Tag: TaxJusticeBlog

Our ever-changing economy demands that lawmakers update our tax laws to keep pace.

Take, for example, the growth of online sales. As recently as six years ago, Amazon, the nation’s biggest online retailer, only collected sales tax on consumer purchases in five states. This meant that state treasuries were missing critical sales tax revenue, a problem destined to grow as more consumers shifted their shopping habits from brick and mortar stores to online purchases.

But Amazon’s tax collection habits have improved over the last few years, in part because Amazon changed the way it does business, but also because state lawmakers became increasingly frustrated by the sales tax revenue gap created by e-retail and decided to press for change. While online sales tax evasion remains a problem today, progress is being made.

Now, states are facing another challenge as the on-demand or “gig economy” grows. Companies such as Uber and Airbnb are presenting regulatory challenges and the growth of these services has outpaced lawmakers’ ability to update state and local tax codes. A new ITEP report explores tax policy issues related to the on-demand economy and recommends that state and local tax systems treat these companies in a manner similar to their competitors, especially taxis and hotels.

As background, most states exempt a broad range of services from their sales tax bases because of a historical accident. The revenue loss resulting from these exemptions—on services ranging from lawn care to haircuts—has grown substantially as the service sector has expanded, but lawmakers have been slow to update sales tax bases to reflect the shift toward a more service-oriented economy.

Taxi rides are one service that has long been among those typically exempt from most state and local sales taxes, but there are more than half a dozen states that apply their sales taxes to taxis and similar services. In the context of the on-demand economy, this matters because Uber and other transportation network companies (TNCs) are providing a service nearly identical to taxi rides. But their tax treatment has not always reflected this fact.

In Rhode Island, for example, taxis began collecting sales tax under a law enacted in 2012, but Uber delayed doing so until 2015, claiming the law was ambiguous. Today, the company has taken an even more confrontational stance in Georgia, urging its riders to tell lawmakers that the sales tax, which has long been collected on taxi rides, should not apply to Uber’s services. ITEP’s report indicates that a similar battle could soon come to Ohio, where taxis also collect sales taxes but where Uber appears not to be doing so. Uber has recently received negative publicity on a variety of fronts, ranging from allegations of sexual harassment among its engineers to reports of software designed to impede police investigations into its business in jurisdictions where it may have been operating illegally. Disputes over sales tax collection may seem bland by comparison, but they are important nonetheless.

Airbnb has taken a different approach to state and local tax collection. The company has often been willing to collect and remit lodging taxes (which range up to 15 percent) in exchange for regulations (or a lack thereof) favorable to its business model. Affordable housing advocates concerned about the loss of residential housing, and frustrated neighbors living next to what they call “neighborhood hotels,” by contrast, would like to see tighter restrictions on renting homes via Airbnb. Meanwhile, others have noted (PDF) the enforcement problems created by the high level of secrecy surrounding most Airbnb tax collection agreements.

Partly because of these ongoing debates, Airbnb’s tax collection practices are a patchwork. The company is collecting some state and/or local-level lodging taxes in 26 states, but in many of those states the company’s scope of collection is far from comprehensive. Hundreds of millions of dollars in lodging taxes are being lost each year as visitor preferences shift away from traditional hotels (which collect the applicable taxes) to Airbnb rentals (which often do not). For the time being, many of Airbnb’s customers are allowed to pay less than guests of traditional hotels for the public services they enjoy during their visits.

These issues are likely to remain a work in progress for some time to come. The regulatory questions that are often tied to these tax debates are far from trivial. And even if the tax laws related to these services are updated to reflect today’s economy, there is little doubt that new on-demand services with unforeseen tax policy implications will arise in the years ahead.

Nonetheless, the stakes are too high for lawmakers to delay action any longer. Both tax fairness and fiscal responsibility demand that states and localities update their tax codes to better reflect the realities of these on-demand services. Amazon and the e-retail industry are moving in that direction, though universal sales tax collection remains elusive. As a similar debate unfolds regarding the gig economy, states should move even more quickly to recognize change and update their sales tax practices accordingly.

Read Taxes and the on-Demand Economy.

This week in state tax news saw major changes debated in Hawaii and West Virginia and proposed in North Carolina, a harmful flat tax proposal in Georgia, new ideas for ignoring revenue shortfalls in Mississippi and Nebraska, an unexpected corporate tax proposal from the governor of Louisiana, gas tax bills advance in South Carolina and Tennessee, and property tax troubles in Missouri, Nevada, and New Jersey.

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• The North Carolina Senate has released its preferred tax plan, a billion dollar so-called “middle-class” tax cut featuring a drop in the state’s personal and corporate income tax rates and other reductions.  An ITEP analysis found the top 20 percent of North Carolinians would receive nearly half of the personal income tax cuts under the proposal despite lawmakers claiming the cuts are targeted to low- and middle-income taxpayers.  The Senate’s proposal would come on top of years of tax cuts in the Tarheel state that have already reduced revenues by more than $2 billion annually.
• Louisiana‘s Gov. Bel Edwards is out with a surprising proposal in advance of the state’s legislative session–scrap the state’s corporate and franchise taxes and adopt instead a Gross Receipts Tax (like in Ohio). This proposal comes from left field, a very different direction from reforms suggested by many groups, including the governor’s own Task Force on Structural Changes in Budget & Tax Policy. More details are expected to be released next week.
• Legislators in West Virginia are taking up an extreme constitutional amendment resolution, Senate Joint Resolution 8, this week that would, among other things, repeal the state’s personal property tax, alter the real property tax, apply limitations to the personal income tax, and limit excise, sales and use, and corporate net income taxes. Under the resolution, three-fifths majority vote in each house would be needed to reinstate any repealed tax.
• Sources in Georgia report that the latest change to a harmful regressive income tax cut bill there creates a larger nonrefundable credit to deliver more help to low- and middle-income residents and those without children who were overlooked in the original bill. But the heart of the bill remains a flat 5.4 percent income tax that slashes taxes on the wealthy while raising them for many lower-income people and reducing revenue for education and other priorities by hundreds of millions.
• After crossover, Hawaii legislators are still considering over a dozen tax change bills. Proposals include establishing a state earned income tax credit, reinstating high income tax brackets that were repealed in 2015, and changes to low-income credits. Lawmakers are also weighing possible tax increases to fund the state highway system, including a tax based on car value and fuel tax increases.
• Nebraska lawmakers dead set on massive income tax cuts are trying to get creative to get them passed despite the state’s billion-dollar shortfall and general focus on property taxes. The latest idea floated is to repackage an existing property tax credit and then phase in the income tax cuts in future years using an arbitrary “trigger” mechanism.
• Mississippi‘s shortfall in its Medicaid budget is still $89 million with just a few months to go in the fiscal year and a key legislative deadline coming up this weekend. Lawmakers are now considering simply not paying health providers for several weeks to push the problem off until next year.
• Tennessee legislators have reverted back to Gov. Haslam’s original regressive tax shift plan, which is now advancing through committees in both houses, after failing to replace it with a raid of the general fund for infrastructure needs.
• A bill to raise South Carolina‘s gas taxes and vehicle fees to shore up that state’s infrastructure needs is likely to pass the legislature soon, but could be vetoed by Gov. McMaster.
• New Jersey‘s property tax cap may be revised this year because it is hamstringing local budgets to such an extent that they cannot qualify for state and federal matching funds for local services like public safety needs.
• Efforts to reform Nevada‘s property tax cap that has been undermining local budgets have shifted from various band-aid fixes to a likely study committee to seek solutions over the summer.
• The Missouri House advanced a bill mentioned in this space last week to eliminate a property tax circuit breaker that helps low-income seniors remain in their homes.
• Alabama is seeking to modernize its tax structure to include streaming services like Netflix, Hulu, and music services.
• In an effort to make money managers pay their fair share, Rhode Island legislators have introduced legislation to tax carried interest income the same as earned income.
• In Texas, a bill to limit the increase of local government budgets has passed the Senate and is expected to receive support of the House. Senate Bill 2 would limit county and local government budget increases to 5 percent annually as a way to limit property tax increases. Any increase above 5 percent would trigger an automatic vote.
• Seventy percent of New Jerseyans polled were in favor of raising taxes on the state’s wealthiest residents to restore pension funds the legislature has failed to make adequate contributions to for years.

What We’re Reading…  

• Route Fifty recently published three articles on the impacts of President Trump’s budget proposal for cities and states, including the loss of funding for community development and environmental protection efforts, erosion of emergency preparedness and responsiveness, and major cuts to federal agencies that primarily help low-income urban areas.
  
• The Rockefeller Institute‘s latest report documents job losses in state and local government, showing that employment in this sector remains below pre-recession levels despite growing populations and caseloads, forcing public servants to attempt to do much more with much less.

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. 

The House GOP’s American Health Care Act is being pushed quickly through the legislative process, with a vote on the House floor scheduled for as early as Thursday. The Republican legislation seeks to pay for the cost of repealing highly progressive taxes enacted as part of the Affordable Care Act by making substantial cuts to Medicaid funding and tax credits used to subsidize the purchase of health insurance by middle- and low-income households.

The two biggest tax cuts in the package are its repeal of the Additional Medicare Tax and the Net Investment Income Tax, which increased taxes on investment and wage income for individuals making over $200,000. Together, these provisions represent a $275 billion tax cut for the country’s richest taxpayers over the next ten years. According to a new analysis from the Institute on Taxation and Economic Policy (ITEP), the repeal of just these two provisions would provide the top 1 percent of taxpayers an average annual tax break of $19,672 nationwide.

The egregious inequity of these tax cuts look even worse when you compare them on a state-by-state level with the cuts to the premium tax credits that help low- and middle-income families afford health insurance. The new ITEP analysis gives a state-by-state breakdown of how many taxpayers will be impacted, the percentage of taxpayers impact, the total tax cuts, average tax cut for the top 1 percent, and the percent of tax cuts going to the top one percent. For example, the Center on Budget and Policy Priorities (CBPP) finds that in North Carolina the average premium tax credit would be cut by $5,360 resulting in an equivalent hike in health insurance costs, while ITEP’s data show that the top 1 percent of taxpayers in the state would see an average tax cut of $11,540 from just the repeal of these two Medicare tax increases. Similarly, the tax cuts for the rich are larger in many states than those states are losing in funding for Medicaid. For example, in Colorado federal Medicaid funding would fall by $340 million, while the ITEP analysis finds that the richest taxpayers in the state will see a federal tax cut of $544 million.

The overall impact of the legislation would be devastating. The latest analysis from the non-partisan Congressional Budget Office (CBO) finds that by 2018 as many as 14 million more people would be uninsured under the legislation, and that by 2026 as many as 24 million more people would not have health insurance. The bill would reverse most of the progress in health insurance coverage achieved by the Affordable Care Act. Building on this, the bill, with its nearly $900 billion in tax cuts, will also help pave the way for tax reform legislation by substantially lowering the baseline needed for future legislation to achieve revenue- and distributional-neutrality.

While the legislative process is moving fast, it is still unclear if the legislation has enough votes to pass. In the House, the bill is facing opposition from moderate Republicans, who are concerned about the benefit cuts, and many conservative Republicans, who want a more complete repeal of the Affordable Care Act provisions. There is every indication that the legislation will face total opposition from Democrats, which means that the Republican leadership can only lose 23 Republican votes in the House. The legislation is also likely to face more opposition in the Senate, with many Republican senators expressing concerns about the benefit cuts and a much narrower working margin. The Senate leadership can only afford to lose two Republicans and still pass the legislation.

To help win over moderate and conservative Republicans, the House leadership released a potential manager’s amendment that seeks to mollify opposition on both sides. The proposed changes are modest and are unlikely to significantly affect the harsh overall impact of the bill on health insurance coverage.

For decades, Amazon.com helped its customers dodge the sales taxes they owed to gain an advantage over its competitors. But as the company’s business strategy has changed, so has its tax collection. As recently as 2011, the nation’s largest e-retailer was collecting sales tax in just 5 states, home to 11 percent of the country’s population. Starting next month, when the company begins collection in Hawaii, Idaho, Maine, and New Mexico, it will officially collect every state-level sales tax in the nation on its direct sales.

Despite this progress, the company’s sales tax collection practices are still not comprehensive. It appears that Amazon is not collecting some local-level sales taxes in states such as Alaska, for instance. And Amazon refuses to require sales tax collection by many third-party sellers using its website, meaning that companies with names such as “Buy Tax Free” are using Amazon.com as a way to allow their customers to evade their sales tax responsibilities. Notably, New York Gov. Andrew Cuomo has proposed fixing this  problem by requiring “marketplaces” with more than $100 million in annual sales to collect sales taxes on sales made by third-party retailers.

But despite its shortcomings, this expansion in Amazon’s tax collection practices represents a step forward for rational sales tax policy. It is therefore worth taking a look at the variety of factors that led to this reversal.

First, and perhaps most important, is that Amazon’s effort to shorten delivery times caused it to open distribution centers around the country. Whenever a retailer establishes a physical presence in a state, it comes within reach of that state’s sales tax collection laws.

Second, state lawmakers have become increasingly frustrated by the sales tax revenue gap created by e-retail and some have taken matters into their own hands by enacting laws expanding their sales tax collection requirements. The U.S. Supreme Court has placed limits on states’ authority in this area, but creative lawmakers have found ways to encourage some e-retailers to collect nonetheless.

Third and finally, it appears that Amazon’s pivot away from facilitating sales tax evasion may be helpful in building goodwill with lawmakers from whom it is asking for subsidies. Good Jobs First estimates that Amazon could soon surpass Wal-Mart as the largest retail-sector recipient of state and local government aid, meaning that it would have received over $1.2 billion in public subsidies.

While the nature of the debate surrounding Amazon and state and local tax policy may be changing, it’s certainly not coming to an end.

State tax debates have been very active this week. Efforts to eliminate the income tax continue in West Virginia. Policymakers in many states are responding to revenue shortfalls in very different ways: some in Iowa, Mississippi, and Nebraska seek to dig the hole even deeper with tax cuts, while the Missouri House’s response has been to slash funding for a property tax program that helps low-income seniors remain in their homes. Other responses include Oregon lawmakers considering sensible reforms to broaden the income tax base and Delaware‘s governor who wants to engage the public and “reset” the budget and tax conversation altogether. In other news, Florida and Oklahoma legislators are reconsidering tax breaks and credits given out in previous years, and several states continue to look at their gas taxes for transportation funding needs as well as reforming other consumption taxes.

— Meg Wiehe, ITEP State Policy Director, @megwiehe  

Major Tax Overhauls Being Debated

• In West Virginia new changes to SB 335 will be moving on to the state’s full Senate Finance Committee for consideration. The bill would still eliminate the state’s income taxes, but over a longer period. Personal income taxes would be decreased to a flat rate of 2.5 percent before phasing out, inching toward elimination if certain triggers are met, between 2023 and 2032. Post personal income tax elimination, if triggers are met, the corporate net income tax would then phase out, followed by a reduction in severance taxes. The elimination/reduction of these taxes would be replaced by an 8 percent general consumption tax and soda and alcohol tax increases.
• Meanwhile, the West Virginia House of Delegates is considering a 5.1 percent flat tax rate for the state’s personal income tax coupled with a 5.5 percent sales tax rate and base broadening.
• Georgia lawmakers are considering a slew of tax changes, including a harmful regressive proposal to flatten the state’s income tax, though that bill includes positive aspects and could be improved with a simple fix.

Varied Responses to Revenue Shortfalls

• Some Nebraska legislators continue to seek tax cuts despite a large and growing revenue shortfall and political disagreement over tax and funding priorities.
• Even after sweeping several special funds into the General Fund, Mississippi lawmakers are still faced with a budget gap, and the state is likely to “collect less revenue than it did the previous year for only the second time in modern history,” a largely self-imposed problem due in part to repeated tax cuts. Some are arguing this needs to be the wake-up call to convince the legislature to cancel the harmful tax cuts passed last year that are to be phased in over the next ten years.
• Soon-to-be Iowa Gov. Kim Reynolds indicated recently that she is on the tax-cut train and plans to cut income taxes under the long-debunked belief that doing so will grow the state’s economy. Meanwhile the revenue forecast has been reduced again, growing the state’s revenue shortfall by $131 million for the current fiscal year and $191 million for the upcoming budget.
• Rather than consider revenue solutions to Missouri‘s fiscal woes, the House has opted to eliminate funding for a property tax circuit breaker program that helps low-income seniors and people with disabilities stay in their homes as their property taxes rise and their incomes remain fixed. A major contributor to the revenue shortfall appears to be unintended consequences of corporate tax measures passed in 2013 and 2015.
• Facing a $1.6 billion budget deficit, some lawmakers have suggested limiting Oregon‘s mortgage interest deduction, which currently costs the state $500 million a year and disproportionately benefits taxpayers in the highest income tax bracket. The bill would cap the deduction at $15,000 and eliminate it altogether for homeowners making over $200,000 (MFJ).
• Delaware Gov. John Carney is holding “budget reset” conversations around the state, asking for input on how to best fill the state’s $350 million budget gap and promoting a balanced approach that includes funding cuts for services as well as additional revenues.
• North Dakota’s revenue shortfall grew again as the official forecast was reduced due to a “double whammy” of low oil prices and farm commodity prices.

Reconsidering Tax Breaks

• The Oklahoma Senate, struggling with the negative effects of recent tax cuts, approved legislation that would repeal the tax cut’s trigger and stop the state’s top 5 percent income tax rate from dropping to 4.85 percent next year.
• The Florida House passed a bill last week with a veto-proof 87-28 vote to eliminate Enterprise Florida, an agency used primarily by Gov. Rick Scott to hand out tax subsidies to businesses.

Transportation Funding Needs

• South Carolina‘s glaring need for a gas tax update to fund repairs to its ailing roads and bridges has been fairly uncontroversial so far, as one version passed the House last week and a slightly larger version has now advanced from a Senate committee, but Gov. McMaster has thrown a potential wrench in the plan by hinting he may veto the bill. Local jurisdictions that share in those costs will be watching closely, especially considering a proposed fix to the state’s underfunded pension system would push costs onto cities, towns, schools, and other local jurisdictions in what one mayor is calling a local “bailout” to cover for state mistakes.
• In other transportation funding news, West Virginia‘s Senate Transportation Committee has advanced a bill to increase some fees and taxes, including a 4.5-cent gas tax increase, to fund the state’s roadways, and both California and Colorado have introduced bills that would respectively increase the gas and sales taxes in order to fund infrastructure.
• Lawmakers from Connecticut, Massachusetts, Rhode Island, Vermont, and New Hampshire are all considering proposals to reduce carbon emissions, possibly moving toward a regional initiative.

Consumption Taxes and More

• Some Connecticut legislators are looking to marijuana as a revenue raiser, using Colorado’s experience as a blueprint.
• The South Dakota Supreme Court has struck down a law requiring online retailers to collect sales taxes, an expected result that puts the question one step closer to being reconsidered in the U.S. Supreme Court.
• Arizona‘s Governor Doug Ducey has signaled his support for extending a 0.6 percent sales tax hike that is set to expire in 2021. In FY 2016, the tax brought in $644 million.
• Struggling to retain qualified teachers, two California senators have introduced a bill that would completely exempt teacher income from the personal income tax.
• A New Jersey lawmaker has introduced a bill to give a $100 tax credit to people who donate blood at least four times per year.
• Nevada lawmakers are now debating adding a property tax floor to some types of properties to help make up for the revenue issues their two property tax caps have caused, adding further complexity and highlighting why these arbitrary caps are not considered good policy solutions.
• The Florida House has advanced a bill to the Senate that would restrict local jurisdictions’ ability to set their own tax rates.

 Governors’ State of the State Addresses

• Most governors have now given their addresses for the year. The next scheduled address is Gov. Kasich of Ohio on April 4.

What We’re Reading…  

• The Rockefeller Institute’s latest report on state and local tax revenues shows revenue growth coming in “much lower than historical averages” and foresees “continued weakness in personal income and overall state tax revenue collections.” The struggles have been worst among oil-dependent states (more on that here and here). The report also outlines some of the many ways federal tax and budget changes are causing difficulties for states and localities (more on that here).
• A new report by Good Jobs First evaluates how well (or poorly) city and county governments disclose the tax incentives subsidizing economic development programs.
• New Jersey Policy Perspective points out that despite the rhetoric of anti-tax crusaders, the share of the state’s population composed of millionaires has continued to rise and the state now has the third-highest share in the nation.
• New Jersey Policy Perspective also released its Blueprint for Economic Justice & Shared Prosperity last week, a set of realistic, research-backed suggestions for improving the state’s tax code and budget practices.

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.

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. 

New Study Explores the 35 Percent Corporate Tax Myth
A comprehensive, eight-year study of profitable Fortune 500 corporations finds that, on average, the nation’s richest firms paid a 21.2 percent effective tax rate between 2008 and 2015, but a significant number (100) managed to pay no taxes in at least one year, 24 paid zero in four out of eight years, and 18 firms paid zero taxes over eight years.

This is the first time ITEP has examined eight years’ worth of corporate data for profitable Fortune 500 firms. The study comes at a time when members of Congress and the Trump Administration have signaled corporate tax reform is a top priority and will focus on lowering the top corporate tax rate. Read more

The Not So Good and Very Awful Elements of the GOP Health Care Proposal
The jig is up. The GOP plan to repeal and replace (and allegedly improve) the Affordable Care Act is a farce of monumental proportions. Not only would repeal be extraordinarily costly based on the most conservative estimates, it would cut taxes on upper-income people while reducing access to care for lower-income people. If enacted, the plan would be successful solely for those whose broader ideological goal is to reduce taxes for wealthy people. Read more

International Women’s Day: A Tax Perspective
International Women’s Day draws attention to progress that has been made and the work that still needs to be done in advancing gender equality. Many campaigns on issues such as equal pay or paid family leave acknowledge that economic policies impact women and men differently. But we often overlook the role governments’ budgeting and taxation practices can play in advancing or preventing progress. Read more

The State Rundown: Much Ado about Consumption Taxes
This week brings more news of states considering reforms to their consumption taxes, on everything from gasoline in South Carolina and Tennessee, to marijuana in Pennsylvania, to groceries in Idaho and Utah, and to practically everything in West Virginia. Meanwhile, the fiscal fallout of Kansas’s failed ‘tax experiment’ has new consequences as the state’s Supreme Court found the state is unconstitutionally underfunding public schools. Read more

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 years, the number one tax policy talking point from corporate lobbyists has been the claim that the United States has the highest corporate tax rate in the world. The story then goes that this high tax rate is driving away business and Congress should move to dramatically lower it.

A new study by the Institute on Taxation and Economic Policy (ITEP) reveals the reality that while corporations face a statutory tax rate of 35 percent, the tax code is so packed full of tax breaks that over eight years our nation’s largest and most profitable corporations paid an average effective tax rate of just 21.2 percent.

The new study, The 35 Percent Corporate Tax Myth, is the 12th edition in a series of studies from Citizens for Tax Justice (CTJ) and ITEP showing the low tax rates that many corporations pay. What makes this new study so unique and powerful is that it examines companies’ tax rates over a full eight-year period. Even given this longer period, the study found that that 18 Fortune 500 companies managed to pay nothing in federal income taxes over the whole 8 years. Overall, 100 of the 258 Fortune 500 companies in the study managed to pay nothing in taxes in at least one year during this period.

Perhaps the most infamous tax avoider in the study is General Electric, which managed to pay nothing in taxes on its $40 billion in profits over the past 10 years. The biggest recipient of tax breaks in the study was AT&T, which avoided $38 billion in taxes over the 8-year period.

Busting the conventional wisdom, the report also found that most multinational companies in the study paid a higher tax rate to foreign governments than to the U.S. government. This means that U.S. tax rates are competitive with those of our major economic partners.

For their part, President Donald Trump and the House GOP leadership appear to buy into the high rate myth. Congressional leaders and the President have each signaled that cutting taxes for corporations will be a major legislative priority in 2017. In his revised tax proposal, President Trump proposed to dramatically cut the corporate tax rate from 35 to 15 percent. His proposal would cut corporate taxes by $2.4 trillion over the next 10 years.

Similarly, the House GOP tax reform blueprint would lower the corporate tax rate from 35 to 20 percent. To make up for some of the revenue loss, the House GOP have proposed a border adjustment tax (BAT), which would exempt revenue from exports from taxation and not allow companies to deduct the cost of imports from their taxable income. Even if the BAT raised the $1.2 trillion it’s estimated to raise (which is a big “if” considering the opportunities for tax avoidance and its potential to be ruled illegal by the World Trade Organization), the plan would still cut corporate taxes by $1.3 trillion over 10 years.

Rather than cutting their taxes even further, Congress should raise more revenue from corporations. The best place to start would be to close the myriad of loopholes, such as the deferral or stock option loopholes, that allow so many companies to pay so little in taxes. In addition, Congress should also mandate that companies disclose detailed financial information on a country-by-country basis so that policymakers and the public have an even clearer picture of how much and where companies are paying taxes. With so many critically needed public investments, corporations should be required to pay their fair share in taxes.

Thursday, March 8 is International Women’s Day. The day draws attention to the progress that has been made and the work that still needs to be done in advancing gender equality. Many campaigns on issues like equal pay or paid family leave acknowledge that economic policies impact women and men differently. But we often overlook the role governments’ budgeting and taxation practices can play in advancing or preventing progress.

Researchers in Western developed countries like the United Kingdom have noted how severe budget cuts in that country placed more of the financial burden on women than men. Because we don’t yet live in an equal society, women earn less than men, receive more public services than men, and are more likely to bear the responsibility of raising children on their own. This means that revenue cuts that impact public programs disproportionately harm women.

A diverse group of ambitious countries, like Sweden, Uganda, and South Korea, have adopted gendered budgeting which intentionally considers the differential impact of revenue changes on women and men. These practices recognize that you can’t address the issue of women’s stunted economic gains if you don’t know how policies are contributing to the problem.

In the U.S., we are a long way from incorporating a gendered lens into our budgeting practices. But we do have several tax credits for working families that do practically (even if unintentionally) target women. As a result, policies that decrease the value or narrow the eligibility of these credits disproportionately impact women. Federal credits include the Child and Dependent Care Tax Credit, which offsets some of the child care costs incurred by women who work outside the home; the Child Tax Credit, which offsets some of the additional costs of raising children and recognizes the importance of investing in the next generation of workers; and the Earned Income Tax Credit (EITC) which boosts the wages of low-income workers.

Some states offer state versions of one or more of the federal credits—only New York and Oklahoma offer versions of all three. But in most states the credits are not refundable. This means a low-income woman can only reduce the tax she would owe and cannot use the refund to pay towards the additional expenses related to her health care or child care, or to boost her pay to compensate for the wage gap.

The effectiveness of these credits is in the hands of lawmakers. One way federal lawmakers can improve the credits is by indexing their value to inflation so they keep place with the increasing costs of child care and other living expenses. Lawmakers in states without these credits that support working families should establish them. This year we’ve seen proposals to establish EITCs in Georgia, Hawaii, Missouri, Montana, and Utah; and a proposal to make Washington state’s EITC fully refundable.

We’ve got a long way to go before we collect and distribute revenue in a way that’s fair and equitable to all women—we haven’t done anything through the tax code to address the economic disparities of women of color or lesbian, bisexual or transgender women—but we have the tools to begin making some progress.

This week brings more news of states considering reforms to their consumption taxes, on everything from gasoline in South Carolina and Tennessee, to marijuana in Pennsylvania, to groceries in Idaho and Utah, and to practically everything in West Virginia. Meanwhile, the fiscal fallout of Kansas’s failed ‘tax experiment’ has new consequences as the state’s Supreme Court found the state is unconstitutionally underfunding public schools. Make sure to check out our “What We’re Reading” section, which is chock full this week with recent research on Earned Income Tax Credits, state and local responses to budget woes and federal uncertainty, and more.

— Meg Wiehe, ITEP State Policy Director, @megwiehe  

• Legislative attempts in West Virginia to restructure the state’s tax system, replacing the state’s personal income, corporate income, and sales and use taxes with an 8 percent general consumption tax, are expected to cost at least $610 million a year as currently structured. The state’s fiscal note warns of potential unintended consequences of the tax shift, such as increased taxes on business inputs and consumers evading the higher tax rate on goods and services. That being said, the state is looking for ways to move forward with income tax repeal.
• Kansas lawmakers return from recess with the added pressure to enact substantive tax reform due to a state Supreme Court ruling that the state is not adequately investing in public education. The state has until June 30 to present a satisfactory plan. As lawmakers continue to work on tax reform, the Senate has clearly indicated that Gov. Brownback’s proposals will not be in the mix.
• Tennessee Gov. Bill Haslam’s “IMPROVE Act,” which combined a needed gas tax update to generate revenue for roads with an unneeded package of tax cuts, may be falling apart. A subcommittee this week replaced the gas tax component of the bill with a sales tax redirection that essentially raids the state’s general fund budget for the money needed for roads, while also cutting taxes that go into the general fund. Gov. Haslam is still pushing to get the gas tax provision of the bill restored. Polls show public opinion on the plan is mixed, though more informed respondents are more supportive.
• South Carolina is setting a better example for what to do when a gas tax falls far behind the times and is no longer bringing in adequate revenue for the state’s infrastructure costs, as the House voted this week to approve raising the rate by 10 cents over five years without tacking on other tax cuts or siphoning off funding from other priorities. The Senate may begin debate on the bill next week, though a filibuster attempt is expected.
• Pennsylvania‘s auditor general suggests the state consider regulating and taxing marijuana to close its budget gap. By doing so, the state could bring in $200 million a year.
• West Virginia‘s Gov. Jim Justice weighs a state tax on sugary sodas as companies in Pennsylvania (namely, Pepsi) fight against Philadelphia’s recent tax increase.
• Lawmakers in Idaho are hoping to get a hearing on a bill that would eliminate the sales tax on food along with the state’s grocery tax credit. Efforts to do the reverse in Utah—reinstate the sales tax on food and enact offsetting tax credits for low-income households—will have to wait for another legislative session.
• It’s potentially a big season for sales and excise tax policy in New Mexico. Amazon will start collecting sales taxes in April, the Senate passed a bill that would raise the gas tax for the first time in 20 years, and lawmakers are considering a $1.50 per pack increase on cigarettes to fund education.
• More than three-fourths of Florida residents polled are against a proposed corporate tax cut, preferring to keep the tax and devote the revenue to education. Of course, that didn’t stop Gov. Scott from proposing more tax cuts in his annual address.
• Despite the state’s $1.7 billion projected deficit, democratic lawmakers in Connecticut are lining up in support of a full exemption of social security income. The plan is expected to cost $45 million a year.

 Governors’ State of the State Addresses

• Governor Scott of Florida gave his address on Tuesday. Most governors have now given their addresses for the year. The next scheduled address is Gov. Kasich of Ohio on April 4, with Gov. Carney of Delaware and Gov. Cooper of North Carolina‘s speech dates still to be announced.

What We’re Reading…  

• A new study from the Carsey School of Public Policy at the University of New Hampshire found that state EITCs are particularly effective tools for reducing poverty, especially among children and households of color.
• Federal Community Development block grants and other housing assistance to state and local jurisdictions are likely on the chopping block, one of many reasons state and local policymakers should keep a close eye on federal developments. The U.S. Conference of Mayors expressed their concern about these and other potential cuts last week.
• NPR lists Iowa, Louisiana, Missouri, and New Mexico as some of the many states cutting higher education funding in response to revenue problems.
• On top of the other fiscal troubles for states and localities mentioned above, many have also already been deferring maintenance on infrastructure for years in response to budget issues in what may amount to a “fiscal time bomb” when the repairs cannot wait any longer.
• The Louisiana Budget Project has released a new blueprint for state tax reform including ITEP analysis, highlighting four key policy recommendations the legislature should enact to end budgetary shortfalls and to reinvest in the state’s prosperity.

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 Monday, House Republicans released legislation that would repeal or modify many of the most significant portions of the Affordable Care Act (ACA). A central theme of the GOP plan is that it would significantly cut funding for low- and middle-income families’ health care, while eliminating the ACA’s expansion of Medicare taxes on the wealthiest taxpayers.

The ACA expanded the Medicare tax so that it currently applies not just to income from work, but also to most investment income received by high-income people. It also increased the Medicare tax rate on the highest income people from 2.9 percent to 3.8 percent. Repealing these ACA taxreforms would slash taxes on the super rich, while 98 percent of all taxpayers would see no tax change.

The most recent Internal Revenue Service (IRS) data show that in 2014 more than two-thirds of the Obamacare Medicare taxes were paid by individuals making more than $1 million. A third of the taxes were paid by individuals making more than $10 million. Repealing these taxes would give tax filers making more than $10 million dollars an average tax cut of more than half a million dollars a year.

Repeal would also be very expensive. According to estimates from the Joint Committee on Taxation, the repeal of the Medicare tax expansions would cost $275 billion over 10 years.

The House GOP proposal would also repeal a series of tax increases on health industry companies such as the medical device tax, a tax on health insurance providers and prescription drug makers. Altogether, the bill would repeal about $594 billion in tax increases.

At a time of growing income inequality, the House GOP is proposing to make things much worse by taking away critical healthcare coverage and support from low- and middle-income families and redistributing the savings from these cuts to pay for tax cuts for the wealthy and corporations.