Jindal have said they will call a special session in 2016 to deal with the budget and revenue crisis.

Improved budget numbers in South Carolina have caused some officials to question whether the state needs to raise its gasoline excise tax – last increased over 26 years ago. Forecasters say the state will see an additional $1.2 billion next year in unallocated money and new tax revenues. State Sen. Tom Davis says that rather than increase the gas tax, road repairs should be funded with this unexpected revenue.  Of course, funding long-term infrastructure projects with what appears to be a one-time windfall will create sustainability problems down the road.  In the last session, Haley attempted to use the push for a gas tax increase as an opportunity to enact a significant income tax cut for high-income households. A similar “tax shift” will likely be on the table once again during the upcoming session.

For years, the nation’s transportation funding account has lurched from crisis to crisis.  Revenues have consistently failed to keep pace with the cost of infrastructure maintenance and construction.  And the root cause of these very serious problems is crystal clear: Congress’s failure to raise the gas tax since 1993.

Yet despite an abundance of voices urging action—including businesses, labor unions, civil engineers, truckers, and even AAA—Congress is continuing its long-running opposition to a gas tax increase.  Instead, House and Senate lawmakers are nearing the end of a vigorous search of the nation’s proverbial couch cushions as they hope to find enough “pay-fors” to delay having to enact a real funding reform package for at least a few more years.

The gasoline tax is the single largest source of funding for transportation infrastructure in this country.  For more than 22 years, the federal gas tax has been stuck at a flat rate of 18.4 cents per gallon, meaning that the typical driver today is paying the same $3 per tank of gas (give or take) in federal tax that they did during the first year of President Bill Clinton’s administration.  But since $3 cannot buy as much asphalt and machinery today as it did two decades ago, our transportation funding account has predictably slipped into perpetual imbalance.

Rather than update our gas tax rate, Congress is hoping to cobble together a few years’ worth of funding by shuffling around money paid by airline passengers, selling off millions of barrels of oil from the Strategic Petroleum Reserve, and spending Customs “user fees” on things that are unrelated to Customs and Border Protection.

But as bad as this incoherent and gimmicky package truly is, the sad reality is that it is better than the next most likely option on the table: a corporate “repatriation” tax.  In addition to doing nothing to fix the unsustainability of our transportation funds, repatriation would reward and encourage offshore tax avoidance and reduce federal revenues in the long-term.

At this particular moment in history, it looks like budgetary gimmicks are about the best we can hope for out of Congress.  Given that reality, state lawmakers should be aware that they will need to continue picking up the slack if our nation’s transportation network is going to keep moving forward.

But the change in the couch cushions will eventually run out.  This certainly isn’t a long-term solution for funding the nation’s infrastructure.

Update March 9th, 2016: We have since revised downward our analysis from $16.2 trillion to $13.9 trillion, to reflect that Ted Cruz’s staff has informed the media that the actual VAT rate will be 18.56 percent, rather than the 16 percent that he had been advertising. 

During Tuesday’s Republican presidential candidates’ debate, Sen. Ted Cruz (R-TX) made a claim that, in theory, shouldn’t be too hard to live up to. He said his tax plan is less irresponsible than plans put forth by his competitors, and he claimed the ten-year cost of his plan is less than a trillion. “It costs less than virtually every other plan people have put up here,” Cruz said.

Being less irresponsible than Jeb Bush, Marco Rubio and Donald Trump—each of whom have proposed tax plans that would cost $7 trillion or more over the next decade—is a low bar to hurdle. Yet contrary to his assertions, Cruz’s plan would be more costly than any of the other plans put forth by his competitors. A Citizens for Tax Justice (CTJ) analysis of the Cruz tax plan finds that it would cost $1.3 trillion in its first year alone and a staggering $16.2 trillion over ten years.

Cruz’s plan would eliminate the corporate income tax, the estate tax, and the payroll tax, digging an $18 trillion hole in federal revenues over a decade. He also proposes to sharply reduce the personal income tax, replacing the current graduated rate system with a flat-rate 10 percent.  Cruz’s plan would repeal most itemized deductions and tax credits, but it would leave the mortgage interest and charitable deductions largely intact, along with the Child Tax Credit and the Earned Income Tax Credit. On balance, these personal income tax changes would lower income tax revenues by 60 percent and add another $12.8 trillion to the plan’s 10-year cost.

Cruz proposes making up for the $31 trillion in lost revenue by introducing a regressive value-added tax (VAT), and, it seems, a healthy dose of magic pixie dust.

Cruz’s claim that his plan would cost “less than a trillion” depends critically on raising an enormous amount from his 16 percent VAT, which would apply to almost everything American consumers purchase. The remaining revenue shortfall would, in Cruz’s estimate, be offset by a supposed economic boom based on the discredited supply-side magic that has been part of the far right’s economic fantasies for decades.   

But Cruz’s math has a gigantic hole in it. He wouldn’t just make consumers pay his VAT, he would also make the government pay the tax (to itself) on all of its purchases, from warplanes to paper clips and the wages it pays to its employees. Cruz’s claim that the government can raise money by taxing itself accounts for a third of the alleged yield from his VAT.

Without this sleight of hand, Cruz’s overall plan would cost more than $16 trillion over a decade and reduce total federal revenues by well over a third.

Even this enormous amount may be a low-ball estimate since Cruz insists that he would “eliminate the IRS.” If he really means that, then he would apparently reduce total federal revenues by closer to 100 percent. After all, without a tax collection agency, why would anyone pay taxes?

As Citizens for Tax Justice (CTJ) outlined in a post last week, most major Republican presidential candidates have released tax proposals that would overwhelmingly benefit the wealthy and balloon the national debt. No one can refute this, but candidates and anti-tax, trickle-down economics supporters are trying to obscure the facts.

Last week, the business-backed Tax Foundation released a blog that chides reporters for using dollar amounts instead of percentages to inform the public about how generous candidates’ tax cuts would be for the top 1 percent.  They may as well dangle a shiny object. Shifting the debate toward an analytic discussion of percentages versus average dollars is a distraction. The real issue is why are candidates and their allies trying to convince the public that corporations and the wealthy need more budget-busting tax breaks in the first place?

Federal lawmakers are struggling to find ways to fund the Highway Transportation Fund, pay for debts that have been built up over the past four decades and maintain essential public services. How enormous tax cuts fit into this equation is a far better issue to debate than average dollars versus percentages or shares. Better still, why not call candidates on the carpet and ask them to explain why the nation needs massive tax cuts and what programs they would cut as a result of the lost revenue?

The tax cuts for “jobs creators,” and trickle-down, stimulate-the-economy argument is tired, shopworn and unproven. The public has previously been sold the vision of a future in which everybody—but mostly and especially the rich—gets a tax cut and the nation’s economy grows by leaps and bounds. It didn’t happen in the past, and no serious person thinks it will happen in the future.

When CTJ analyzes tax proposals, its tables show average tax changes in dollars by income group, tax changes as a share of income and the overall share of the tax cut that each income group would receive. Including all three columns of data reveals a complete picture of the distributional effects, as opposed to just the change in after tax income which, in isolation, can obscure the impact.

The most important figures regarding the GOP candidates’ tax plans are the enormous revenue losses that each would incur. In the case of Sen. Marco Rubio, CTJ estimates it would lose $11.8 trillion over a decade. Jeb Bush’s plan would add $7.1 trillion to the national debt over 10 years. Donald Trump’s plan would blow a $12 trillion hole in the federal budget over a decade. An analysis of Rand Paul’s flat tax plan found it would starve the federal government of $15 trillion over a decade, and a forthcoming CTJ analysis of Ted Cruz’s plan likely will find it would be equally as devastating to the federal budget.

It is fair game to evaluate whether the nation can afford a tax proposal in which the biggest share and dollar amount flow to the wealthy.

CTJ director Bob McIntyre says criticisms of using dollars to evaluate candidates’ tax plan are a ruse.

“Why is anyone even talking about tax cuts?” McIntyre said. “We already don’t raise enough revenue to pay for existing programs, and as more and more Baby Boomers continue to retire, we’ll need a lot more revenue to pay back IOUs to Social Security, while maintaining other essential programs.”

By trumpeting tax cuts without talking about the consequence and then attempting to shift the public debate toward theoretical discussions about percentages versus whole numbers, candidates and anti-tax advocates are trying to obfuscate the real issue, McIntyre said.

Given the reality of our nation’s fiscal situation, neither dollars nor percentages can justify more huge tax cuts for the wealthy. That’s the substantive discussion we should be having.

Earlier today, Michigan Gov. Rick Snyder signed a package of tax changes that will eventually fund improvements to the state’s transportation infrastructure, but it comes with cuts to other services and a weakened long-term fiscal position.  When most of the law’s provisions are phased in five years from now, they will collectively drain (PDF) more than $800 million from local governments, universities, health care, and corrections every year.  Making matters worse, a modified income tax trigger could push the general fund loss to $1 billion per year within a decade and could turn this so-called “funding” package into a net revenue loser.

Below is a list of the package’s most significant components (revenue estimates are for Fiscal Year 2021):

New Revenue

• $404 million from increasing the gasoline tax by 7.3 cents and the diesel tax by 11.3 cents on Jan. 1, 2017.  These tax rates will also be tied to inflation starting in 2022.
• $221 million from increasing most vehicle registration fees by 20 percent and from levying higher fees on electric vehicles.

Funding Shifts

• $600 million annually will be moved out of the general fund to be spent on transportation.  The Detroit Free Press identifies local governments as the group most likely to face funding cuts under this shift, followed by higher education, public health, and corrections.

Tax Cuts

• $206 million in tax cuts will be distributed to Michiganders by expanding the state’s property tax credit for low- and moderate-income families.  Some features of the credit will also be indexed to inflation starting in 2021.
• A sizeable, but uncertain revenue loss will come from cutting the state’s top income tax rate via an ill-conceived “trigger” mechanism.  Starting in 2023, the state’s income tax rate will be reduced if general revenue growth exceeds the inflation rate multiplied by 1.425.  The non-partisan House Fiscal Agency estimates (PDF) that if this law were in effect today, $593 million in revenue would be lost next year as a result of dropping the tax rate from 4.25 to 3.96 percent.  If this type of cut is combined with the property tax credit expansion, fuel tax increases, and vehicle registration fees just described, the net result of this “funding” package will be to reduce state revenues—not raise them.

Ultimately, these reforms to Michigan’s fuel taxes are long-overdue and the property tax credit expansion is a reasonably effective way of offsetting some of these taxes for lower-income families.  But the components of this package that will have the largest impact on Michigan’s budget in the years ahead are the $600 million general fund earmark for transportation, and the automatic income tax cuts scheduled to take effect long after most of today’s lawmakers have left office.

In a time of fiscal austerity, it is breathtaking to learn that Congress has allowed Fortune 500 companies to avoid an estimated $620 billion in federal taxes on earnings they are holding offshore. While the inaction by lawmakers on this issue may create the impression that there is nothing to be done, the reality is that this tax avoidance could be shut down tomorrow if Congress decided to act. Making this point clear, Wisconsin Rep. Mark Pocan has proposed a pair of new bills this week that would substantially curtail offshore tax avoidance by U.S. multinational corporations.

To start, Rep. Pocan’s The Corporate Fair Share Tax Act takes direct aim at the driver behind the infamous corporate inversion loophole. Using this loophole, U.S. companies, like Burger King or Medtronic, merge with a smaller foreign company and then claim to be a foreign company for tax purposes. The primary advantage of this arrangement is that it allows these pretend foreign companies to engage in an accounting maneuver known as “earnings stripping,” wherein the U.S. subsidiary borrows money from its new foreign parent and then makes interest payments that have the effect of decreasing its U.S. income for tax purposes. To counter this maneuver, the The Corporate Fair Share Tax Act would no longer allow companies to deduct excess interest payments from their U.S. income. This measure would raise an estimated $64 billion in new revenue over 10 years according to the Joint Committee on Taxation (JCT).

The immediate need for this kind of anti-inversion legislation has become even clearer in recent days as Pfizer, one of the nation’s largest pharmaceutical companies, has indicated that it is seeking to invert and incorporate in Ireland to avoid potentially billions in taxes that it owes. Pfizer and a handful of other companies with inversions in the works this year confirm that congressional action is still needed, despite the improvements made to the law through an executive action by the Obama Administration last year.

Rep. Pocan’s second piece of legislation, the Putting America First Corporate Tax Act, would strike a blow at the heart of the offshore tax avoidance by requiring companies to pay the same tax rate at the same time on their foreign and domestic profits. Right now, the U.S. tax system allows companies to defer paying taxes on earnings that they book abroad (at least on paper) until they officially repatriate it back to their U.S. parent company in the form of dividends. This policy creates a huge incentive for companies to shift their U.S. profits to low- or no-tax jurisdictions in order to avoid taxes. IRS data show that U.S. companies are booking more than half of their (allegedly) foreign profits in known tax havens.

Rep. Pocan’s legislation would stop this practice by ending the ability of companies to defer paying U.S. taxes on their offshore income, meaning that they would pay the same tax rate at the same time on earnings regardless of whether they are booked in the United States or in the Cayman Islands. This legislation would not only level the playing field between multinational and purely domestic companies, but according to the U.S. Treasury Department, it would raise as much as $900 billion in critically needed revenue over 10 years.

Congress should take action against offshore tax dodging and an excellent place to start would be the passage of Rep. Pocan’s The Corporate Fair Share Tax Act and Putting America First Corporate Tax Act.

Voters went to the polls in a number of state and local elections this week, with lots of implications for tax policy. This rundown covers the burning ballot outcomes and election results that followers of state policy should know about!

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Washington state voters approved Tim Eyeman’s Initiative 1366 with 53 percent of the vote. The measure mandates an automatic decrease in sales tax revenue by $1 billion unless the legislature agrees to refer a ballot measure to voters that would require a supermajority to raise taxes. As we noted in a previous blog post, Initiative 1366 is a disaster for the state. Legal challenges to its legitimacy are sure to follow, but at the moment eyes are on state legislators and what they will do to avoid both the revenue loss and the supermajority requirement.

Voters in Texas approved two proposals that will impact road and school funding. Proposition 1, which increased the property tax homestead exemption from $15,000 to $25,000, will cost schools in the state at least $1.2 billion over the biennium. Homeowners will keep $126 annually, on average. The measure passed with 86 percent of the vote. Proposition 7 diverts up to $2.5 billion a year in sales tax revenue from the general fund to the State Highway Fund beginning in 2018. It passed with 83 percent of the vote.

Ten out of seventeen counties in Utah passed a ballot initiative for transit funding, though the measure went down in defeat in the state’s most populous counties, Salt Lake and Utah. Proposition 1 implements a local sales tax with revenue split between transit providers, cities and counties.

Voters in Kentucky elected Republican Matt Bevin governor in an upset over challenger Jack Conway, the state’s attorney general. Bevin, a businessman often at odds with his own party’s mainstream, has pledged to end Kentucky’s successful healthcare exchange and is opposed to Medicaid expansion. He has also called for corporate and personal income tax cuts and for the repeal of Kentucky’s inheritance tax. Bevin’s election is likely to move Kentucky tax policy in a less fair and unsustainable direction.

Mississippi voters easily reelected Gov. Phil Bryant, who faced token opposition from Robert Gray, a long haul truck driver. Lt. Gov. Tate Reeves and House Speaker Phil Gunn, both also reelected, were responsible for a flurry of tax bills last session that would have lowered income taxes and eliminated the corporate franchise tax. At one point, lawmakers considered eliminating the income tax entirely. These efforts failed because backers could not gain a supermajority vote for their changes; now, Republicans are just one vote away from a supermajority. Expect more of the same during the state’s next legislative session.

In a bright spot, voters in Seattle, WA and Maine approved ballot questions to limit the influence of money in politics and to increase the power of small donors. Maine voters passed by 55 percent a proposal to update their public elections system. Candidates who opt for public funding will now receive additional funds if super PACs spend big for their opponents, and the transparency rules for independent spending have been tightened. The question also requires the legislature to scale back or repeal some business tax breaks in order to fund public financing. Voters in Seattle passed by 60 percent a new concept called “democracy vouchers.” Each citizen will receive four $25 publicly-funded vouchers to pledge to candidates of their choosing. The Seattle initiative also lowered campaign contribution limits, increased ethics enforcement, and banned contributions from lobbyists and city contractors. Hopefully, these measures will make lawmakers more responsive to the public on matters of tax fairness rather than entrenched interests.