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Will Upton

Tennessee Voters to Decide on Permanently Barring State Income Tax

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Posted by Will Upton on Tuesday, October 14th, 2014, 5:00 AM PERMALINK


A Constitutional Amendment on the November Ballot would bar Tennessee from ever enacting state or local income tax.

Amendment 3: “No State Income Tax Amendment” – Tennessee Amendment 3 is a legislatively referred ballot measure that would prohibit the state government and local governments from instituting a state or local income tax. The ballot measure reads: “ Shall Article II, Section 28 of the Constitution of Tennessee be amended by adding the following sentence at the end of the final substantive paragraph within the section: Notwithstanding the authority to tax privileges or any other authority set forth in this Constitution, the Legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income or any state or local tax measured by payroll or earned personal income; however, nothing contained herein shall be construed as prohibiting any tax in effect on January 1, 2011, or adjustment of the rate of such tax.”

Currently, Tennessee is one of nine states without a state individual income tax – though the state does have what is called “The Hall Tax” which is a 6% tax on dividends. Despite a 1932 Tennessee Supreme Court ruling that struck down a state income tax, tax and spend proponents have argued that there are now legal grounds to institute an income tax in Tennessee. The passage of Amendment 3 would enshrine Tennessee’s position as a no-income tax state in the state constitution and require a much greater threshold to enact a state income tax.

State Senator Brian Kelsey, who sponsored the referendum, argues, “If this amendment passes, Tennessee will never face an income tax battle again… Not having a state income tax has already brought jobs to Tennessee, and clarifying this prohibition will help Tennessee become the number one state in the Southeast for high quality jobs.”  Writing in Forbes, Travis H. Brown of How Money Walks notes: “Tennessee is a significant player in the Heartland tax revolution, creating real opportunities for working families while Washington, D.C., sputters and stagnates on tax reform. Heartland states understand the need to compete, both on a national and international stage. A yes vote on Amendment 3 sends the clearest of messages: In order to stay competitive, Tennessee must eliminate the possibility of an income tax, today and tomorrow.”

“Tennessee and the other eight states without an income tax have outperformed the United States average in the categories of population growth, economic growth, and employment,” said Grover Norquist, president of Americans for Tax Reform. “By approving Amendment 3 this November,” added Norquist, “Tennessee voters can ensure that their state maintains this competitive advantage over other states, regardless of the partisan and ideological makeup of future state legislatures.”

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Simon Cunningham/LendingMemo

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Marijuana Tax Hike Could Go Up in Smoke

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Posted by Will Upton on Friday, October 10th, 2014, 4:20 AM PERMALINK


The Washington state legislature hiked taxes on marijuana, will the voters buy it on the ballot?

Washington State has a non-binding Advisory Question on this year’s ballot, Advisory Question 8: “Concerns Marijuana Excise Tax”. Advisory Question 8 deals with the state’s recently legalized marijuana industry, specifically, the state legislature’s decision to essentially deem the industry non-agricultural – exposing consumers to a higher tax burden than they would have with other agricultural products. All-in-all, consumers will face a $24.9 million tax increase over the next decade. The ballot language reads: “The legislature eliminated, without a vote of the people, agricultural excise tax preferences for various aspects of the marijuana industry, costing an estimated $24,903,000 in the first ten years, for government spending. This tax increase should be:
[  ]  Repealed [  ]  Maintained”

The Advisory Question was placed on the ballot after the passage of Senate Bill 6505. The legislation redefined the marijuana industry, declaring it non-agricultural, exposing consumers to higher taxes.

In Washington State, Advisory Questions were once part of a broader provision that was frequently enacted via initiative that required a two-thirds supermajority of the legislature to raise taxes. Tax increases could also be placed on the ballot for voter approval. The Advisory Question was the only provision to survive the state Supreme Court striking down the statute requiring a two-thirds supermajority of the legislature to increase taxes in 2013. The grounds for the decision were based on the argument that preventing tax hikes somehow prevented the “adequate” funding of education.

Advisory Question 8 will be an interesting issue to watch as Washington State voters have had a long streak of opposing tax increases.

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Austin Chronicle / Chronicle Promotions

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Another Tax Revolt in Massachusetts?

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Posted by Will Upton on Thursday, October 9th, 2014, 5:00 AM PERMALINK


Massachusetts voters could scrap a new law that indexes the state gas tax to inflation.

Question 1: “Eliminating Gas Tax Indexing” – An initiated state statute, Question 1 could repeal a law passed this past legislative session indexing the Massachusetts state gas tax to inflation – eliminating a vote-less backdoor tax hike on taxpayers. The initiative reads “This proposed law would eliminate the requirement that the state’s gasoline tax, which was 24 cents per gallon as of September 2013, (1) be adjusted every year by the percentage change in the Consumer Price Index over the preceding year, but (2) not be adjusted below 21.5 cents per gallon.” Voters are told: “A YES VOTE would eliminate the requirement that the state’s gas tax be adjusted annually based on the Consumer Price Index. A NO VOTE would make no change in the laws regarding the gas tax.”

In addition to the ballot language, voters are also presented with an argument in favor of eliminating the gas tax indexing, as well as an argument against. The initiative has the support of several legislators and Jeffrey T. Kuhner (President of the Edmund Burke Institute for American Renewal) who notes in The Washington Times: “…the law is more than a corrupt attempt to hike taxes through the back door. It represents a fundamental assault on the very basis of our constitutional republic: No taxation without representation. This law does the very opposite. It enshrines the pernicious principle of taxation without representation. Democratic lawmakers have given themselves a free pass from voting for any future gas tax increases. This violates the basic precept of self-government – namely, that elected representatives can only raise the people’s taxes with their explicit consent through a vote in the legislature. The precedent is ominous. Today, it is gas taxes that will be hiked automatically. Tomorrow, it will be property, sales and income taxes. It is liberal corruption at its worst – a one-party regime that doesn’t even pretend to care about democratic accountability and government transparency.”

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The Kansas Tax Cuts Are Not to Blame for Revenue Woes

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Posted by Will Upton on Thursday, October 2nd, 2014, 1:28 PM PERMALINK


Several pundits, including the New York Times's Paul Krugman, have made hay over Kansas’ “revenue shortfall” this past fiscal year, chalking it up to the historic 2012 and 2013 Kansas tax cuts. At first glance, one might suppose them correct. Indeed taxes were cut and revenue did fall. But their 30,000 foot view passes over the more likely culprit behind the $338 million revenue drop – a change in the federal capital gains rate, caused by President Obama’s forced expiration of some of the Bush tax cuts.
 
The Kansas tax reforms did not cause the revenue shortfall. According to the Kansas Department of Revenue (KDOR), the shortfall stands at about $338 million for FY 2014, which ended on June 30. Now, $103 million of that—nearly a third--can be squarely blamed on the Division on the Budget increasing its revenue estimate just months before the end of the fiscal year. In the beginning of April 2014, the Division on the Budget increased their revenue estimate from $235 million to $338 million, citing strong economic indicators. The revision occurred right before Division on the Budget realized that their revenue estimates for the year were off beyond what could be considered a standard deviation. If you subtract the $103 million revenue error and use the original revenue projection, the shortfall is only $235 million.
 
As ATR has argued—and backed with CBO data—in the past, the shortfall is mainly due to a shift in capital gains payments by taxpayers into the prior fiscal year to avoid higher rates caused by the expiration of some of the Bush tax cuts (namely the increase in capital gains tax). Several states experienced surplus revenue in 2012-2013 (Virginia, Connecticut, and New Jersey) but are now experiencing deviations from initial revenue estimates or downward revisions in state revenue for 2013-2014. In Connecticut, for example, Democrat Gov. Dan Malloy’s budget director blamed their $400 million decrease in projected revenue on the capital gains shift prompted by the Fiscal Cliff.
 
Josh Barro in the New York Time’s “The Upshot” argues that if you reduce taxes you will get less revenue. No one is arguing with this assertion, at least in the short term. In fact, KDOR agrees with Barro: “The initial estimate for FY 2014 is $5.464 billion, which is $704.8 million, or 11.4 percent, below the newly revised FY 2013 figure. Factors influencing this forecast in addition to the state of the economy include the fully annualized impact of the new state income tax law that is effective in tax year 2013….” For Barro and other critics, the shortfall is proof-positive that Brownback’s tax cuts have wrecked the Kansas economy, except that there is, again, plenty of evidence that the error has more to do with federal tax policy than state tax policy.
 
As noted above, the shortfall actually stands at about $235 million for this past year. Duane Goossen, a former Kansas Budget Director who served under three governors (one Republican, two Democrats), has estimated that the capital gains shift possibly cost Kansas $147 million in tax revenue: “If Kansans had claimed another $3 billion of income for 2013 and that income had been taxed at the upper rate of 4.9 percent (the highest rate in place for tax year 2013), at most $147 million would have been added to state income tax collections in FY 2014… Even $147 million in additional tax receipts... would not have stemmed the tide of our state's $712 million revenue drop.” 
 
A critic of the tax cuts, Goossen uses a gimmick to make the capital gains shift look minor by comparing it to year-to-year revenue (a much larger drop but one anticipated and factored into the revenue estimate by the Division of the Budget) as opposed to the estimating error as it stands. If compared to the past year’s shortfall, the capital gains shift caused by President Obama’s intransigence makes up roughly 62.5% of the revenue shortfall (using Goossen’s $147 million estimate).
 
Additionally, $10 million of the revenue shortfall can be attributed to a drop in Kansas’s excise tax collections in the first quarter of 2014. This coincides with the negative GDP growth experienced by U.S. during the same period. Negative growth suppresses consumption and would throw off excise tax revenue estimates.
 
In the end, the Kansas tax cuts may account for a net revenue deviation of about $78 million – or 1.5% of Kansas’s total revenue collections, projected to be $5,986,481,000 this past year. Anything below a deviation of 2% is something most states that have not enacted major tax reform experience on an annual basis. As to worries of a future shortfall and lost revenues, most responsible legislators in Kansas will tell you that there needs to be some spending restraint in the state and it is their intention to enact said restraint, avoiding any further revenue woes. In short, the Kansas revenue shortfall is little more than hyperventilating scare tactics. Don’t’ believe the fever-pitch hype.
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Wisconsin Democrats Don't Know Much about Taxes

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Posted by Will Upton on Wednesday, September 17th, 2014, 3:18 PM PERMALINK


Wisconsin Gov. Scott Walker (R) has come under fire from his Democrat challenger Mary Burke and the Wisconsin Democrat Party for rolling back the Wisconsin Earned Income Tax Credit (EITC). Despite passing historic tax cuts, Walker’s Democrat opponents insist that he has raised taxes on Wisconsin’s middle class. It appears that Democrat Mary Burke and her allies need to brush up on their tax policy, because they are flat out wrong. 

The thrust of the Wisconsin Democrat attack on Gov. Walker is that he cut the Wisconsin EITC while in 1986 President Ronald Reagan expanded the Federal EITC. Thus Gov. Walker raised taxes while President Reagan cut them. Unfortunately for Mary Burke and the Wisconsin Democrat Party, there is little truth in their attacks.

Here are the facts: In both instances, the EITC is refundable, meaning that even if a taxpayer is able to zero-out their personal income tax liability, they can still claim the credit and receive money from the state. Simply put, the EITC allows for the government to use the tax code to spend money. The U.S. Congress’s Joint Committee on Taxation scores all refundable tax credits as spending, not as tax cuts. Democrat candidate Mary Burke, in an ad attacking Gov. Walker, praised President Reagan for expanding the EITC, saying he had a “good idea about taxes.” Burke shows a complete lack of understanding of what the EITC is by tying it to taxes. Again, Congress’s own Joint Committee on Taxation scores the EITC as spending. The Wisconsin Democrat Party takes a similar line as Burke, again showing a complete lack of knowledge regarding the EITC and what it is actually scored as. Gov. Walker did not raise taxes on Wisconsin's middle class, nor was President Ronald Reagan's expansion of the EITC a tax cut for the middle class. The EITC is scored as spending, not a tax cut or a tax increase.

In reality, Gov. Walker – by rolling back the Wisconsin EITC – cut state spending reducing the state’s reliance on taxpayers. Since taking office in 2010, Gov. Walker has enacted over $2 billion in tax relief, while creating a more efficient and effective state government that is not burdensome to taxpayers or a hindrance to economic growth.

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ATR Releases List of 2014 State Pledge Signers Ahead of Elections in Tennessee

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Posted by Jorge Marin, Will Upton on Wednesday, August 6th, 2014, 4:11 PM PERMALINK


As the Tennessee primary approaches, Americans for Tax Reform has released a new list of state legislative and state-wide candidates seeking office who have signed the Taxpayer Protection Pledge. These candidates have shown a strong commitment to their state’s taxpayers by putting their convictions against new and/or higher taxes in writing. Please show your support at the ballot boxes on Thursday, August 7th.

The list for Tennessee is as follows:

 

Incumbents

 

  • Mae Beavers (S-17)
  • Jack Johnson (S-23
  • Bill Ketron (S-13)
  • Randy McNally (S-5)
  • Steve Southerland (S-1)
  • Harry Brooks (H-19)
  • Kevin Brooks (H-24)
  • Glen Casada (H-63)
  • Bill Dunn (H-16)
  • Jeremy Faison (H-11)
  • Steve Hall (H-18)
  • Beth Harwell (H-56)
  • Ryan Haynes (H-14)
  • Matthew Hill (H-7)
  • Curtis Johnson (H-68)
  • Kelly Keisling (H-38)
  • Jon Lundberg (H-1)
  • Steve McDaniel (H-72)
  • Steve McManus (H-96)
  • Dennis Powers (H-36)
  • Courtney Rogers (H-45)
  • Charles Sargent (H-61)
  • Tony Shipley (H-2)
  • Mike Sparks (H-49)
  • Terry Weaver (H-40)
  • Rick Womick (H-34)

 

Challengers

 

  • James R. “Jim” Finney (S-29)
  • Matt Swallows (S-15)
  • Dan Howell (H-22)
  • Tonya Miller (H-53)

 

Photo Credit: Corey Seeman

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Kansas Tax Cuts Are Working

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Posted by Will Upton on Wednesday, July 2nd, 2014, 9:54 AM PERMALINK


Despite the objections of some – perhaps biased – observers, the Kansas tax cuts appear to be working. Christopher Ingram at The Washington Post’s Wonkblog declared the failure of the Kansas tax cuts based on a single metric – when compared to average US job growth, Kansas job growth has lagged. It should also be of note that Ingram bases part of his criticism off of a Center for Budget and Policy Priorities (CBPP) study, citing them as a “nonpartisan think tank” – the The New York Times has called CBPP “left-leaning”, The Washington Post has called them “progressive”, and Time Magazine has called them “liberal” as has the National Journal.

To really understand the success of the Kansas tax cuts, one would need to look not at a US aggregate of unemployment data, but at the Kansas-Missouri border where two states share a split metro area and for all-intents-and-purposes a porous boundary.

  1. Bureau of Labor Statistics data details a significantly better trend for Kansas as opposed to Missouri following the passage of the first round of tax cuts in 2012. In the year 2012, both Missouri and Kansas saw significant drops in state unemployment rates. Kansas began in January, 2012 with a rate of 6.1% and finished out the year at 5.4%. Missouri began 2012 at 7.5% and finished out the year at 6.7%. However, in 2013 after the 2012 Kansas tax cuts had kicked in, the two states diverged. Kansas continued to reduce their unemployment rate, dropping from 5.5% in January 2013 to 4.9% in December. Missouri, on the other hand, saw their rate fluctuate – beginning the year at 6.5%, then climbing to 7.2% in August of 2013 before finally seeing a drastic drop in December to 5.9% (partially due to holiday hires in the retail sector – note: this applies to Kansas as well). The preliminary rates for 2014 show Kansas holding steady at 4.8% (comparable to nearby Iowa holding steady at 4.3/4.4%, Nebraska at 3.6%, and Colorado around 6%). Missouri, unlike Kansas, has seen their unemployment rate increase – moving from 6% in January of 2014 to 6.6% in May.

 

  1. An examination of the non-farm employment data provided by the BLS for the Kansas City Metro-Area, specifically, shows a drastic shift of employment growth from the Missouri side to the Kansas side:


The greatest job growth in the Kansas City metro-area has been generated in Kansas, not in Missouri. It is arguable that the 2012 spike was caused by businesses anticipating a better tax climate in Kansas after the 2012 tax cuts.

From a broader regional view, Kansas still remains a relatively high tax state with a top rate of 4.9% – at least until further income tax rate reductions kick in. Colorado, by comparison has a flat rate of 4.63%. Prior to 2013, Kansas was higher – at 6.3% – than Missouri which has a top rate of 6%. Additionally, the current 4.9% rate is relatively on par with Oklahoma which has a top rate of 5.25% - though, again, prior to 2013 the top rate in Kansas was higher.

While the state budget shortfall has made news, there is strong evidence that most of the shortfall can be traced to federal tax policy changes and not state changes – though Josh Barro writing at The New York Times disagrees. CBO data, that I have detailed here, points to a shift in capital gains filings out of 2013 and into the end of 2012 to avoid President Obama’s “Fiscal Cliff” which resulted in an increase in the federal capital gains tax. This left many states – from California to Connecticut – with shortfalls and downward revisions in revenue projections this past tax year. Long story short, other states who have not enacted tax reforms like Kansas are also struggling with the accuracy of their revenue projections this year.

One final note, Kansas is required by law to have a balanced budget, unlike the Federal government. A significant budget surplus this year will alleviate much of the concern with the lower than expected revenue collections. Opponents of tax reform and spending interests want to try and write an early obituary for the Kansas tax reform. Unfortunately for them, the tax cuts are working and will continue to improve the Kansas economy for years to come.

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ATR Releases List of 2014 State Pledge Signers Ahead of Elections in Colorado, Maryland, Oklahoma, and Utah

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Posted by Jorge Marin, Will Upton on Thursday, June 19th, 2014, 3:17 PM PERMALINK


With the primary elections of several states slated to take place Tuesday, Americans for Tax Reform has released an updated list of incumbents and challengers for state legislative and state-wide office who have signed the Taxpayer Protection Pledge for the states of Maryland, Oklahoma, Utah, and Colorado. These candidates have made a written commitment to their constituents to oppose any and all efforts to increase taxes. ATR strongly encourages taxpayers to consider those who have made this commitment when they vote on Tuesday, June 24. The list of incumbents and challengers who have signed the Taxpayer Protection Pledge and will be on the ballot Tuesday can be found in the following links:

Colorado

Maryland

Oklahoma

Utah

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D.C. Budget Provides Overall Tax Relief for City Residents

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Posted by Will Upton on Friday, June 6th, 2014, 12:25 PM PERMALINK


For the first time in 15 years, residents of the District of Columbia will receive significant tax relief. The budget, approved by the city council would provide a net $158 million in tax relief over the next five years. Initially, the tax cuts would impact low and middle income residents – once fully phased in, residents earning up to $1 million a year would see income tax relief as well as tax relief on inheritance.

It was incorrectly reported that Americans for Tax Reform supported the expansion of the city sales tax to yoga and gym services specifically. Americans for Tax Reform does NOT endorse this tax increase, NOR do we endorse the targeted excise tax increase on high-end tobacco products, among others. We do acknowledge that the overall budget is a net $158 million tax cut on District of Columbia taxpayers and view this as a step in the right direction.

While sound tax reform often involves expanding the sales tax base, ending credits and deductions, and lowering overall tax rates accordingly – in at least a revenue neutral manner – the Washington, D.C. city council would have better served taxpayers by eliminating wasteful spending and outdated city programs to pay for income tax relief. Too often politicians engage in tax shifting – hiking taxes on specific industries to pay for broad based income tax relief. Tax shifting is NOT sound tax policy.

The net income tax cut for taxpayers in the city budget is a step in the right direction for an overtaxed city like Washington, D.C. However, taxpayers and members of the city council should be leery of tax shifting schemes. It is far better to reduce spending as a means to reduce the tax burden on Washington, D.C. residents than by increasing taxes on specific industries.

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Mariya Gencheva

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ATR Releases List of 2014 State Pledge Signers Ahead of Primaries in Iowa, Montana, New Mexico, and South Dakota

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Posted by Will Upton, Jorge Marin on Monday, June 2nd, 2014, 10:53 AM PERMALINK


As the next round of state primary elections approaches, Americans for Tax Reform is proud to release a new list of candidates, both challengers and incumbents, who have signed the Taxpayer Protection Pledge for the states of Iowa, Montana, New Mexico, and South Dakota. The candidates on this list have announced their strong commitment to the taxpayers of their states and districts and pledged to oppose any and all efforts to increase the tax burden on their constituents. ATR urges taxpayers to consider the individuals who have staked their career to protecting the interests of the American citizen when they cast their ballots on Tuesday, June 3. The list of incumbents and challengers who have signed the Tax payer Protection Pledge and will be on the ballot Tuesday can be found in the following links:

Iowa

Montana

New Mexico

South Dakota

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