Patrick Gleason

Runaway Spending: A Bipartisan Problem

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Posted by Patrick Gleason, Nathaniel Rome on Friday, June 26th, 2015, 9:44 AM PERMALINK


In a time when it seems like Republicans and Democrats cannot agree on anything, there is something that appears to have bipartisan agreement: overspending. In an analysis of state government spending in all 50 states, it is clear that all state governments are growing at an unsustainable rate, some more so than others.  

A reasonable baseline is for a state to adjust spending in line with inflation and population changes. Americans for Tax Reform used the Tax Foundation’s handy state spending calendar to find out how state spending over the last decade compared to inflation and population growth. The chart below shows how cumulative state spending in all 50 states has increased at a much faster rate than population growth and inflation. The orange line below shows change in population and inflation from 1999 to 2009. The blue line represents growth in total state government spending during that period.

First, here is the national trend, looking at all 50 states:


(Source: U.S. Census Bureau, Tax Foundation)

This information is more useful if we break it down state-by-state to see who the worst offenders of overspending are. Below is a table of each state and the percent that they overspent beyond the rate of growth the population and inflation over the 10 year period from 1999 to 2009:

State

Overspending  Percent

California

36%

Wyoming

33%

Oklahoma

31%

Mississippi

31%

Kansas

31%

Wisconsin

31%

South Carolina

27%

Rhode Island

27%

Florida

27%

Maine

26%

New Mexico

25%

Indiana

25%

Colorado

24%

Nebraska

24%

Vermont

24%

Pennsylvania

24%

Kentucky

23%

Illinois

23%

Louisiana

23%

Ohio

23%

Maryland

23%

Arkansas

23%

Minnesota

22%

New Jersey

22%

Missouri

22%

Arizona

22%

Delaware

22%

North Carolina

22%

Iowa

21%

Alabama

21%

Idaho

20%

Texas

20%

Tennessee

20%

Michigan

19%

Montana

19%

New York

18%

Alaska

18%

Virginia

16%

Washington

16%

Georgia

16%

North Dakota

16%

Massachusetts

16%

South Dakota

16%

Hawaii

15%

West Virginia

14%

Oregon

14%

Connecticut

14%

Utah

12%

New Hampshire

9%

Nevada

8%

(Source: U.S. Census Bureau, Tax Foundation)

The biggest overspender is (unsurprisingly) California. California alone overspent by nearly $347 billion – more than the GDP of Denmark – over the decade from 1999 to 2009. But what is surprising is that each and every state overspent by billions of dollars. 33 states overspent by more than 20 percent beyond the rate of growth in population and inflation, and all but two states overspent by at least 10 percent.

State budgets have been a mixed bag this year, with some states confronting shortfalls and some who have surpluses. For state lawmakers still grappling with how to balance a budget – either through cutting spending, raising taxes, or a combination of the two – the numbers demonstrate that the problem is on the spending side of the ledger.

 

 
Photo Credit: 
401(K) 2012, https://www.flickr.com/photos/68751915@N05/

Top Comments

ashmcgonigal

If the description of where the numbers came from is accurate, it's hard to imagine anyone taking this graph seriously. Unless the data were rejiggered without mentioning it, this fails to take into account previously-federal spending pushed to the states, and the cost of maintaining a much larger retiree population. In short, ATR is either pushing to institute Carrousel or just plain lying with this report.

bobbymike34

My take on the article;
Timeframe 1999 - 2009 overspending is a cumulative number over that period.

Overspent percentage above population and inflation growth

Example

FY2000 - State A spent $10 billion in 1999 and inflation + population growth is 3% this equates to a budget of $10.3 billion IF State A spent $10.5 billion in 2000 they overspent by $200 million

FY2001 - State A spent $10.5 billion in 2000 (but should have only spent $10.3 remember) and inflation + population growth is 3% this equates to a budget of $10.61 (two years of 3% compounded) billion IF State A spent $10.91 billion in 2001 they overspent by $300 million or $500 million over the two years.

Now you do this for 10 years it is easy to see how even New Mexico could have spend billions (remember accumulated overspending) more than inflation + population dictated.

Betty Bishop

How old are your numbers? What are you deriving your numbers from? New Mexico's entire state budget is less than 8 Billion dollars, so we can not have increased our spending by billions. What is the time frame for the increased spending?


Louisiana Budget Standoff: It’s the Spending, Stupid

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Posted by Patrick Gleason on Thursday, June 11th, 2015, 2:58 PM PERMALINK


Louisiana's legislative session ends at 6 pm this evening and legislators have yet to come to an agreement on to how to balance the budget. The Baton Rouge Advocate referred to the current situation as “Louisiana’s worst budget crisis since the late 1980s.”

Some Louisiana legislators, both Republicans and Democrats, want the budget to be balanced with higher taxes. Already a number of Republican members of the House are on the record voting for over $600 million in higher taxes. Others argue that the current tax code, while in need of reform, brings in sufficient revenue and that the state should put spending in line with available funds.

Looking at historical data, it’s clear the problem with the Louisiana budget is on the spending, not tax, side of the ledger. The chart below shows that Louisiana government spending during last decade grew much faster than the rate of population growth and inflation. The orange line below shows change in population and inflation in Louisiana from 1999 to 2009. The blue line represents growth in Louisiana government spending during that period.

Government Spending in Louisiana (1999-2009):

(Source: U.S. Census Bureau, Tax Foundation)

Had Louisiana politicians kept spending in line with population growth and inflation – a reasonable metric for sustainable budgeting – Louisiana would’ve spent $34.9 billion less in taxpayer dollars than it did during the previous decade. After being hit with the more than 20 federal tax increases signed into law by President Obama in recent years, the last thing Louisiana residents need are higher state taxes.

When it comes to the question of whether Louisiana has a spending or revenue problem – to modify a saying popularized by a famous Louisianan – it’s the spending, stupid. 

Photo Credit: 
Sean Marshall, https://www.flickr.com/photos/7119320@N05/

Top Comments

IBFreeman

ATR gave Jindal the cover to sign off on all these tax increases with their support of the SAVE scheme. ATR really let down it's supporters and stood with the phony Jindal at the expense of tax payers.

Why did you do that??? Why did you fail to suggest cutting out film credits and solar power credits that are only tax credits in name only and should be line item spending in the Louisiana budget.

Does ATR receive any credits from Louisiana?

Kevin

The chart. Above is not only out of date, but also includes federal dollars, which were skewed by Katrina recovery dollars.

Total State funding is way below nominal GDP growth, especially in the past 8 years.
$13.4 million in FY 2004 (pre Katrina)
$14.7 million in FY 2009 (Jindal's 1st budget about same as Blanco's last)
$15.5 million in FY 2015
$14.8 million in FY 2016 (Jindal's last budget proposed, though I believe enacted should be closer to FY 2015)


ATR Response To Louisiana Lawmakers

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Posted by John Beattie McEwan, Patrick Gleason on Monday, June 8th, 2015, 2:55 PM PERMALINK


On Sunday night, Americans for Tax Reform received a letter from a handful of Louisiana legislators with questions about the Taxpayer Protection Pledge, a written commitment that candidates make to their constituents (not ATR) to oppose any and all efforts to raise taxes. Below is the response ATR President Grover Norquist sent back to Louisiana legislators today:

June 8, 2015

Dear Representative Robideaux,

Thank you for the letter you sent Sunday night by fax to Americans for Tax Reform (ATR). You suggest that politicians should take credit for tax cuts passed by previous legislatures. That would allow tax and spending politicians to hike taxes every time they come into office following a tax cut or series of tax cuts. Under that logic, President Obama could argue he didn’t raise taxes.

As I noted in a letter sent to you and your colleagues at the beginning of session, your constituents have already been hit with more than 20 federal tax increases signed into law by President Obama in recent years. Piling on with a net tax increase at the state level will only do more damage to hardworking Louisiana taxpayers.

As you know, Louisiana is not undertaxed. The problem is that some want to spend more than the current tax code collects. You ask about the SAVE Act. ATR does not support or oppose the SAVE Act. While the SAVE Act does include a credit that can be used to offset other tax increases, there are other ways to achieve revenue neutrality, such as by repealing the corporate franchise tax and/or cutting the state income tax. If you don’t like the SAVE Act, why not find other offsetting tax cuts that are more to your liking? ATR is agnostic as to whether a credit or deduction is good policy. We merely call balls and strikes regarding whether a change in tax law results in a net tax increase.

Any change in the tax code that increases the net tax burden is a tax hike. Raising the income tax or sales tax rate, and making no other changes, is a tax hike. Eliminating tax credits or deductions without an offsetting overall rate reduction or tax relief elsewhere is a net tax increase. The Obama administration has argued that removing tax provisions that reduce the tax burden for energy industry employers is not a tax increase. It clearly is. However, removing tax credits or deductions while reducing the tax rate so that the total bill is revenue neutral is not a tax hike.

The government of Louisiana has been overspending for decades and has grown much faster than the rate of inflation and population growth. Fixing that is key to right-sizing state government. While much progress has been made in recent years, it’s clear there is much work left to do. Members of the Louisiana House of Representatives couldn’t even find the political will this year to pass legislation that would end the use of taxpayer resources for the collection of government union dues. The fact that such a commonsense reform couldn’t get done is disconcerting.

As occurs in states across the country, ATR is more than willing to work with lawmakers in Louisiana to help find ways to reform government so that spending is at a sustainable level and tax increases can be avoided.

Sincerely,

Grover Norquist

President

Americans for Tax Reform

Photo Credit: 
Richard Rutter

Top Comments

IBFreeman

The idea that ending corporate welfare like the Louisiana Film Tax "Credits" is raising taxes is ridiculous. It is spending wrapped in the name of credits.

If ATR is going to ever have any credence in this fiscal conservative's mind they will let it be known that contrary to Jindal's claim such cash redeemable, transferrable credits are not tax reductions. They are, in fact, welfare spending.

I doubt you have the courage to challenge the Governor on this issue as the affiliates of these film makers are often the same media he courts for publicity in his ill conceived run for president.

Do the taxpayers in several states a favor and publicly and loudly declare transferrable, cash redeemable film industry credits spending as they are.


Large Share of Jobs Tied to Trade in all 50 States

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Posted by Patrick Gleason on Monday, June 8th, 2015, 8:30 AM PERMALINK


Today, ATR takes a look at the number of jobs in every state tied to trade and the share of the workforce that trade-related jobs account for. These numbers underscore the importance of international trade when it comes to job creation and the livelihoods of individuals and families across the country. 

Percentage/Number of State Jobs Tied to Trade (2013)

1.

Hawaii

32.29% (201,322)

2.

Florida

31.25% (2,400,000)

3.

Vermont

31.18% (95,502)

4.

Idaho

30.95% (197,537)

5.

California

30.67% (4,700,000)

6.

Montana

30.54% (137,632)

7.

New Jersey

30.54% (1,200,00)

8.

Connecticut

30.49% (507,118)

9.

Washington

30.39% (915,225)

10.

Maryland

30.31% (790,950)

11.

Mississippi

29.91% (335,058)

12.

Tennessee

29.90% (829,452)

13.

South Dakota

29.70% (124,179)

14.

Missouri

29.65% (815,374)

15.

Colorado

29.52% (709,826)

16.

Georgia

29.47% (709,826)

17.

Arizona

29.42% (747,837)

18.

Maine

29.39% (177,519)

19.

Nevada

29.37% (350,466)

20.

North Carolina

29.24% (1,200,000)

21.

Virginia

29.19% (1,100,000)

22.

Illinois

29.17% (1,700,000)

23.

Alabama

29.13% (558,334)

24.

South Carolina

29.11% (559,329)

25.

Michigan

29.08% (1,200,000)

26.

Iowa

29.04% (448,445)

27.

New York

29.00% (2,600,000)

28.

Nebraska

28.92% (284,114)

29.

Arkansas

28.89% (342,335)

30.

Utah

28.76% (374,963)

31.

Kentucky

28.67% (529,278)

32.

Oregon

28.52% (484,067)

33.

Delaware

28.49% (123,312)

34.

Ohio

28.47% (1,500,00)

35.

Kansas

28.39% (392,522)

36.

Massachusetts

28.21% (955,486)

37.

Rhode Island

28.10% (132,416)

38.

New Hampshire

27.88% (179,655)

39.

Pennsylvania

27.79% (1,600,000)

40.

Wisconsin

27.56% (785,186)

41.

Minnesota

27.55% (774,730)

42.

Louisiana

27.46% (539,002)

43.

Indiana

26.87% (796,619)

44.

New Mexico

26.78% (217,198)

45.

Alaska

26.73% (90,572)

46.

Texas

26.49% (3,000,000)

47.

West Virginia

24.44% (186,939)

48.

Oklahoma

24.23% (398,589)

49.

North Dakota

23.98% (108,340)

50.

Wyoming

23.36% (68,436)

(Source: Bureau of Labor Statistic, TradeBenefitsAmerica.org)

Congress is now considering whether to grant the White House trade promotion authority (TPA), under which negotiated trade deals are sent to Congress for an up or down vote, but are not subject to amendments. Approval of TPA is critical to the completion of two pending trade deals with European and Asian countries. As Americans for Tax Reform president Grover Norquist pointed out in a recent op-ed for Reuters, “granting the President trade promotion authority is the only way to get prospective trading partners to sit down for time-consuming and complicated negotiations required to reach an agreement.” 

Earlier this week, Americans for Tax Reform released data on the percentage of each state’s GDP that is tied to international trade. Click here to read Grover’s Reuters column explaining how expansion of free trade benefits the U.S. economy and why approval of TPA can’t wait.  

Photo Credit: 
Ingo Vogelmann

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Trade Agreements Crucial to Many State Economies

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Posted by Patrick Gleason on Thursday, June 4th, 2015, 10:00 AM PERMALINK


The House of Representatives is now considering whether to grant the White House trade promotion authority (TPA), under which negotiated trade deals are sent to Congress for an up or down vote, but are not subject to amendments. Approval of TPA is key to the completion of two pending trade deals with Asian and European nations. As Americans for Tax Reform president Grover Norquist pointed out in a recent op-ed for Reuters, “granting the President trade promotion authority is the only way to get prospective trading partners to sit down for time-consuming and complicated negotiations required to reach an agreement.”  

While enactment of trade deals that reduce tariffs and other barriers to trade will grow the economy as a whole, some states have a great deal at stake. The following is breakdown of how much each state’s economy is tied to trade:

Percent of State GDP Tied to Trade (2013)

1. Washington

24.58%

26. Ohio

11.32%

2. Louisiana

22.79%

27. New York

11.15%

3. Texas

21.27%

28. Arizona

11.04%

4. South Carolina

16.89%

29. Nebraska

10.95%

5. Kentucky

16.85%

30. South Dakota

10.70%

6. Vermont

16.61%

31. Minnesota

10.67%

7. Michigan

16.58%

32. Wisconsin

10.48%

8. Utah

15.65%

33. New Jersey

10.48%

9. Mississippi

14.64%

34. Alaska

10.45%

10. Indiana

14.16%

35. New Hampshire

10.17%

11. Tennessee

14.05%

36. Connecticut

10.03%

12. North Dakota

13.85%

37. North Carolina

9.84%

13. West Virginia

13.65%

38. Pennsylvania

9.26%

14. Nevada

13.56%

39. Arkansas

8.69%

15. Delaware

13.56%

40. Missouri

8.40%

16. Illinois

13.15%

41. Montana

8.17%

17. Idaho

13.01%

42. Colorado

7.71%

18. Georgia

12.85%

43. Rhode Island

7.52%

19. Oregon

12.71%

44. Virginia

7.20%

20. California

12.68%

45. Maryland

6.98%

21. Iowa

12.61%

46. Maine

6.76%

22. Alabama

12.24%

47. Hawaii

6.51%

23. Florida

12.04% 

48. Oklahoma

6.10%

24. Massachusetts

11.90%

49. New Mexico

5.75%

25. Kansas

11.45%

50. Wyoming

4.40%

Source: Bureau of Economic Analysis, TradeBenefitsAmerica.org 

Looking at the state-specific impact, it’s clear trade is crucial to the economy of many states. In three states – Washington, Louisiana, and Texas – over a fifth of the economy is linked to exports. Rounding out the top ten list of states whose economies are most reliant on trade are South Carolina, Kentucky, Vermont, Michigan, Utah, Mississippi, and Indiana. In 36 states, over a tenth of the economy is linked to exports. Lawmakers in these congressional delegations in particular will be doing their states a disservice by opposing TPA.

After being approved by the Senate last month, it’s now the House’s turn to act. ATR president Grover Norquist explains why time is of the essence when it comes to congressional approval of fast track authority required to get pending trade deals completed:

“We have a Democratic president who wants fast-track authority. We have a unified GOP Congress that wants to pass it. After the 2016 election, Republicans may not control the Senate. That would doom fast-track authority right there.

“If the authority isn’t granted now, there is a real possibility that the United States may not do any trade agreements for the next decade. Washington cannot afford such a withdrawal from the global economy.”

To read Norquist’s Reuters column in its entirety, click here

Photo Credit: 
World Bank

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Wisconsin Lawmakers Consider Pro-Taxpayer Reforms

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Posted by Patrick Gleason on Friday, May 29th, 2015, 4:49 PM PERMALINK


There are currently several significant reforms pending in Wisconsin that will be decided by state lawmakers in the coming weeks, all of which have major taxpayer implications.

Wisconsin is one of 32 states that has a prevailing wage law on the books, which requires state and local governments to pay inflated wages for taxpayer-funded construction projects. Legislation to repeal Wisconsin’s prevailing wage law, which is supported by Americans for Tax Reform, was passed out of Assembly committee this week.

For lawmakers who are looking to save or free up taxpayers dollars, repealing the state’s prevailing wage law is low-hanging fruit. According to a Wisconsin Taxpayers Alliance study, Wisconsin’s prevailing wage law inflates wages 45 percent above market rates. The study found that the state’s prevailing wage law forced Wisconsin taxpayers to cough up $200 to $300 million in additional labor costs in 2014. The Madison-based MacIver Institute explains how prevailing wage laws cost taxpayers:

“The extra costs associated with prevailing wage are felt all across the state. In Vilas County, an ATV trail along Highway K will cost an additional $150,000 because of the archaic law. In the Village of Grafton, taxpayers were given the bill for an additional $260,000 to cover the maintenance costs of two water towers. No additional work was done in either scenario. Taxpayers simply had to pay more.”

Repealing the state’s prevailing wage law is a great way for Wisconsin lawmakers to save money and get more bang for the taxpayer buck. When Ohio exempted school projects from prevailing wage requirements in 1997, construction costs dropped by 10 percent. Gov. Scott Walker has come out in support of full repeal of prevailing wage. All that’s needed is for lawmakers to send him a bill.

Prevailing wage isn’t the only law that Wisconsin lawmakers should repeal in the coming weeks. Rep. Dale Kooyenga and Sen. Howard Marklein have introduced legislation to repeal Wisconsin’s Alternative Minimum Tax (AMT). Getting rid of the AMT would fix a major flaw in Wisconsin’s tax code.

Originally intended to apply to a small number of high-income filers, the AMT ensnares more and more Wisconsin families every year with higher taxes. In 2011, 5,900 Wisconsin taxpayers paid the AMT. In 2015, Wisconsin’s AMT is expected to jump 450 percent and hit tens of thousands of taxpayers. By repealing the AMT, Wisconsin lawmakers would both improve the state’s tax climate and protect thousands of individuals and families from being hit with higher taxes.

Wisconsin legislators have enacted a number of pro-taxpayer reforms in recent years, but there is still much work to be done and room for improvement. It will be a huge victory for Wisconsin taxpayers if bills to repeal the Badger State’s prevailing wage law and Alternative Minimum Tax make it to Gov. Walker’s desk this summer.

 

Photo Credit: 
Edward Stojakovic

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ATR to Louisiana Lawmakers: Repeal the Inventory Tax

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Posted by John Beattie McEwan, Patrick Gleason on Monday, April 20th, 2015, 3:08 PM PERMALINK


The Louisiana legislature convened its 2015 session last week. Balancing the state’s budget, which faces a projected $1.6 billion deficit, is the top item on the docket this session. Aside from balancing the budget without raising taxes, Louisiana lawmakers could make their state more economically competitive this year by repealing local inventory taxes, which put the state at a tremendous disadvantage.

Recognizing this, Americans for Tax Reform sent the following letter to members of the Louisiana Senate Revenue and Fiscal Affairs Committee encouraging them to repeal the highly debilitating local inventory tax:

April 17, 2015

To: Members of the Louisiana Legislature

From: Americans for Tax Reform

Dear Members of the Louisiana Legislature,

On behalf of Americans for Tax Reform and our supporters across Louisiana, I encourage you to keep taxpayers in mind as you work to balance the budget during the 2015 session. Aside from balancing the budget without raising taxes, one of the best things you can do for the state economy during the 2015 session is repeal the local inventory tax, which is one of the most distortive and anti-growth taxes a government can have on the books.

Inventory taxes are one of the most unsound and economically-damaging forms of taxation, which is why just over a dozen states have them and many states have repealed them in recent years. Rather than focus on maximizing commerce, inventory taxes force employers to instead make decisions based on minimizing their tax burden. Inventory taxes put some businesses at a disadvantage relative to others. They are particularly harmful to large retailers and any other Louisiana businesses that store large quantities of merchandise. Because of the inventory tax, businesses have a great incentive to shift inventory to shipping and storage facilities in other states.

As you know, to make up for the damage done by the local inventory tax, the state provides a state tax credit to businesses that pay it. Rather than have the state try to make up for bad tax policy at the local level, Louisiana legislators would better serve the state by repealing local inventory taxing authority, thereby eliminating the need for a state credit. Allowing local officials to make up the revenue through a less harmful form of taxation, spending restraint, or a combination of the two, would make Louisiana a more attractive place to locate a business, invest, and create jobs.

There will be many calls for higher taxes in the coming weeks. Avoiding tax increases isn’t just good politics, it’s good policy. Tax Foundation economist William McBride reviewed academic literature going back three decades and found that “while there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions and monetary policy."

In McBride's survey of 26 studies dating to 1983, he found "all but three of those studies, and every study in the last 15 years, find a negative effect of taxes on growth." John Hood, chairman of the John Locke Foundation, analyzed 681 peer-reviewed academic journal articles going back to 1990 and concluded that keeping state and local tax and regulatory burdens as low as possible promotes economic growth. "Most studies find," Hood discovered, "that lower levels of taxes and spending, less-intrusive regulation correlate with stronger economic performance."

Your constituents have already been hit with the more than 20 federal tax increases signed into law by President Obama in recent years. Piling on with further tax increases at the state level will hinder economic growth and add insult to injury. I urge you to make the most of this session by eliminating the inventory tax and balancing the budget without raising taxes, both of which would greatly benefit individuals, families, and employers across Louisiana. Americans for Tax Reform will continue to follow these issues closely throughout the session and will be educating your constituents as to how you vote on this important matter. If you have any questions, please contact Patrick Gleason, ATR’s director of state affairs, at (202) 785-0266 or pgleason@atr.org.

Onward,

Grover G. Norquist

President, Americans for Tax Reform 

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Ferry Zed

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Texas Lawmakers Take on The Reviled Margin Tax

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Posted by Sven Werner, Patrick Gleason on Friday, March 20th, 2015, 4:16 PM PERMALINK


Despite being more progressive from a tax policy standpoint than most states, Texas still has a major flaw in its tax code: a gross receipts tax on employers known as the margin tax. The Texas margin tax is complex, unnecessary and keeps small and mid-size businesses from creating jobs. It even applies to companies who don’t make a profit. The good news is lawmakers are working to fix this problem during the 2015 legislative session. Two bills that would reduce the margin tax’s burden on Texas employers, Senate Bill 7 & Senate Bill 8, were approved by the Texas Senate Finance Committee this week.

SB 7 would, if signed into law, reduce the margin tax by 15 percent. SB8 would raise the exemption from $1 million to $4 million and exempt businesses that owe less than $1,000. While either of these bills would be better than passing nothing, cutting the tax rate is better approach than raising the exemption. The best outcome would be to put the margin tax on a path to elimination. There are six bills pending in the Texas Senate that would ultimately do away with the margin tax.

Texas is currently ranked as the 10th best business tax climate on the non-partisan Tax Foundation’s annual index. By getting rid of the margin tax, Texas would improve to the 3rd best business tax climate in the nation. A Texas Public Policy Foundation Report found that, based on dynamic econometric models, repealing the margin tax would lead to the creation of 129, 200 jobs in the first five years after its elimination.

It’s wise for Texas legislators to use the 2015 legislative session to improve their tax code as much as possible. Other states are working to cut taxes this session, even states with relatively competitive tax codes. One example is Tennessee. Like Texas, Tennessee does not tax worker paychecks. However, Tennessee does tax dividend income. Even though Tennessee has a lower state and local tax burden than Texas and all but three other states Tennessee lawmakers are planning to approve legislation this year to phase out their tax on investment income. With other states working hard to make themselves as attractive as possible to investment and job creation, Texas lawmakers cannot rest on their laurels.

Fortunately it looks like some form of margin tax relief will be approved this year. Texas Gov. Greg Abbott (R) recently declared that he “will reject any budget that does not include genuine tax relief for Texas employers and job creators.” A great way for legislators to send Gov. Abbott what he has requested is to pass legislation to end or at least significantly cut the margin tax.

 

Photo Credit: 
Stuart Seeger

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Pennsylvanians Facing Historic Tax Increases with Gov. Wolf's New Budget

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Posted by Sven Werner, Patrick Gleason on Wednesday, March 18th, 2015, 3:28 PM PERMALINK


Recently Pennsylvania Gov. Tom Wolf presented his first budget, which includes the largest state tax increase in Pennsylvania history. His budget proposal of $33.6 billion represents a 16 percent increase over last year’s budget.

This increase of the income tax rate would mean a $2.3 billion net increase for Pennsylvania's taxpayers.  According to his budget, the income tax rate will be raised by 20%, from 3.07% to 3.7%. This proposed income tax increase, were it to become law, would have a significant negative effect on Pennsylvania taxpayers.  For a household making $60,000, it would raise their state income tax bill from $1,842 to $2,220, or an increase of $378.

Gov. Wolf’s budget proposal is historic, and not in a good way, as his proposed $4.5 billion state tax increase would be the largest increase in Pennsylvania history. Gov. Wolf uses these tax increases to increase spending by $800 million.

Senate Majority Leader Jake Corman (R-Centre) has called out the problems with Gov. Wolf’s plan:

“You don’t raise $4.5 billion in taxes to increase spending by $800 million,” Senate Majority Leader Jake Corman, R-Centre, said after the governor gave his address Tuesday. “Come on. Let’s all deal in reality here.”

Not only will Pennsylvanians face an income tax increase, but also an increase of the sales tax from 6 to 6.6 percent. In addition, under Gov. Wolf’s budget, many goods that have been exempt from the sales tax would be taxed, include nursing care, parks, and textbooks. It’s ironic that Gov. Wolf wants to start taxing textbooks, when at the same time he increases spending on education.

Wolf’s proposed budget hurts the economy’s driving forces the hardest: small business owners

The National Federation of Independent Business calls “small business the biggest loser in governor’s proposed 2015-16 state budget.” According to IRS data, over 776,000 small businesses file under the individual income tax system and Gov. Wolf’s budget would leave them with less income to hire more workers, give raises to current workers, and invest in Pennsylvania. That IRS data only accounts for sole proprietors. Including the share of small businesses made up of S-Corps and partnerships, a couple hundred thousand more small businesses that file under the individual income tax system in Pennsylvania and would be adversely impacted by Gov. Wolf’s budget.

Elections have consequences. Pennsylvania taxpayers will likely face perennial tax hike threats from Gov. Wolf. Fortunately, the Republicans-controlled legislature is less inclined to drain more money from the private economy to increase government coffers.

 

Photo Credit: 
Ad Meskens

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Texas Lawmakers Look to Increase the Lone Star State’s Tax Advantage

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Posted by Sven Werner, Patrick Gleason on Friday, March 6th, 2015, 2:35 PM PERMALINK


Texas has been a role model in terms of governance, tax reform and job creation, but it still has a major flaw: a gross receipts tax on employers known as the margin tax. The Texas margin tax is complex, unnecessary and keeps small and mid-size businesses from creating jobs. It even applies to companies who don’t make a profit.

Its elimination would move Texas from being currently ranked 10th at Tax Foundation’s Business Tax Climate Index to 3rd best in the nation.  A Texas Public Policy Foundation Report  found that, based on dynamic econometric models, repealing the margin tax would lead to the creation of 129, 200 jobs in the first five years after its elimination.

The good news is that legislation to get rid of the margin tax, Senate Bill 105, is being considered by legislators. Texas Gov. Greg Abbott stated that he “will reject any budget that does not include genuine tax relief for Texas employers and job creators.” A great way for legislators to send Gov. Abbott what he has requested is to pass legislation to end the margin tax.

Other states are working to make their tax codes more competitive by cutting rates and providing relief to individuals, families, and employers. As such, Texas lawmakers cannot rest on their laurels. Americans for Tax Reform reached out to Texas legislators today to urge them to repeal the margin tax. A copy of s letter can be found below:

March 6, 2015

Dear Members of the Texas Legislature,

On behalf of Americans for Tax Reform and our supporters across the Lone Star State, I urge you to keep taxpayers in mind as you consider the issues that will come across your desk during the 2015 legislative session. There are two main things that you can do to protect Texas taxpayers and stoke economic growth: 1) rein in the unsustainable trajectory of state spending, which can be accomplished by instituting a true and unbustable state spending cap; and 2) eliminate the state’s business tax, otherwise known as the margin tax.  

As has been noted in Forbes, even relatively-well governed states like Texas face significant fiscal challenges. A Texas Public Policy Foundation report titled “The Conservative Texas Budget,” outlines a series of smart policy recommendations and reforms to rectify Texas’s overspending problem that, while not as bad as that of some states, is still a major problem. One of those proposed reforms, the institution of clear and achievable spending limits, is the best step that lawmakers could take to protect Texas taxpayers.

I also write today to urge you to use the 2015 session to rid Texas of the margin tax. As you know, legislation, Senate Bill 105, has been filed that would do just that. The Lone Star State has been a model for other states on numerous matters of governance, and for good reason, but the margin tax is the one major blight on the state’s otherwise stellar business tax climate and now is the perfect time to unlock the state’s full economic potential by repealing this misguided tax.

The margin tax reduces the job-creating capacity of Texas businesses and does so in an incredibly onerous way at that. As the Texas chapter of the National Federation of Independent Businesses put it, the margin tax is "crippling the small and mid-sized businesses” throughout the state. In addition to the harm it does to employers, economists of all political stripes agree that it is one of the worst ways to raise revenue. Professor John Mikesell, an expert in public finance at Indiana University, has described the margin tax as a "badly designed business profits tax...combin[ing] all the problems of minimum income taxation in general—excess compliance and administrative cost, penalization of the unsuccessful business, undesirable incentive impacts, doubtful equity basis—with those of taxation according to gross receipts."

The tax is so complex – it applies variably to different industries and types of businesses – that the costs to comply with this levy for some employers are actually greater than their tax liability. One of the more egregious aspects of the margin tax is that it applies to companies without regard as to whether a profit was generated, meaning businesses that lost money can still end up having a margin tax liability.

A recent TPPF report found that, based on dynamic econometric modeling, eliminating the margin tax could result in a gain of $10.8 billion in new real personal income in the first year and a personal income boost of $16 billion in the first five years. The report also found that repealing the margin tax could generate an additional 129,200 jobs over the next five years. Texas is currently ranked as having the nation’s 10ths business tax climate the 3rd best in the country.

 

Other states are eager to compete with Texas for jobs. In fact, a number of states have passed tax reform in recent years that seeks to make them more competitive with Texas, and over a dozen are set to pursue such policies in 2015. It’s important for Texas lawmakers to not rest on their laurels. In order to stay ahead of states that wish to entice employers away from Texas, it would behoove legislators to repeal, or begin phasing out, the margin tax in 2015. It’s time to eliminate this unnecessary impediment to private sector growth and job creation. It’s also time to right the unsustainable trajectory of state spending, which can be accomplished with a robust spending cap, like the one proposed by TPPF.

 

When good ideas come out of Texas, such as smart criminal justice reform, it’s easier to take them elsewhere because other states rightfully want to emulate Texas. But that can cut both ways. For example, a Texas-style margin tax was on the Nevada ballot last year. The pro-margin tax campaign there basically had one talking point: “Texas has a margin tax, so it must be a good idea.” Fortunately Nevada voters were smart enough to reject that ballot measure. Killing the margin tax will be good for the Texas economy, but it will also make it less likely that such a damaging tax will be adopted elsewhere.

I urge you to use the 2015 session to give a boost to the Texas economy by getting rid of the margin tax. Americans for Tax Reform will continue to follow these issues closely throughout session and will be educating your constituents as to how you vote on these important matters. If you have any questions, please contact Patrick Gleason, s director of state affairs, at (202) 785-0266 or pgleason@atr.org.

Onward,

Grover Norquist

      President, Americans for Tax Reform

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