Gov. Scott Walker Signs Historic Tax Cuts into Law
Wisconsin Governor Scott Walker today signed Senate Bill 1, legislation that provides $504 million in tax relief over the next two years to hardworking Wisconsin taxpayers. SB 1 reduces income and property tax rates, and eliminates income tax rates for manufacturers in the Badger state. Gov. Walker signed the bill at Horsens Homestead Farms in Cecil, Wisconsin.
SB 1 represents the third significant piece of tax relief enacted by the Walker administration, bringing the total amount of tax cuts to $2 billion. Workers, families and homeowners will now have more money in their pockets thanks to the efforts of Gov. Walker and the Republican majorities in the legislature.
"I want to congratulate Governor Walker for designing, promoting, and now signing Senate Bill 1 into law," said Grover Norquist, president of Americans for Tax Reform.
"Scott Walker inherited a state budget that falsely promised to spend more than Wisconsin citizens could afford. He avoided the 'easy' and traditional path of yet again raising taxes and slashing budgets across the board. Instead he reduced taxes to create more jobs and opportunities and therefore more tax revenue while reducing spending by reforming government to perform better at lower costs: specifically Act 10. Reducing the tax burden and reforming government to cost less is the path forward for Wisconsin and the nation."
Governor Kasich's Tax Plan Less Than Inspiring
Ohio Governor John Kasich has unveiled his Mid-Biennium Review (MBR) and the best that could be said about it is that it contains the good, the bad, and the ugly.
First, the good. Gov. Kasich’s proposal enacts another round of income tax cuts in the State of Ohio, building upon the across the board 10-percent cut that he signed into law last year. All in all, Gov. Kasich’s new income tax cut would reduce the tax burden on Ohio taxpayers by $461 million in FY2015, $816 million in FY2016, and $909 million in FY 2017; totaling nearly $2.2 billion in tax relief over three years.
While the new round of income tax rate reductions is laudable. Ohio will continue to have a staggering NINE income tax brackets and an equally confusing and convoluted municipal income tax regime remains unaltered. An attempt to streamline and consolidate the state’s municipal tax system via House Bill 5 was unfortunately hijacked by special interests and watered down into little more than a weak gesture towards any real reform.
On their own, Gov. Kasich’s income tax cuts would grow the Ohio economy – unfortunately, however, Gov. Kasich has also proposed a round of tax increases; including higher taxes on tobacco products, e-cigarette/vapor products, higher oil and gas severance tax, and a hike in the Commercial Activity Tax (CAT).
The MBR proposal would see a 15-percent increase in the state CAT tax. Essentially, the CAT tax is a penalty on doing business in the state of Ohio measured by a business’s gross receipts. By 2017, the increase in the CAT tax would amount to a $743 million tax increase.
Ohio’s oil and gas industry does not escape Gov. Kasich’s tax increases either. The MBR proposes to increase the severance tax rate to 2.75-percent of a producer’s gross receipts – a primary pay-for for the proposed income tax cuts. One of the most startling components of the oil and gas tax increase, however, is the divergence of 20-percent of severance tax revenue to local governments in shale oil and gas producing regions. The state monies would be overseen by a new government bureaucracy called the Ohio Shale Gas Regional Commission (a nine member board appointed by the Governor). On the positive side, Gov. Kasich is pushing for the elimination of severance taxes on small convention gas producers – less than 910,000 cu.ft/quarter). All-in-all, the severance tax increase would amount to an $874 million tax hike by 2017.
Another troubling component of Gov. Kasich’s MBR is the regressive tax hike placed on tobacco consumers. Over a two year period Ohio’s tax on cigarettes would increase from $1.25 to $1.85 a pack. This tax increase will be borne primarily by lower-income earners. Even more important, tobacco taxes have repeatedly proven to be a declining source of revenue and an inadequate pay-for for permanent income tax reductions.
Along the same lines of the proposed tobacco tax increase, Gov. Kasich has proposed an equivalent tax on e-cigarette and vapor products. Currently, under Ohio law, these products are not taxed in the same manner as tobacco products. The fact is, e-cigarettes and vapor products are not equivalent to tobacco products and are often used as a means to quit harmful combustible tobacco products.
In total, the Governor's MBR tax plan amounts to a $174 million tax cut for Ohioans over three years. Gov. Kasich should work with lawmakers in Columbus to craft a pro-growth tax reform measure, consolidating income tax brackets while reducing the tax burden and simplifying the mess that is the municipal income tax regime. Avoiding any “rob Peter to pay Paul” schemes would be key in this process. Yes, Ohio needs to continue its efforts to reform the tax code, but doing so on the backs of the oil and gas industry, Ohio businesses, tobacco consumers, and vapor product consumers is not the way to achieve this.
UPDATE: This post has been updated to reflect that Ohio's Earned Income Tax Credit is non-refundable and therefore is a tax cut and not government spending. In total, the MBR amounts to a $174 million tax cut over three years.
Arkansas Private Option Funding Vote Fails Again
Day four of the legislative fight over funding Medicaid Expansion via the “Private Option” in Arkansas saw House Speaker Davy Carter call another vote – and for the fourth time in a row, the House of Representatives failed to gain the 75 votes it needs to pass the appropriation.
Armed with a flawed and biased study from the Arkansas Chamber of Commerce and tax preparation firm Jackson-Hewitt, Speaker Carter and Private Option proponents have repeatedly forced votes in an attempt to badger legislators into accepting a massive and unaffordable expansion of the entitlement program. Writing in the Arkansas Democrat-Gazette and The Federalist, I have repeatedly pointed out serious issues with the metrics of the Jackson-Hewitt study – including the base assumption that without Medicaid Expansion, no Arkansas businesses will cover employees falling into Obamacare’s Medicaid gap:
In defense of the Private Option, the Arkansas Chamber of Commerce released a study by the tax-prep firm Jackson-Hewitt claiming that without Medicaid Expansion, Arkansas businesses would see a tax increase between $27 and $40 million. Already, the study has been exposed as little more than fear mongering.
First, the base assumption of the study is that no employer in the state would provide insurance coverage to an employee who would qualify for Medicaid if expansion were to occur – yes, it assumes zero, zilch, none. That is a wildly irresponsible assumption. Why not assume that businesses would cover 100 percent of qualifying employees?
Even more troubling is this post from the Advance Arkansas Institute noting the detrimental impact the Private Option will have on Arkansas hospitals.
During today’s vote, a legislator fled the House floor, prompting Speaker Carter to call on the State Police to find and return the lawmaker to the legislative chamber – the move prompted some observers to note that the move was akin to Kevin Spacey’s character, Frank Underwood, on the television show House of Cards. Perhaps the better comparison is with a Dread Pirate. It has become apparent that Speaker Carter will continue to force votes until the 75 “yea” votes needed materialize – a strategy akin to saying, “The floggings will continue until morale improves.” Dread Pirate Davy Carter, maybe that moniker will stick. When “no” vote lawmakers are summoned to the Speakers Office they may feel like they are being summoned to Dread Pirate Davy Carter’s “locker.”
At this juncture, the battle over the Arkansas Private Option continues and it appears that tomorrow there will be yet again another vote (number 5 in the House) on funding the unaffordable entitlement expansion.
ATR Urges Illinois Lawmakers to Vote No on the Soda Tax
Americans for Tax Reform issued a letter today to the Illinois State Senate opposing a new tax on soda being pushed by Democrat Senator Mattie Hunter. Senate Bill 3524 imposes a "rate of $0.01 per ounce of bottled sugar-sweetened beverages sold or offered for sale to a retailer for sale in the State to a consumer. Provides that the distributor shall add the amount of the tax to the price of sugar-sweetened beverages sold to a retailer, and the retailer shall pass the amount of the tax through to the consumer."
In the letter, ATR's president Grover Norquist noted:
Aside from the negative economic impact associated with raising taxes, soda taxes do not help to decrease obesity or caloric intake. The non-partisan Tax Foundation released a study which found that “soda and candy taxes do not necessarily decrease caloric intake. One recent study finds that when adolescents switch away from soda due to price increases, the drop in calories is offset by an increase in calories consumed in other food and drink.
To read the full letter, click here.
Another Frack Tax in Ohio?
The 2014 Ohio General Assembly will be faced with a new tax on oil and natural gas extraction in the state in the form of H.B. 375, or some version of it. The bill, introduced by Rep. Matt Huffman (R – 4th District), would create a new and separate severance tax on horizontal wells as opposed to vertical wells. This new tax legislation, it is hoped, will generate new revenues for the Department of Natural Resources and for plans to continue to reduce the state income tax burden.
In the past, industry groups in Ohio have been sympathetic to state regulation and taxation of the oil and gas industry in order to avoid greater federal EPA intervention. H.B. 375 should raise alarm bells for Ohio taxpayer advocates and those who want to see increased natural gas production and competition with neighboring states like Pennsylvania.
The current language of H.B. 375 would enact a 1-percent gross proceeds tax on each horizontal well that, after a period of time, would then jump to 2-percent. The rate would then drop back to 1-percent as well production declines. H.B. 375 does make an honest attempt to address a concern that was raised during the last legislative session, that many of the entities that would pay the new severance tax aren’t the well operators but the land-owners (many of whom are Ohio farmers). A series of income tax credits are created in H.B. 375 with the aim to make the land-owners liable for the severance tax whole.
What the overall revenue impact of H.B 375 is remains to be seen. The legislation is due for an initial committee hearing this Wednesday and a fiscal note should follow. Americans for Tax Reform urges lawmakers who have signed the Taxpayer Protection Pledge to be mindful of what is shaping up to be a tax hike. While robbing Peter to pay Paul is never a sound policy, if Ohio lawmakers do move forward with H.B. 375, it would behoove them to ensure the legislation is revenue neutral by offsetting the tax increase with revenue equivalent rate reductions in the Ohio personal income tax.
Republican Governor Tax Cuts Since 2011
Writing in Forbes, ATR's Patrick Gleason notes it will be governors’ races that tell the tale of a GOP revival in 2014. It has been on the state level that the GOP has been able to enact transformative and pro-growth reforms. Since the Republican election wave in 2010, 19 GOP governors have reduced taxes in their state, amounting to a net $38.33 billion in total tax relief. On the other hand, Democrat governors have increased the tax burden in their states by $43 billion.
Americans for Tax Reform has produced a full breakdown of tax relief legislation passed by 19 Republican governors. Click here to view a pdf of the breakdown.
Taxpayers Win Big in Kansas City, Missouri
Yesterday voters in Jackson County, Missouri (including the voters of Kansas City) went to the polls faced with Question One. The ballot question would have increased the county sales tax by .5-percent amounting in an $800 million tax hike over the next 20 years. The revenue would go to fund new research facilities for local hospitals – something that, as opponents noted, in the past would have been funded through federal and state grants, along with private fundraising.
In a landslide victory for taxpayers, Question One was defeated with 86-percent of voters against and only 14-percent in favor. The ballot measure drew strong opposition from community and taxpayer groups alike – even drawing sharp criticism from the less-than-taxpayer-friendly Kansas City Star:
To urge a “ no” vote is not a happy place for this newspaper. It’s easy to root for a major translational research hub and the talented researchers it may draw. We simply don’t see an additional tax on one county’s shoppers, be they individuals or businesses, as the primary path to that goal…
Voters need to make it a point to get to the polls, reject this tax initiative, and then the community can pull together to find more equitable funding to advance this worthwhile effort.
With voters rejecting a massive tax increase in Colorado by a 2 to 1 margin, the defeat of Question One in Jackson County, Missouri serves as yet another example that voters are souring on the tax and spend philosophy touted by Democrats across the nation.
Take Action: Stop the PA Medicaid Expansion
Pennyslvania Governor Tom Corbett has reversed course and is now pushing for Obamacare's Medicaid expansion in the Keystone State. ATR needs your help to convince Gov. Corbett that Obamacare is bad for Pennsylvanians. If enacted, the expansion could crater the state budget, leading to higher taxes and reduced services for the people of Pennsylvania.
ATR Needs Your Help to Override Gov. Nixon's Tax Cut Veto
Americans for Tax Reform needs your help in pushing for tax relief for struggling Missouri families and businesses. With neighboring states like Kansas and Oklahoma enacting pro-growth tax reform, the Missouri legislature passed its own tax reform plan, House Bill 253. Unfortunately, Missouri’s Democrat governor Jay Nixon vetoed the bill! If Gov. Nixon gets his way, Missouri businesses will be left at an economic disadvantage – neighboring states have been cutting taxes all across the board.
The Missouri House of Representatives has a chance to override Nixon’s veto. I urge you to contact your representative by filling out the form below and demanding they vote to override Gov. Nixon’s veto.
ATR Calls on Missouri Legislature to Override Gov. Nixon's Veto of HB 253
Today Americans for Tax Reform issued a letter to members of the Missouri House of Representatives calling on them override Gov. Jay Nixon’s veto of HB 253, legislation that would begin the process of reforming Missouri’s tax code. With neighboring states like Kansas and Oklahoma moving towards lower, more competitive tax rates, lawmakers in Jefferson City must begin their own process of reform to keep Missouri economically competitive and encourage job creation.
On behalf of Americans for Tax Reform (ATR) and our members across Missouri, I write today in support of HB 253 and urge you to OVERRIDE Gov. Nixon’s veto of this important piece of legislation. HB 253 would represent a significant reduction of the tax burden on Missouri businesses and families. Currently, Missouri’s tax climate is a hindrance to economic growth and job creation. HB 253 would take important steps towards keeping Missouri competitive with her neighbors, many of whom have enacted large tax cuts in the past several legislative sessions.
Presently, the corporate income tax rate that businesses in Missouri face is 6.25%. HB 253 would nearly cut this in half over a ten year period, reducing it to 3.25%. In addition, the top individual rate would be brought down to 5.5% over the same ten year window. Under HB 253, these measures are only to be implemented if the state is collecting revenues that rise by $100 million or more annually. Contrary to claims, HB 253 takes tax cuts from future growth in state revenue, and returns it to businesses and hard-working taxpayers.
HB 253 represents not only an important step forward for the Show-me-state, but also a very critical move in order to remain economically relevant in an increasingly competitive region. Neighboring states such as Kansas and Oklahoma have significantly reduced the tax burden on businesses and taxpayers. Iowa, Nebraska and Indiana have enacted tax cuts as well, and many of them are just getting started. In order to stay on pace with her neighbors, Missouri must allow businesses to keep more capital so that they may invest further and create jobs. Taxpayers, too, would be accorded more take home pay under HB 253.
ATR urges you to support HB 253 and override Gov. Nixon’s veto. Legislators in Jefferson City should continue to focus on policies that allow the private sector to grow and create jobs; reducing the tax burden that they face is an excellent way to do so. ATR will be following this issue closely and educating your constituents as to how their legislators in the House of Representatives vote on this important matter.
You can read the full letter here.