Oklahoma and Kansas: Moving in the Right Direction on Tax Reform
Oklahoma and Kansas are two states looking to tackle major tax reform this year.
In Oklahoma, economist Art Laffer has teamed up with the Oklahoma Council on Public Affairs to push for pro-growth tax reform. Their plan would replace the existing income tax brackets with a flat tax rate of 2.25-percent in 2013 and reduce the rate by 0.25-percent each year after until the rate hits zero. Along with implementing a flat tax, the plan would eliminate current state credits and deductions.
Phil Kerpen and Stuart Jolly of Americans for Prosperity note in National Review Online that moving to eliminate the state income tax is a smart move:
“Over the past decade, non-income-tax states have seen 59 percent economic growth, versus just 38 percent for high-income-tax states. Job growth has been 4.7 percent in the non-income-tax states, while high-income-tax states actually lost 2.9 percent of their jobs. Population growth is the same story, up 12.3 percent in the non-income-tax states and just 3.8 percent in the high-income-tax states. Perhaps most interestingly, non-income-tax states are seeing more rapid growth in state and local tax revenue, as the high-income-tax states are undermining economic performance and, as a consequence, depressing revenues.”
The story is much the same in Kansas where Governor Sam Brownback is pushing a plan to phase out the state’s income tax as well. Brownback has cited Kansas’s overly complicated tax code that picks too many winners and losers, as well as private sector job loss and poor capital flow, as reasons for his plan.
In the initial stages of the plan, the Kansas tax system would move from three income brackets to only two income brackets with rates set at 3-perent for income under $15,000 for individuals and 4.9-percent for income at or over $15,000. Additionally, the plan would eliminate the income tax on non-wage business income. Like Oklahoma, the Kansas plan would eliminate several credits and deductions.
After the initial reforms in Kansas, Governor Brownback has proposed capping annual budget growth at 2-percent a year with excess revenues being applied to reductions in the individual and corporate income taxes – leading to an eventual phase out all-together.
Americans for Tax Reform has sent letters to both the Kansas and Oklahoma legislatures reminding them that effective tax reform does not increase taxes on net. You can read those letters here and here.
What do you think, should more states move to phase out their income tax?
Maryland Governor Doubles Down on Taxes in New Budget
Today, Americans for Tax Reform sent a letter to the Maryland General Assembly in opposition to Governor Martin O’Malley’s budget. You can read the letter here.
Gov. O’Malley’s budget would increase income taxes by capping deductions on single earners making more than $100,000 annually and on couples making more than $150,000. Estimates show that capping deductions for singles and couples at these respective levels would impact not just the top 1-percent or even 10-percent, but the top 20-percent of wage earners in the state.
Not satisfied by soaking Maryland’s middle class, Gov. O’Malley has proposed almost every other tax increase in the book, throwing them all into the budget – even the kitchen sink, literally. Gov. O’Malley’s budget includes a “flush tax” increase on Marylanders’ water and sewage usage – better fix those leaky faucets and think twice about needing to use the toilet.
Determined to put the final nail in the coffin of Maryland businesses and employers, Gov. O’Malley’s budget includes tax increases on the coal and telecommunications industries, and a tax on cigars and smokeless tobacco. Increasing taxes on major employers in the state and on products sold by small business retailers are not ingredients for economic recovery in Maryland, they’re indicators of the economic and fiscal disaster that looms over the state.
The proposed budget would increase taxes on cigars and other tobacco products by 70-percent at the wholesale level. This tax increase would hammer already struggling small businesses and retailers in Maryland, especially those near the border. Why purchase a product in Maryland when it is cheaper to buy in the state next door? Higher taxes on tobacco products doesn’t cause people to use them less, it just drives business across state lines – hurting Maryland retailers in the process.
Don’t just take ATR’s word for it though. Excise taxes do drive business across state lines, the Atlanta Journal Constitution’s PolitiFact points out, “ATR told us that Chicagoans flocked to neighboring Indiana when Cook County, which encompasses the Windy City, raised its cigarette tax by $1 in 2006. After the 2006 changes in Cook County, Chicagoans paid among the highest prices for cigarettes in the country. A team of University of Illinois-Chicago researchers found in a sample survey of discarded cigarette packs that 75 percent of them came from outside Cook County, The Huffington Post reported. The taxes on a pack of cigarettes in Chicago in 2007 was $4.05. The taxes were $1.37 outside city limits.”
Even worse, Gov. O’Malley has been more than coy about the total cost of his budget. The Maryland Reporter calculated that Gov. O’Malley’s budget approximately costs $35.5 billion, over a 2-percent increase from last year – though Gov. O’Malley seems to think that his budget cuts spending.
Maryland House Minority Leader Tony O’Donnell called the budget, “…an outrageous kick in the stomach to small businesses and families struggling to make ends meet.”
Gov. O’Malley calls his budget a “balanced” approach. It would appear that he intends to “balance” his budget on the backs of hard working Marylanders and their families.
To read ATR’s letter in opposition to Gov. O’Malley’s budget, click here.
Elgin, Illinois City Council and Mayor Declare War on Christmas and Spirited Joy
Elgin Mayor David Kaptain may not want be viewed as the Grinch, but he’s certainly doing a good job of playing the part this Christmas.
The Elgin City Council and Kaptain will vote on a city sales tax increase and a 3-percent tax on alcohol this week as a part of the city budget. Residents of Elgin are already hurting after Gov. Pat Quinn signed into law a massive 66-percent increase in the state income tax earlier this year.
For some Elgin residents taxes on alcohol have already been hiked. Elgin is split between Cook and Kane Counties. Cook County has already levied a heavy tax hike on distilled spirits, now those Elgin residents who live in Cook County could be taxed even more for a drink this holiday season.
“While he’s not sweeping to steal all of the presents from the Who’s down in Whoville, what Mayor Kaptain, along with the Elgin City Council are set to do this week is just as out of sync with the Christmas spirit,” said ATR president Grover Norquist. “With just a few shopping days left, Kaptain and company want to raise taxes on Christmas presents and holiday cheer.”
Norquist continued, “Making this move more egregious is the fact that it goes directly against the recommendations of the citizen task force that was appointed to direct Kaptain and council members. Their instructions were simple: cut spending and have the city government live within its means, just as the families and employers of Elgin must do.”
Elgin Illinois City Council Trying to Tax the Joy Out of the Holidays
Americans for Tax Reform took action today to educate residents of Elgin, Illinois about a city council vote this week to increase their taxes. The proposed 3-percent tax on alcohol sales in Elgin would hurt area small businesses and leave Elgin families with less money in their pocket just in time for the holiday season. Bah Humbug. Elgin residents who live in Cook County would be hit with the second tax hike on alcohol in as many months, as Cook County recently approved a tax increase on alcohol despite bipartisan opposition from taxpayers and small businesses alike.
2011 has been a tough year for Elgin, IL taxpayers. The increased levy on sales and alcohol would come on the heels of Governor Quinn’s massive 66-perent hike in the state income tax earlier this year. As a result of that tax increase, the average family with a taxable income of $40,000 now has nearly $1,000 less a year for clothes, food, school supplies, and bills.
The tax environment in Illinois has become so onerous that businesses that have called Illinois home since their beginning are threatening to leave the state. Sears has complained about the anti-business, anti-job tax environment, while the Chicago Mercantile Exchange (CME) has considered moving to Indianapolis, Indiana. To prevent this, state lawmakers have approved a special tax carve out for Sears and CME. By raising rates and shrinking the tax base, Illinois lawmakers are enacting the opposite of pro-growth tax reform.
Adding insult to injury for Elgin taxpayers, at the end of next year the largest federal tax increase in history will kick in. The lowest federal income tax bracket will jump from 10 to 15-percent. The highest bracket will move from 35 to 39.6-percent. The child tax credit will be cut in half and the Alternative Minimum Tax will hit 28 million families, up from 4 million last year. And these are just some of the tax increases that will take place.
A citizen’s task force recommended against the tax as well as a proposed increase in the city sales tax. Instead of heeding the words of Elgin residents, however, the city council continues to push forward on raising taxes. Rather than trying to tax holiday cheer, Elgin council members should do what families across Illinois have done all year, cut spending and live within their means.
Read ATR president Grover Norquist’s letter to the Elgin City Council here.
Elgin City Council members can be reached at 847-931-5590
Isn't Chicago Taxed Enough Already?
Cook County Board President Toni Preckwinkle is pushing new increases in the excise taxes on distilled spirits and tobacco products. The cost of a gallon of distilled spirits would rise by $.50 a gallon.
On the whole, Chicagoans are already heavily taxed. The excise tax on distilled spirits is already higher than New York City. In January of this year, lawmakers in Springfield upped the state income tax by 66-percent. With more money coming out of their paychecks, what will Chicagoans think when they’re suddenly having to pay more for a bottle of whiskey or a pack of cigarettes? The lower taxes of Indiana are just a few miles away.
In response to the proposed tax increases, ATR has sent the letter below to Board President Toni Preckwinkle and the members of the Cook County Board:
Office of Cook County Board President
118 N. Clark Street Room 537
Chicago, IL 60602
Dear President Preckwinkle,
I write to you in strong opposition to the proposal to increase the excise tax on distilled spirits by $.50 a gallon and to increase the excise tax on tobacco products. The fact is, distilled spirits and tobacco products are already overtaxed and should not be considered an acceptable, sustainable, or stable source of new revenue. An increase in the excise tax on distilled spirits and tobacco products would only exacerbate the problems of overtaxing and the continued lack of a sustainable revenue source. Time and time again taxes on liquor or tobacco have failed to meet their revenue projections.
Lifestyle taxes like those on distilled spirits and tobacco products serve to divert related commerce to neighboring counties where the products can be purchased for a lower price. They hurt small businesses, cost jobs, and rarely live up to their revenue estimates – in fact, in the case of Washington, D.C., an increase in the tax on cigarettes actually lead to a 20-percent decrease in revenues from cigarette sales.
Enacting an increase in the excise tax would cost Cook County nearly 300 jobs, and lead to a projected decline of nearly $16 million in sales for distilled spirits. When the unemployment rate in Cook County is over 10-percent and the hospitality industry in Chicago remains 13,000 jobs below pre-recession levels, you must ask yourself, is increasing the excise tax really what is best for the people of Cook County? I think you will find that the answer is No. Higher taxes on alcohol and tobacco will also exacerbate the economically deleterious effects of the 66-percent hike in the state’s income tax that lawmakers in Springfield levied on your constituents earlier this year.
Even at its current rate, the excise tax on alcohol in Chicago is higher than that of New York, increasing it further will only hurt the economy of a city that derives a great portion of revenue from tourism and conventions. Higher taxes drive away consumers, it is simple. Without consumers and tourists, the sidewalks along Michigan Avenue may become quiet and empty; the convention center at McCormick Place may lay dormant.
Lastly, increasing the excise tax would only further the regressive harm the tax does at its currently onerous rate. Companies don’t pay taxes, people do. Businesses pass new costs on to consumers. It will be the middle-income and lower-income Cook County workers and families who will bear the brunt of this tax. Lifestyle taxes disproportionately hurt those that can afford the new tax least.
I encourage you to take this letter into consideration, and stand up for heavily burdened Cook County taxpayers by rejecting any increase to the excise tax on distilled spirits and the excise tax on tobacco products.
Grover G. Norquist
Were Virginia Democrats For Pledges Before They Were Against Them?
Americans for Tax Reform received a letter today from Virginia State Senator Creigh Deeds (D) stating: “I have been in office for a number of years and have cast thousands of votes. I do not fill out questionnaires or make pledges because I do not believe questionnaires and pledges are indicative of the thought process required in legislating.”
Sen. Deeds must have forgotten about signing the Virginia Gun Owners Coalition’s “Virginia Gun Owners Pledge” during his 2009 for run governor.
This comes on the heels of a press release by the Virginia Democratic Party attacking the Taxpayer Protection Pledge. If Virginia Democrats operate by the same logic as Sen. Deeds, then perhaps their aversion is just to the Taxpayer Protection Pledge – in short, Virginia Democrats just want to raise taxes.
To View A PDF of ATR's Press Release Click Here
A Told You So Moment in Maryland
The Maryland Tourism Council has an interesting post on the July revenue numbers from the recent increase in the state’s alcohol tax:
Maryland raised approximately $6 million in July from the increase in the sales tax on alcohol (from 6% to 9%). If the new revenue in July turns out to be the monthly average, it would add approximately $72 million a year, less than the $85 million projected, when the increase was approved.
ATR sounded the alarm this past April, noting that the alcohol tax increase was poor policy. Simply put, lifestyle taxes on alcohol and tobacco rarely fulfill their revenue projections and are neither a sustainable nor stable tax base. When Washington, D.C. increased the city’s cigarette taxes, they actually saw a decrease in the cigarette tax revenues by 20-percent.
Additionally, either Maryland Democrats have poor math skills or they simply just didn’t care as the alcohol tax forced restaurants and bars to increase their prices to create even change so as to avoid having to use pennies. Can you think of the last time a bartender gave you back nickels, dimes, and pennies as change?
The alcohol tax increase has been nothing but a raw deal for the already over taxed people of Maryland. They now pay higher prices and taxes on their alcohol, all the while the state once again falls short of their “revenue projections.” Unfortunately this is not the first time Gov. Martin O’Malley and Maryland Democrats have displayed their ignorance as to the dynamic impact of increased taxes. The infamous Millionaires Tax was pitched by Gov. O’Malley as a measure to make top income earners pay their “fair share.” In reality, all it did was cause the flight of top income earners and job creators from Maryland, while creating $100 million revenue erosion in the tax base.
What do you think? Should Marylanders push their legislators to repeal the alcohol tax increase?
Stephen Hunt and Jason Flanary Take the Taxpayer Protection Pledge
Stephen Hunt and Jason Flanary have both taken the Taxpayer Protection Pledge in their primary race for state Senate in Virginia’s 37th Senate District.
ATR has offered the Pledge to all candidates for federal office since 1987. To date, 41 U.S. Senators and 237 members of the U.S. House of Representatives have signed the Pledge. Additionally, thirteen governors and over 1,200 state legislators have signed the Pledge.
Click here for the PDF of each release.
In Washington State, Tax Hikes Are Not the Solution
State Senators in Washington State are looking to hike taxes on farmers and small businesses in an effort to close the $5.3 billion budget gap created by the state’s spending addiction.
Three bills are being circulated in the State Senate that would increase taxes by $350 million. Such an increase on a declining agricultural sector could stifle any economic progress that might be made.
Currently Washington State has a projected unemployment rate of 9.2%, that’s 320,400 residents without work. Washington is tied with Alabama and Colorado, ranking 33rd out of the 50 states in the number employed – raising taxes will not help them improve upon this number.
This is not a revenue problem, as many politicians in the state seem to think, it is a spending problem. Had Washington State lived within its means and kept spending in line with population and inflation over the last decade, the state would have spent $26.7 billion less than it actually did for that duration – money that could have been put in a rainy day fund or, ideally, returned to taxpayers.
Taxpayers in the Evergreen State, and taxpayers across the nation for that matter, need to remind their state legislators that raising taxes doesn’t solve their state’s economic problems. Only reductions in taxation and spending will encourage economic growth and prosperity.
To read ATR’s letter to the Washington State Senate click here.
ATR Opposes Oklahoma "Provider Fees"
Today, Americans for Tax Reform sent a letter to members of the Oklahoma state Senate and the Office of Governor Mary Fallin in strong opposition to Oklahoma HB 1381.
HB 1381 would lead Oklahoma down a dangerous road that is becoming more-and-more popular amongst fiscally reckless and irresponsible state governments. Enacting a “provider fee”, HB 1381 would levy a new 2% tax – though that tax rate could rise upwards of 4% – upon hospital revenues in the state.
The new tax, a $118 million tax hike, would be funneled into a pool that would receive matching funds from the federal government’s Medicaid program. The pool would then be redistributed to hospitals in Oklahoma. This is essentially a shell game with taxpayer dollars with Oklahoma politicians cleverly gaming a failing welfare system.
Despite the argument that the cost of the new tax will not be passed on to consumers because of Medicaid’s matching funds, it must be understood that it is not in the self interest of profit-seeking entities of such great size to incur these fees without passing on at least a portion of the burden to their consumers.
Finally, as ATR has noted in the past, “Giving additional money to states changes their ‘fiscal behavior,’ encouraging them to increase spending and taxes… States receive matching federal funds based on the revenue they collect. This encourages states to increase taxes to generate more revenue to receive more aid… Overall, these aid transfers to states are comparable to the parent who continually gives their spendthrift child more and more money every week. Rather than learning some fiscal restraint, the child continually spends with the assumption he will receive more.”
To read ATR’s letter to the Oklahoma state Senate click here.