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    Entries in tax policy (16)


    Despite Budget Shortfalls, Some Governors Call for Tax Cuts

    In addition to new tax breaks, some states are also considering raising gas and sin taxes.

    BY  JANUARY 25, 2017

    Nebraska Gov. Pete Ricketts speaks during a news conference. (AP/Nati Harnik)

    About half of the states are facing budget shortfalls this fiscal year, but many governors are still pushing to cut taxes in their proposed 2018 budgets.

    The proposals vary in scope but generally fall within two categories: comprehensive and targeted.

    Nebraska Gov. Pete Ricketts' proposal is of the comprehensive variety and may be the most aggressive call for tax cuts so far. He is asking for property and personal income tax cuts to be phased in beginning in 2019 -- even as the state faces a $900 million budget gap. Property taxes would be reduced via a new valuation formula and income tax breaks would kick in incrementally and only in years when state revenue grows by more than 3.5 percent.

    On the whole, most of the comprehensive proposals are part of ongoing efforts.

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    Missouri Passes Nation's First-Ever Ban on Services Sales Taxes

    As states increasingly try to tax services like Netflix and yoga, Missouri voters have decided to keep that from ever happening. How that will impact consumers is unclear.
    BY  NOVEMBER 9, 2016

    As more governments look to expand their sales tax to services like Netflix and yoga, Missouri has become the first state to pass a ban on doing so.

    With nearly all precincts reporting, voters approved the ban Tuesday 58 percent to 42 percent, persuaded by the argument that the measure was designed to protect the state's middle class and lower income earners.

    The sales tax is generally seen by economists as regressive, meaning it places a bigger burden on low-income families because it takes a bigger chunk of change from their income.

    “The time was right to make a stand," said Scott Charton, a spokesperson for the ballot measure's backers. "This is a victory for Missouri’s hard-working taxpayers and their families."

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    The Week in Public Finance: Unbalanced Budgets, Alaska's Tax Battle and Creditor Complaints

    A roundup of money (and other) news governments can use.
    BY  JULY 15, 2016

    Unbalanced Budgets

    Fiscal 2017 isn't starting off so well for some states.

    In Mississippi, officials announced they need to withdraw up to $63 million from the rainy day fund to cover declining revenues that left it with an $85 million budget shortfall. The announcement came just two days after the legislature removed the state’s restriction on how much it can withdraw from the fund in any given year. It reduces the state’s savings to just 1.4 percent of its general fund budget. Both moves drew criticism from Moody’s Investors Services.

    Pennsylvania this week was placed on a credit watch by Standard & Poor’s rating agency for passing a budget that failed to offer a spending plan for more than $1 billion of it. Lawmakers eventually agreed on a revenue plan, but it still requires borrowing more than $200 million from a separate state fund.

    Moody’s also criticized Kansas this week for yet another shortfall. We recently mentioned that Kansas is one of four states in a recession, according to federal economic data. Its total tax revenue was more than 7 percent short of what it expected for fiscal 2016. The state has struggled to meet its revenue expectations ever since lawmakers approved income tax cuts in 2012 and 2013.

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    The Week in Public Finance: Defending Wall Street Fees, Ranking Property Tax Rates and More

    A roundup of money (and other) news governments can use.
    BY  JUNE 17, 2016

    Defending Wall Street Fees

    The performance fees that public pension plans pay private equity and hedge fund managers are coming under scrutiny. Some say the high fees aren’t worth the returns on investment and complain that many costs remain hidden. Those two points were part of a critical report last month by the right-leaning Maryland Public Policy Institute on Maryland’s hidden Wall Street fees.

    Now, the Maryland State Retirement Agency has issued a lengthy response questioning the institute’s conclusions. In a letter published this month by Executive Director R. Dean Kenderdine and Chief Investment Officer Andrew C. Palmer, the system’s officials attack the institute’s methodology while defending its own financials.

    Maryland reported paying $85 million in performance fees in 2014, but according to the report it may have actually paid more than $250 million. The policy institute made that estimate by comparing Maryland’s disclosed performance fee rate against the rate of performance fees disclosed by New Jersey, which has a similarly sized alternative investment portfolio and fairly comprehensive fee disclosure policy.

    But Kenderdine and Palmer say Maryland's $85 million in reported fees are accurate because New Jersey has been “much more aggressive in its pacing of investments.” In other words, the private equity funds New Jersey invests in are designed to start producing returns soon after the pension puts money in the fund. Maryland’s private equity funds, however, haven’t hit that so-called harvesting period when investments are sold and managers receive performance fees from that profit, said Kenderdine and Palmer. So the performance fees are smaller but could theoretically be larger in the coming years.

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    The Week in Public Finance: Punishment for Illinois, Budget Battles and New Jersey's Win

    A roundup of money (and other) news governments can use.
    BY  JUNE 10, 2016

    A Battle Over Illinois’ Downgrade

    Illinois was downgraded this week to two steps above junk status by Moody’s Investors Service. The downgrade is largely due to the state’s inability to pass a budget for the past year and a half. A political stalemate has crippled lawmaking in the state and Illinois -- already the lowest-rated state -- is being docked now with a Baa2 rating. The state’s current budget gap has only worsened over the past year. The structural budget deficit, including what Illinois is supposed be spending on pensions but isn’t, amounts to 15 percent of total general fund expenditures, Moody’s said. A day after the Moody's downgrade, Standard & Poor's also downgraded Illinois.

    Apparently unperturbed by the fact that its overwhelming debt is what got it into this pickle, Illinois plans to borrow a half-billion in bonds later this month. The downgrade will likely increase the interest rate Illinois will have to pay on those bonds and impact the state’s outstanding $26 billion in debt.

    Not long after the downgrade, the world’s largest money manager said investors should boycott Illinois’ upcoming sale.

    “We as municipal market pa

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