taxes

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The Week in Public Finance: Do Supermajorities Really Stop Tax Hikes?

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Republican lawmakers in Florida want voters to approve a ballot measure that theoretically would make it harder to raise taxes. But it's debatable whether supermajority requirements actually do.
BY  | JULY 20, 2018
A November ballot initiative would require the Florida legislature to have a supermajority to raise taxes. (TNS/Joe Burbank)

In an effort to protect conservative tax policy, Florida lawmakers are hoping to make their state the 15th with a supermajority requirement to raise taxes.

The push has drawn national attention because it comes as some are predicting a wave of Democratic victories this fall that could pull state policy more to the left. Opponents of the proposed Florida constitutional amendment -- which would require 60 percent voter approval to pass -- say Republican lawmakers put this on the November ballot to “stack the deck” against any Democrats taking office after them.

“It’s very clear that they’re getting ready for when they’re out of power,” Tallahassee Mayor Andrew Gillum, a Democrat, told The Washington Post. Gillum is running for governor on a platform of enacting "Medicare for All" and putting an additional $1 billion into education -- promises that would likely take tax increases to keep. “Everything we have proposed hinges on our ability to defeat this.”

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The Week in Public Finance: Tardy State Budgets, Philly's Soda Tax Sputters and Raising the Debt Ceiling

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BY  | AUGUST 4, 2017
Connecticut state Sen. Majority Leader Bob Duff, left, holds a GOP budget alongside state Democratic President Pro Tempore Martin M. Looney. (AP/Jessica Hill)

And Then There Were Three...

It's been one month since the fiscal year began and three states still don't have a signed budget. Meanwhile, Rhode Island just enacted its budget Thursday night.

Gov. Gina Raimondo signed Rhode Island's new budget almost immediately. The $9.2 billion plan includes a $26 million cut in the car tax, free community college tuition and an increase in the minimum wage, among other policies. The agreement means the governor now has to find $25 million in savings across state government.

The three remaining states without a budget are Connecticut, Pennsylvania and Wisconsin. In Connecticut, the legislature recently approved a new collective bargaining agreement with public employees that’s projected to cover $1.5 billion of the state's estimated $5 billion budget deficit over the next two years. The deal may now help move along negotiations on how to address the rest of the budget gap.

Pennsylvania lawmakers have approved a spending plan, but have yet to address the state’s revenue problems. Key in the coming days will be whether the state’s House approves the Senate’s revenue package that includes several tax increases and expansion of legalized gambling.

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Immigrants Cost Taxpayers, Then Pay More Than Most

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New research shows immigrants ultimately make state and local governments more money on average than native-born Americans.
BY  | JULY 6, 2017
Immigrant boy waving an American flag.
Adult children of first-generation immigrants eventually contribute more than native-born Americans in federal, state and local taxes. (AP/Jacquelyn Martin)

While the national debate rages over immigration, new research shows how much new immigrants cost state and local governments in the short-term -- and how much they pay off in the long-term.

Two studies, one by the Urban Institute and a larger one by the National Academies of Science (NAS), find that first-generation immigrants are costlier to state and local governments than native-born adults, but over time, those effects reverse. While first-generation immigrants cost an average of nearly $3,000 more per adult, the adult children of these immigrants eventually catch up and contribute the most on average to federal, state and local coffers.

Kim Reuben, a senior fellow at the Urban Institute, says the initial higher costs of new immigrants is in large part because of their children. "Education is expensive -- if you have more kids in general as a group compared to other groups, you're going to have higher costs," says Reuben, who co-authored the study and contributed to the NAS report. "But the answer isn't to not educate those kids because we also find that the people who contribute the most to society, even when you control for demographics, are these immigrant [kids]."

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The Week in Public Finance: Trump's Tax Plan, the Tampon Tax and Calling Out the SEC

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BY  | APRIL 28, 2017

Trump Sort of Unveils His Tax Plan

President Trump unveiled his tax reform plan this week, and the massive cuts it proposes have left many wondering how the government would pay for the plan.

Much of the single-page, bullet-pointed statement, which The New York Times called “less a plan than a wish list,” contained promises Trump made on the campaign trail: a much lower corporate tax rate, the elimination of the U.S. tax on foreign profits, a reduction in the number of individual income tax brackets from seven to three, a lower tax rate, and the scrapping of most itemized deductions, including one that lets taxpayers deduct their state and local taxes from their declared federal income.

Treasury Secretary Steven Mnuchin said Wednesday that economic growth, combined with eliminating deductions, would pay for the cuts. Meanwhile, a Tax Foundation analysis of some of these key ideas shows that the plan would ultimately result in more tax revenue for state governments.

States Go Old School to Fight Tax Fraud

D.C. and more than a dozen states are shunning paperless refunds to avoid being conned out of hundreds of millions of dollars.
BY  | MARCH 22, 2017

As fraudsters go high-tech to scam governments for tax refunds, some states are employing decidedly low-tech ways of stopping them.

In 15 states and the District of Columbia, tax returns that are flagged as unusual are issued as a paper refund check. The old-school method comes as tax filers are more susceptible to having their identity stolen. "When there's a suspicious situation, we send paper checks because that has to go to a physical person," says D.C. CFO Jeff DeWitt.

Things that could flag a return include the filer having a new mailing address or using a bank account from previous years.

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The Week in Public Finance: Pensions Protest Bathroom Bills, a Billion-Dollar Showdown in Kansas and More

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BY  | FEBRUARY 24, 2017

Pension Funds Mess With Texas

The country’s largest public pension systems and investors are pressuring Texas officials not to approve a so-called bathroom bill introduced in January. The legislation targets transgender individuals by requiring them to use the public restroom that aligns with the gender on their birth certificate.

Pointing to North Carolina, which lost hundreds of millions in business from canceled sporting events, concerts and conventions after its bathroom bill became law last year, the group warned in a letter that Texas could meet the same fate. Already, the National Football League and the NCAA have said that the siting of future events in Texas would be jeopardized if lawmakers move forward.

The more than 30 signatories on the letter include comptrollers, controllers and treasurers of California, Connecticut, New York, Oregon, Rhode Island and Vermont, as well as major firms such as BlackRock and T. Rowe Price. Collectively, the group represents more than $11 trillion in assets.

The Takeaway: Threats like these aren't new. Called social divesting, stewards of major pensions have increasingly urged corporate boards in recent years to make policy changes, such as pressuring energy companies to move away from fossil fuels.

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The Week in Public Finance: States Vulnerable to NAFTA Changes, New Amazon Taxes and a Credit Ratings Spat

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BY  | FEBRUARY 3, 2017

 

Where a Change to NAFTA Could Hurt the Most

When it comes to trade, a handful of states rely heavily on Canada. That relationship could significantly change if President Trump follows through on his intention to renegotiate the North American Free Trade Agreement (NAFTA).

In an analysis, RBC Capital Markets’ Chris Mauro looks at which states are the most exposed to changes. As it turns out, half of Canada’s exports wind up in the U.S., and 35 states have Canada as their top export destination. Michigan and Illinois are the top destinations, absorbing 16 percent and 11 percent, respectively. Meanwhile, more than two-thirds of North Dakota’s goods land in Canada and nearly half of Maine, Michigan and Ohio’s exports are sent there.

The Takeaway: Trump has called NAFTA a bad deal for the U.S. Although no specifics have been outlined, it’s safe to assume that he would promote more protectionist policies. In his analysis, Mauro warns that “the risk that Canada implements countervailing duties or that the U.S dollar appreciates significantly would severely affect the competitiveness of these U.S. states.”

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

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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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Pleas for More Education Funding Fall Short on Election Day

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Voters in two states rejected measures that would have raised taxes -- either for consumers or corporations.
BY  | NOVEMBER 9, 2016

Voters in two financially-struggling states have struck down proposed tax increases that would have given more much-needed funding to education.

Public education was one of the biggest casualties of the Great Recession. Nearly a decade since it started, nearly half of states are still providing less general funding for schools than they were the year the economy tanked. But the rejections on election night reflect a feeling among taxpayers that governments are punting on a problem by passing on costs to them, rather than making their own difficult decisions.

In Oregon, which is facing a $1.3 billion deficit, voters shot down a proposal to impose a tax hike on corporations with more than $25 million in annual sales in the state. Opponents, largely corporations, called it a sales tax in disguise because they warned businesses would pass on the costs to consumers.

Pat McCormick, a spokesman for the campaign to defeat the tax, told the The Oregonian/OregonLive that Measure 97 "fell of its own weight when people understood what it would do."

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New Jersey Voters Refuse to Build Casinos Outside Atlantic City

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With Atlantic City in financial crisis because of casino closures, the state's voters aren't willing to take any more gambles.
BY  | NOVEMBER 8, 2016

Atlantic City will keep its monopoly on New Jersey's gambling industry. Voters overwhelmingly rejected a ballot measure that would have added two new casino sites in the northern part of the state.

The results are a rare win for the struggling seaside resort town, which has met repeated disappointment in recent years as casinos have closed and pushed the city into a fiscal crisis.

In the weeks leading up to the vote, polling showed the measure headed for defeat. With about half of precincts reporting on Tuesday night, results showed the referendum failing 78 percent to 22 percent.

Although the measure said about one-third of any new casino revenue would have gone to Atlantic City for 15 years for economic revitalization, opponents said they doubted the revenue-sharing proposal would generate enough money to make a difference. Opponents included casino worker unions and Atlantic City-area stakeholders.

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The Week in Public Finance: NYC's $3 Billion in Giveaways, Weak Revenues and Jacksonville's Pension Fix

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A roundup of money (and other) news governments can use.
BY  | NOVEMBER 4, 2016

Why New York City Gave Up $3 Billion in 2016

New York City is the first major government this year to release what it gives up in economic development-related tax incentives to corporations, following new financial reporting requirements. In its annual financial report, the city disclosed that it waived more than $3 billion in potential tax revenue in 2016 alone, mostly in uncollected property taxes.

The tax abatements represent a little under 4 percent of the city’s nearly $80 billion in general fund revenue in fiscal 2016, which ended on June 30.

The most expensive abatement was for the commercial conversion program, which cost nearly $1.3 billion in forgone revenue last year. The program encourages new housing in the city by offering a property tax discount on new construction or on commercial space that was converted into residential housing. Developments have to meet certain requirements, like reserving one-fifth of the units for affordable housing.

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The Week in Public Finance: Petitioning for Bankruptcy, Lost Airbnb Revenue and Downgrading New Mexico

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BY  | OCTOBER 28, 2016

'Put Bankruptcy on the Ballot!'

Activists in financially beleaguered Scranton, Pa., are petitioning for a ballot initiativethat would let residents decide if the city should file for bankruptcy. It’s a first-of-its-kind petition and reflects the ongoing frustrations of a city that's been "fiscally distressed" for two decades.

Scranton is one of Pennsylvania’s Act 47 cities, which designates it as fiscally distressed and opens it up to aid and other resources from the state. The designation also means that the city must comply with certain fiscal requirements, such as developing a recovery plan.

But Act 47 has had its problems, the biggest being that it doesn’t seem to provide enough oversight.

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In Need of Education Funding, States Look to Customers and Corporations

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Tax-raising ballot measures this fall showcase the political power of corporations.
BY  | OCTOBER 21, 2016

Public education was one of the biggest casualties of the Great Recession. Nearly a decade since it started, nearly half of states are still providing less general funding for schools than they were the year the economy tanked.

Two states, however, are asking voters to boost education funding this fall -- but they differ on who should pay for it: customers or corporations.

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The Week in Public Finance: New Jersey's Tax Plan, Online Lending Myths and Cities' Recovery

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BY  | OCTOBER 14, 2016

New Jersey: Between a Rock and a Hard Place

Moody’s Investors Service has panned New Jersey’s plan to beef up its transportation funding, mainly because it does so at the expense of other state programs. The legislature this month approved a 23-cent gas tax increase, which will raise approximately $1.2 billion.

But to offset the tax increase, the legislature also approved tax reductions.

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City Revenues Expected to Finally Recover From Recession

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But cities are still dealing with slow revenue growth and rising costs, according to a new report.

BY  | OCTOBER 14, 2016

 

City revenues have struggled to get back to pre-recession levels. But things may finally be looking up.

On Thursday, officials announced that they expect city incomes to fully recover by next year -- a decade after the start of the Great Recession.

It’s by far the longest revenue recovery period in more than a generation as the bounce back period after the previous two recessions was done in half the amount of time. Currently, officials estimate that city revenues (accounting for inflation) have reached 96 percent of what they were in 2006, the year before the recession started.

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The Week in Public Finance: New Jersey's Tax Plan, Online Lending Myths and Cities' Recovery

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BY  | OCTOBER 14, 2016

New Jersey: Between a Rock and a Hard Place

Moody’s Investors Service has panned New Jersey’s plan to beef up its transportation funding, mainly because it does so at the expense of other state programs. The legislature this month approved a 23-cent gas tax increase, which will raise approximately $1.2 billion.

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Houston’s Plan to Cut Pension Costs in Half Overnight

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Mayor Sylvester Turner is garnering praise for his proposal's comprehensiveness and balance.
BY  | SEPTEMBER 29, 2016

Earlier this month, Houston Mayor Sylvester Turner released his outline for fixing the city's underfunded pension system, an issue that earned the city a credit rating downgrade in March.

Observers say the plan is the best effort yet at solving a problem that has eluded past city officials. If approved, the proposal would immediately cut Houston's unfunded liability by $3.5 billion -- or nearly in half -- while putting Houston on a path to pay off the rest of its pension debt over the next generation.

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The Week in Public Finance: Troublesome Sports Arenas, Buying Muni Bonds and California's Tenuous Recovery

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BY  | SEPTEMBER 23, 2016

Nebraska Town Hit With 'Superdowngrade'

The tiny town of Ralston, Neb., was surprised by a seven-notch "superdowngrade" this week when its arena bonds were sent hurdling into junk rating territory. S&P Global Ratings said it moved the rating from A+ to BB because of the financial strain the building is placing on the city of roughly 6,000 people.

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Would Eliminating Taxes on Services Help or Hurt the Poor?

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As states increasingly look to tax services, Missouri voters can be the first to keep that from ever happening. How that would impact consumers is unclear.
BY  | AUGUST 31, 2016

States have struggled to keep up the same revenue growth as they experienced before the recession. One big reason is that their earnings from sales taxes are declining. That's because these days, consumers are spending far more on services -- most of which aren’t taxed -- than goods, which are.

To remedy the situation, lawmakers have tried and had varying degrees of success expanding the sales tax to services. Massachusetts passed a tax on the cloud and quickly repealed it after the tech industry complained. Pennsylvania enacted the so-called "Netflix tax" on streaming video services. Washington, D.C., added a long list of services to be taxed: yoga, tanning and bowling, to name a few.