More Recent Tax Foundation News: Page 1
Local-level taxes on wages, earned income, or occupational privilege have accumulated in states with poor business tax climates, according to the latest analysis from the Tax Foundation.
In Tax Foundation Fiscal Fact No. 133, tax counsel Joseph Henchman examines the resident and non-resident income tax rates of cities and counties in sixteen different states. Henchman points to six states with widespread local income taxes—Indiana, Kentucky, Maryland, Michigan, Ohio, and Pennsylvania. With the exception of Indiana, all are ranked among the states with the worst business tax climates according to the Tax Foundation's 2008 State Business Tax Climate Index.
Read the new analysis, "County and City Income Taxes Clusters in States with Poor Tax Climates."
Tax Watch is the Tax Foundation's quarterly tax policy newsletter, presenting our economic research and analysis in a simple, non-technical format—ideal for the non-economist looking for a clear explanation of current tax issues.
Highlights from the Summer 2008 issue include:
- Sizing Up Obama's Social Security Tax Plan
- Senate Testimony: Time to Clean Up the Tax Code
- U.S. States Lead World in High Corporate Taxes
- High Gas Prices Fuel Tax Debates
Click here for a free subscription to Tax Watch. Click here to read the new issue (PDF). Click here to read previous issues of Tax Watch.
Senator Obama's tax plan is a dramatic redistribution of the nation's tax burden, according to a new Tax Foundation analysis.
In Tax Foundation Fiscal Fact, No. 132, Tax Foundation president Scott Hodge uses revenue estimates from the Tax Policy Center to show that Obama's plan would greatly accelerate the decades-long trend toward a federal government that depends for tax revenue almost exclusively on a few high-income people. This contrasts starkly with the McCain plan, according to Hodge, which would give every taxpayer a cut and leave the current tax burden distribution approximately where it is.
"Under the Obama plan for 2009," explains Hodge, "more than $131 billion would be redistributed from the top 1 percent of taxpayers to all other taxpayers."
Read the new study, "Hard Numbers on Obama's Redistribution Plan," here. Click here for more on the candidates' tax plans.
In testimony submitted today to the Commercial and Administrative Law Subcommittee of the U.S. House Judiciary Committee, Tax Foundation Tax Counsel Joseph Henchman outlined the importance of a consistent and predictable presence-based standard for business taxation.
"Today, with new technologies, even the smallest businesses can sell their products and services in all fifty states through the Internet and through the mail," Henchman wrote in his testimony. "If such sales can now expose these businesses to tax compliance and liability risks in states where they merely have customers, they will be less likely to expand their reach into those states."
The Tax Foundation testimony made two primary points: (1) the physical presence standard limits destructive and likely unconstitutional state efforts to export tax burdens, efforts that stifle interstate commerce and harm economic growth; and (2) a uniform physical presence standard would decrease transaction costs for interstate commerce, especially small businesses using mail and the Internet.
The hearing was held to consider H.R. 5267, the Business Activity Tax Simplification Act (BATSA), which clarifies that states may only tax businesses that have property or employees in the state. While the Tax Foundation takes no position on the bill, it has catalogued the trend of states shifting tax burdens to out-of-state commerce, which makes democratic accountability difficult and harms interstate commerce.
"The Internet has seen an increased amount of commerce, but some seem to view it as a golden goose that can be squeezed without adverse effects on economic growth," Henchman wrote. "A uniform physical presence standard would restrain these efforts, maintain a level playing field for all types of businesses, and reduce costs and burdens to interstate commerce."
Click here to read the testimony. Read more on business taxes or tax law.
A new Tax Foundation Fiscal Fact examines a package of proposed subsidies and special tax breaks for favored industries, currently under consideration in the Arizona state legislature. Typically, with packages of lobbyist-driven handouts such as these, the actual value to state residents is inversely proportional to the sponsors' soaring language regarding their benefits. So when Arizonans are told that the package's effects will be "bringing in new manufacturing jobs, revitalizing urban areas, attracting tourists, maintaining or expanding the Cactus League and stabilizing the construction market," they should check to make sure they are still in possession of their wallets.
The Arizona State House's press release announcing the proposals grandly reports that "no current general fund money would be used for the projects." Technically, that's true. However, the difference between the government (1) collecting a tax and then cutting a check to a favored business, or (2) exempting that favored business from a portion of its tax liability, is a difference in accounting only. These programs will impose significant costs on Arizona's general fund in the form of tax revenues foregone. In many cases, the special tax benefits will go to businesses or projects that would have existed with or without the new laws, representing a true loss of otherwise-collected revenue.
Read the Tax Foundation Fiscal Fact. Learn more about taxes in Arizona.
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