Dennis Hull

Lou Barletta Signs the Taxpayer Protection Pledge

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Posted by Dennis Hull on Friday, September 17th, 2021, 12:27 PM PERMALINK

Former Congressman Lou Barletta has signed the Taxpayer Protection Pledge in his bid for the Republican nomination for Governor of Pennsylvania. The Pledge, sponsored by Americans for Tax Reform, commits signers to oppose any and all efforts to increase taxes. 

Americans for Tax Reform offers the Pledge to all candidates for state and federal office. Thirteen governors and over 1,000 state legislators have signed the Pledge. Lou Barletta will join more than 30 of Pennsylvania’s state representatives in signing the Pledge this year. 

Attorney General Josh Shapiro and other Democratic contenders for governor do not share Mr. Barletta’s commitment to a pro-growth tax regime. Since taking power in 2014, the incumbent Wolf administration has proposed or supported 14 different tax hikes on Pennsylvania families. The governor’s first proposal – a $4.6 billion tax increase – would have been the largest in state history, burdening a family of four with an additional $1,400 in annual taxes. This February, Democrats proposed another $6 billion in new taxes, including raising the state’s flat personal income tax by a prodigious 46%.  

By signing the Taxpayer Protection Pledge, Lou Barletta promises to take Pennsylvania in a new direction and prioritize the well-being of working families over unnecessary state spending. 

Before the state Convention, ATR will publish a more detailed evaluation of each Republican candidate’s record and positions on taxes and government spending. 

“I want to congratulate Lou Barletta for taking the Taxpayer Protection Pledge. Pennsylvanians deserve better than tax-and-spend policies that fall hard on the backs of hardworking families and small businesses. They want real solutions that create jobs, cut government spending, and make Pennsylvania a more attractive place to live and raise a family,” said Grover Norquist, president of ATR. 

“By signing the Pledge, Lou Barletta has demonstrated that he understands the problems of hard-working taxpayers in Pennsylvania.” 

“Democratic candidates in Pennsylvania have made it clear they will continue to pursue a higher tax and spend agenda that grows government and increases the burden of state spending on taxpayers. This is nothing new for supporters of the Wolf administration, which pursued tens of billions in new taxes over two terms in office,” Norquist continued. 

The taxpayer protection Pledge is a public, written, commitment by an elected official or candidate to the voters of his or her state. The pledge is a commitment to oppose and vote against any tax increase. All candidates for federal and state office are offered the pledge each election cycle since 1986.

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Needed Property Tax Relief In Texas Clears Key Committee Hurdle

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Posted by Dennis Hull on Wednesday, September 1st, 2021, 12:37 PM PERMALINK

A bill to slash property taxes by at least $2 billion was passed unanimously by the Texas Senate Finance Committee this week on August 30, clearing the way for final approval by the Senate. This bipartisan tax relief plan, Senate Bill 91, takes aim at the state’s onerous school district Maintenance and Operations (M&O) taxes. Known as the “Robinhood Tax,” M&O property taxes are imposed by Texas municipalities and account for nearly half of the total annual property tax burden, totaling $56 billion last year.

SB 91 would allocate at least $2 billion and up to $4 billion in state dollars to pay down local M&O taxes, creating substantial tax relief for Texans. For the owner of a median $300,000 home, tax savings under the new bill will come out to about $200 next year, according to Senator Paul Bettencourt, the author and primary sponsor of the tax plan.

“Texans will see a reduction of at least 6.6 pennies on their school district tax rate in the 2022 property tax year,” said Bettencourt at Monday’s Finance Committee hearing. “Each billion available for compression will lower the M&O tax rate for all property owners in Texas.”

This new round of tax relief is contingent upon a revenue trigger being met. The total amount of tax savings under the new bill will depend on a key revenue estimate for the 2022-23 fiscal year, to be provided by the Texas Comptroller on June 1, 2022. If the Texas economy continues to grow at its current pace, school district M&O taxes could be lowered by as much as $4 billion as surplus state tax revenue subsidizes local property taxes.

Vance Ginn, chief economist at the Texas Public Policy Foundation, testified in favor of SB 91 at Monday’s hearing. Ginn points out that property taxes are inefficient, as they rely on subjective valuations by appraisal review boards, and can often force people out of their homes if not paid, meaning no one truly owns their property in Texas. Moreover, Ginn argues, property taxes tend to hurt low- and fixed-income earners the most. Booming housing markets, of which Texas has many, lead to rising home valuations and higher property taxes, regardless of the homeowner’s ability to afford the additional tax burden.

Not only is property tax relief clearly needed, Texans are demanding it. Recent polls show that 82% of Texans consider property taxes to be a “serious issue,” while more than two-thirds would be upset if no legislative action is taken to lower property taxes this year. Their concerns are valid; over the last 20 years, local property taxes have grown faster than the average taxpayer’s ability to pay for them, helping make Texas the state with the 7th worst property tax burden on homeowners.

By passing SB 91, Texas legislators can heed the advice of Americans for Tax Reform and its coalition partners to ease a crushing tax burden on Texas families. “Texans cannot afford to wait until 2023 for the Legislature to address these issues,” noted a joint statement released on Monday by the Texas Public Policy Foundation, the Texas Conservative Coalition Research Institute, and Americans for Tax Reform. “Not only is the burden too high, but the system is designed to allow insatiable local governments to keep squeezing every last dime out of taxpayers.”

SB 91 now awaits a full vote in the Texas Senate and subsequent votes in the House before it can go to Governor Greg Abbott’s desk. ATR will be following this legislation closely.

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New Petition Could Protect Massachusetts Residents from A Regressive Fuel Tax

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Posted by Dennis Hull on Wednesday, August 25th, 2021, 12:19 PM PERMALINK

The Massachusetts Fiscal Alliance submitted a petition last week to let voters instead of Beacon Hill decide the fate of a destructive cap-and-trade program that would limit gasoline and diesel supply into the state. 

The Transportation and Climate Initiative (TCI) was a proposed regional compact that tried to limit Massachusetts' emissions from cars and trucks. By auctioning off emissions "allowances" for vehicle fuel suppliers, proponents of the initiative hoped to force energy companies to pay for the right to sell a particular amount of gas and diesel. But of the TCI's initial 14 members, just two remain interested in joining the program: Rhode Island and Massachusetts. Even the Rhode Island legislature – controlled in both chambers by a Democratic supermajority – expressed reluctance to enter the cap-and-trade agreement, ending this year's session without passing legislation to join the TCI. In fact, Rhode Island House Speaker Pro Tempore Martin Looney called the TCI a regressive tax on the poor. 

Representative Looney is correct: by restricting the supply of gasoline into the state, Massachusetts would experience a rise in the cost of transportation by as much as 38 cents per gallon, paired with imminent and debilitating fuel shortages. The Massachusetts Fiscal Alliance estimates that more than 80,000 vehicles will be without fuel in 2025, just two years after the program is scheduled to begin. To offset that fuel shortage, Massachusetts would need to replace 2,000 gas-powered cars with electric vehicles every month – an impossible task for a state that sold the same number of EVs over the entire course of 2020. Meanwhile, low-earning residents most directly impacted by a fuel shortage will face a challenging set of unappealing choices: drive less, pay more for fuel, or shell out the cash for an expensive electric vehicle. 

The Sierra Club, a prominent environmental group, has backed out of its support for the TCI, arguing that the 26% reduction in emissions by 2032 is "too weak." Indeed, for a program that virtually forces thousands of low-income residents to decide between paying higher fuel costs or purchasing an expensive electric car, the program's ultimate effect on CO2 emissions is paltry. Moreover, a 26% reduction is exceptionally negligible in light of the dozens of other states that are not committed to reducing fuel use. Nor will the TCI affect the global impact of emissions, especially with countries like China that burn enormous amounts of coal and other dirty fossil fuels. 

The TCI's projections acknowledge that if Massachusetts did not join the agreement, the state would still experience a 19% reduction in carbon emissions over the next decade, thanks to better fuel economy standards and growing demand for EVs. Meanwhile, the effect of the TCI itself would only reduce emissions between 1 and 7 percentage points. Such a minuscule reduction in emissions does little to justify a new annual tax burden of up to $5.6 billion. 

Massachusetts residents have already made clear their opposition to gas taxes in a 2014 referendum. At issue was a 2013 law that would have automatically increased gas taxes by indexing them to inflation while placing a minimum cap on gas taxes to prevent any decrease in the tax rate. The law also provided a one-time gas tax hike of 14.2%, from 21 to 24 cents per gallon. Faced with the grim reality of automatic, unlimited gas tax increases, voters in the Bay State approved a resolution to repeal that law. Instead, the TCI would impose a similar, albeit indirect, fuel tax in stark contrast with the preferences of Massachusetts voters. 

While Governor Charlie Baker remains committed to joining the TCI, the petition filed by the Massachusetts Fiscal Alliance would successfully place the question before voters in a referendum on the 2022 ballot if the petition is approved and the organization can collect 80,239 signatures by November 17. Massachusetts voters will likely have the chance to again say no to new gas taxes and protect their poorest residents from the bitter effects of a statewide fuel shortage.


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States Slash Corporate Taxes, Promote Growth as Biden Considers Higher Rates

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Posted by Dennis Hull on Tuesday, August 3rd, 2021, 4:29 PM PERMALINK

As President Joe Biden and congressional Democrats push for a massive corporate tax hike, states across the country are moving in the opposite direction. This year, five states – Idaho, Nebraska, New Hampshire, Oklahoma, and Louisiana – cut their corporate tax rates, providing hundreds of millions in tax relief for employers and workers. These states will enjoy a more competitive business climate with their commitment to pro-growth tax reform.

Compared to other forms of taxation, corporate taxes are by far the most detrimental to economic growth, according to analysis by the Tax Foundation. Academic research reveals that workers bear the brunt of the corporate tax burden – at least half – through reduced wages. That applies in particular to “the low-skilled, women, and young workers.”

On the other hand, lowering corporate tax rates can spur investment in things like buildings, equipment, and research and development. The 2017 Tax Cuts and Jobs Act did just that: by lowering the corporate tax rate from 35% to 21%, corporate fixed investment jumped 9.0% in 2018 and an additional 4.4% the next year.

Take a look at how these five states, all Republican-led, are slashing corporate tax rates and promoting free enterprise:


  • H.B. 380 will reduce Idaho’s flat corporate tax rate from 6.925% to 6.5%.
  • The tax cut is retroactive to January 1, 2021, giving businesses the opportunity to claim a tax refund.



  • L.B. 432 not only reduces the top marginal corporate income tax rate – it also creates a framework for future tax reductions next year.
  • The top marginal corporate income tax rate will be lowered from 7.81% to 7.5%, starting in January 2022. In January 2023, that rate will be further reduced to 7.25%.
  • The other of Nebraska’s 2 corporate tax brackets will maintain the same rate of 5.58%. This rate applies to the first $100,000 of taxable corporate income.
  • The law also expresses the intent of the legislature to further reduce the top corporate rate, down to 7% in 2024 and 6.84% in 2025.
  • Total tax savings:
    • $1.9 million in FY 2022
    • $9.1 million in FY 2023
  • Total tax savings if other reductions are enacted:
    • $19.8 million in FY 2024
    • $26 million in FY 2025


New Hampshire

  • With the passage of H.B. 1 and 2, New Hampshire will slightly lower its two major business taxes.
  • The Business Profits Tax (BPT) – the state’s corporate income tax – will be reduced from 7.7% to 7.6% starting in 2022.
  • The Business Enterprise Tax (BET), which is similar to a value-added tax, will be reduced from 0.6% to 0.55%. The filing threshold is also increased from $200,000 to $250,000, providing relief to many small businesses.
  • H.B. 2 removes revenue triggers from the BPT and the BET, creating a fixed rate that will no longer rise with low tax revenue.



  • With Governor Stitt’s signing of H.B. 2960, Oklahoma now ties Missouri for the 2nd lowest corporate income tax rate in the nation.
  • Starting January 2022, Missouri’s flat corporate income tax will be lowered by more than a third, from 6.25% to 4%.
  • The lower rate will also apply to pass-through companies like LLCs, partnerships, and sole proprietorships. That allows these small businesses to pay the lower corporate tax rate of 4%, rather than a personal income tax rate of 5.4% levied on profits over $8,424.
  • Total tax savings:
    • $110 million in Fiscal Year 2023



  • Residents will vote on a constitutional amendment this November that will determine whether new tax cuts ultimately go into effect. If the amendment fails, none of these tax cuts will be enacted.
  • Louisiana will consolidate its 5 corporate income tax brackets into 3 new, simplified brackets.
  • Louisiana’s top corporate tax rate will come down from 8% to 7.5%.
  • The law also permanently suspends part of the Corporation Franchise Tax by exempting the first $300,000 of taxable capital starting in January 2023, a major boon to small businesses.
    • The rate on taxable capital in excess of $300,000 will also be reduced, from 3% to 2.75%.
  • If tax revenue growth targets are met over the next several years, the franchise tax will go down even further.
  • These cuts will bring Louisiana out of the bottom 10 rankings in the Tax Foundation’s State Business Tax Climate Index, moving the state from 42nd to 38th.


Photo Credit: Jacopo Werther

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With Green Light from Biden, New Traffic Tax Under Review in San Francisco

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Posted by Dennis Hull on Tuesday, August 3rd, 2021, 3:58 PM PERMALINK

Small businesses in downtown San Francisco are still struggling to get back on their feet after the pandemic. But city transportation officials are barreling ahead with a congestion tax plan that will drive businesses, customers, and dollars out of the city center.

Since 2004, San Francisco has considered implementing a “congestion pricing” system to alleviate worsening traffic in the busiest parts of downtown. By charging a fee to drivers who enter the city during rush hour, officials say traffic could be reduced by up to 15% as drivers switch to public transit for their commute.

Multiple scenarios are under consideration, but each would tax drivers a fee of $6.50 to enter congested pricing zones during rush hours, from 6–9 am and 3:30–6:30 pm. To advance “equity,” the fee would only be levied on commuters making over $100,000 annually. Anyone making under $46,000 is exempt from the tax entirely, while those in the middle of that range pay a discounted rate. The physical boundaries for the tax are yet to be decided, but one zone would include the financial district and the immediate downtown area. At the same time, another proposal expands the zone north and south to include Fisherman’s Wharf and Mission Bay.

Regardless of where and how the tax is implemented, congestion pricing is sure to impact economic growth at a critical point in the city’s recovery. Remote workers and empty offices will likely stick around for years. But with a hefty new fee to enter the downtown area, executives and businesses will decide to hold off on bringing workers back to the office. After crippling small businesses with some of the harshest Covid lockdowns in the country, the local government now plans to use a new tax to hobble the ability of those businesses to bounce back.

A congestion tax would also price families out of the downtown area, essentially forcing those people to use a failing public transportation system. Many people in the suburbs who commute to the city center will find themselves unable to afford the added cost of driving to work every day.

Those people will have no choice but to use the San Francisco public transit system, which ranks pitifully low compared to peer cities like D.C. and Chicago. San Francisco is at the bottom of its peer group for the most problem-prone transportation. The city also ranked last or second to last in average speed for every category, reflecting above-average density and congestion on railways and buses. Despite this failing infrastructure, 34% of San Franciscans already use public transportation, compared to an average of 17%. But the proposed congestion tax to drive on city roads will coerce thousands of additional residents to hop on a train or take a bus, with no plans to make the troubled system more efficient.

Meanwhile, local businesses – primarily the tourism industry – will undoubtedly suffer. Fewer people visiting the downtown area, directly as a result of the new tax, means fewer dollars flowing into the city’s economy at a time when the city desperately needs that cash for economic recovery. Several families say the tax would discourage them from visiting downtown, including Ben Flores of Manteca: “As a visitor and as someone who regularly comes here to see the sights, and to eat at restaurants and just to walk around and have fun, knowing that I have to spend money on everything else… really would maybe kind of drive me away. And if not me, I’m sure other families.”

Though it will take at least three years to implement a congestion tax, things are moving faster with the Biden administration’s recent approval of a similar program in New York City. Now that the Trump administration is no longer an obstacle, New York is set to become the first city in the nation to tax drivers, specifically those who enter the busiest parts of Manhattan. Suppose the San Francisco Board of Supervisors gives the green light at the end of the year and the California legislature grants its blessing. In that case, the Golden City may soon have its own version of a congestion tax that will stymie growth and harm local businesses. 

Rather than charge new fees on residents already beleaguered with high taxes, San Francisco should encourage the use of public transportation by improving the system itself. Funds for such a project can be pulled from one of the city’s many unnecessary social programs. For example, a ludicrous “safe sleeping” program costing tens of millions of dollars provided just 260 tents for the city’s homeless, adding up to $60,000 per tent. That money could have been well-spent improving the city’s metro system to reduce downtown congestion instead of wasting taxpayer dollars on tents that cost more than double the price of an average San Francisco apartment.

San Francisco is notorious for wasteful spending of this sort. City politicians often call for new investments in underfunded services like public transportation, roads, and city cleanup. Instead, however, many of those funds are ultimately directed toward unproductive new offices and initiatives. For example, the Office of Racial Equity, created in 2019, sucked more than half a million from the city budget last year. In San Francisco public schools, students are now required to take two full semesters of “ethnic studies” classes, costing taxpayers $2.3 million in 2020. Meanwhile, the “Instruction, Innovation, & Social Justice” section of the school district’s budget receives a comfortable $1.04 million each year.

These millions in city funds should have been directed toward the city’s woefully inept public transit system, but city officials prioritized their political agenda over solving real problems in the city. Indeed, hundreds of department heads and city commissioners are required to complete “Implicit Bias Training” at the cost of $250 per head – an expense that San Francisco reimburses in full. Moreover, a new tax on CEO pay approved by voters last November will raise between $60 and $140 million, but Supervisor Matt Haney wants to spend most of it on health services. The money to improve public transit and solve downtown congestion is there, with no need for an unproductive new tax.

Forcing residents to leave their keys at home by imposing a heavy tax does not create a long-term solution to congestion. Instead, officials should focus on incentivizing public transportation by ending silly programs and directing the money toward much-needed rail improvements and bus repair. New taxes will only burden the businesses, residents, and employees of San Francisco with a prolonged recovery and even shoddier public transportation in the long term.

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Fighting Governor Wolf’s Unilateral Cap-and-Trade Tax on Pennsylvania Families

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Posted by Dennis Hull on Tuesday, July 27th, 2021, 1:20 PM PERMALINK

Boasting 20% of the country’s total natural gas production, gas drives Pennsylvania’s economy. It has also driven the state’s emissions down as much as states in the Regional Greenhouse Gas Initiative (RGGI).

But thanks to unilateral action by Governor Tom Wolf to join the destructive cap and trade program, the state will risk losing its competitive advantage in natural gas production while imposing a $3.5 billion carbon tax on its residents.

The Regional Greenhouse Gas Initiative (RGGI) requires power plants to pay a fee to the state for each ton of carbon dioxide they emit, thereby purchasing a carbon “allowance” from the state. Fuels like coal will suffer disproportionately under the program with their above-average carbon emissions. Over the years, the number of allowances will shrink, leading to an increase in prices for the allowances that Governor Wolf hopes will motivate companies to close fossil fuel plants and eventually transition to wind and solar.

With these stringent new levies on fuel production, electric consumers and workers in Pennsylvania will bear the brunt of the costs. According to the Power PA Jobs Alliance, as more than two-thirds of the state’s power generation is made less competitive or uncompetitive by the program, Pennsylvania will lose more than 8,000 jobs and $2.87 billion in total economic impact. That includes a loss of $539 million in employee compensation and, with resultant lower wages and a weaker economy, a loss of $34.2 million in state and local taxes.

Electric bills will inevitably rise for Pennsylvania families as companies try to recoup billions in new taxes. Since 2009, the average monthly electric bill in Pennsylvania has increased by more than 17%, from around $98 to $115 in 2019. But with an estimated $3.5 billion in carbon tax collection over the next 9 years, a Penn State analysis expects the average household electric bill to rise by $43 every year. That is a burden which many low-income Pennsylvania residents will struggle to afford.

The Republican-controlled legislature is strongly against participation in RGGI, with several Democrats joining them in their opposition. By signing off on the program without the consent of the legislature, Governor Wolf ignores a critical component of the Pennsylvania constitution: that only the Pennsylvania General Assembly may levy new taxes. In fact, every other state that joined RGGI did so with the approval of their respective state legislatures.

Moreover, Pennsylvania law requires physical, public hearings in regions impacted by new regulations like RGGI. Yet just 10 hearings, all of them virtual, were hurriedly scheduled over a five-day period in December. Not one was held in one of the many communities that will suffer from the impending power plant closures as a result of joining RGGI.

Natural gas and fossil fuel production more broadly have been an economic boon to Pennsylvania. But carbon emissions in the state have also dropped dramatically as union workers built more than a dozen major natural gas extraction plants. Over the last 10 years, more than $14 billion has been invested in new production facilities. Increased rates of extraction of natural gas – by far the cleanest fossil fuel – has led to a 30% reduction in carbon emissions in Pennsylvania, in addition to making the state the number 2 natural gas producer in the country. It’s no surprise that more than a dozen labor unions, including the Pennsylvania AFL-CIO, oppose joining the RGGI.

By unilaterally joining the RGGI, Governor Wolf is overstepping his authority and imposing a repressive new tax burden on Pennsylvania families. Instead of having any significant impact on climate change, this move will simply encourage electricity generation, jobs, and capital investment to shift to unregulated, neighboring states like West Virginia and Ohio. In the meantime, Pennsylvanians will struggle with increasingly higher bills and lower growth.

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Massachusetts Legislators Vote to Keep Taxpayers in the Dark

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Posted by Dennis Hull on Thursday, July 22nd, 2021, 2:04 PM PERMALINK

As a state that ranks 47th out of 50 for political transparency, Massachusetts is already infamous for doing business behind closed doors. But despite growing calls from residents and activist groups for a more open process, legislators on Beacon Hill passed a rules package last week that will deceptively conceal voting records and burden the public with even more opaque procedures. 

One proposal in the package would have ensured that legislators and the public have at least 48 hours to read a bill before it’s brought up for a vote. Many Massachusetts bills often reach legislators’ desks just a few hours before the vote, giving them almost no time to file amendments. Ironically, the rules package itself was revealed less than 4 hours before the deadline to file amendments. But business will continue as usual on Beacon Hill after the amendment to require a 48-hour interim period failed miserably in a 39-119 vote. 

The legislature also scratched an amendment to reveal how most lawmakers vote on legislation in committee. Now, only committee members who vote “no” on a bill will be identified by name. The rest of the votes, including those who vote “yes” or abstain from voting, will be bundled into a single aggregate number, thus leaving those politicians free from public criticism. As a result, Massachusetts voters will have even less of an ability to hold their other representatives accountable for their support bills. 

Perhaps the most straightforward of the failed amendments was one aimed at reinstituting a 4-term limit for the Speaker of the House. Those who opposed term limits pathetically argued that they would “discriminate” against the Speaker (since no one else faces term limits) or that they’re undemocratic (since legislators would no longer be able to choose whomever they want for Speaker at any time). But the failure of the term limits amendment in a 35-125 vote reflects the powerful grip of the legislative leadership over the vast majority of its members. Establishment politicians, particularly Speaker Ron Mariano, opposed all of these amendments to rid the Massachusetts legislature of its secretive, top-down procedures. But, for low-ranking representatives, voting for transparency was simply not worth the cost of future retaliation from the people at the top.  

Thanks to the cowardice of freshman legislators who ran on transparency but voted with the establishment, not much will change in the Massachusetts legislature. Even with dozens of protestors on the capitol steps, an open process will once again take a backseat to the personal interests of lawmakers who want to minimize accountability and stay in power. 

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Texas Lawmakers Aim To Deliver Property Tax Relief

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Posted by Dennis Hull on Tuesday, July 20th, 2021, 5:41 PM PERMALINK

Skyrocketing local property tax rates pose an escalating threat to the health of the Texas economy. Many in the Texas Legislature believe that by substituting a broader-based sales tax and limiting government spending growth, much needed property tax relief can be delivered.

Over the last 20 years, data reveals that local property tax burdens across Texas have grown faster than the average taxpayer’s ability to pay for them. Despite the impact of several reforms and buydowns over the years, property tax bills for Texas homeowners rank 7th highest in the nation. And though the state boasts an otherwise friendly business climate, Texas localities levy the 15th worst property tax burden on corporations. In fact, property taxes account for around half of all tax revenue in the state, reaching $70 billion in 2020.

Polling shows Texas families are fed up with the status quo. More than three quarters of Texans say property taxes are a “major burden for them and their family,” according to a recent Texas Public Policy Foundation poll. Onerous property tax burdens hurt low-income earners more than any other group. Since the tax is paid annually and the costs compound over time, property taxes are often an obstacle preventing low-income Texas residents from purchasing their first home. It’s also worth noting that property tax burdens are also borne by renters, as the costs are passed along and factored into monthly rent payments.

Americans for Tax Reform is adjuring Texas legislators to pass tax reform aimed at reducing property tax burdens during this summer’s special session. One option, last proposed in HB 958, would limit government spending over the next decade to buy down school district Maintenance and Operations (M&O) taxes using the surplus dollars. Constituting a whopping 43% of the state’s property tax revenue, an elimination of the M&O tax would mean tens of billions in relief for Texans. If growth in state spending were limited to 4% per biennium, with most of the surplus directed toward school district property taxes, M&O costs would be totally expunged in about a decade, putting those dollars back into the pockets of Texas families.

Another proposal, though recently defeated in the legislature, would substitute M&O property taxes with an expanded sales tax. Vance Ginn, chief economist at the Texas Public Policy Foundation, points out that Texas sales taxes have grown at far lower rates than property taxes. While personal income increased by 157% from 2001 to 2020, property taxes went up by 181%. Sales tax collections, meanwhile, rose by just 133%.

Every year, Texas provides more than $43 billion in exemptions, exclusions, and discounts to the sales tax base. By getting rid of many of those special exceptions written into the tax code, Ginn argues, the state would significantly raise its sales tax revenue and provide a more level playing field.

In fact, significantly reducing property taxes through the elimination of sales tax exemptions would actually lead to an overall reduction in the total state and local sales tax rate, thanks to the tens of billions in additional revenue. “We can eliminate nearly half the tax burden in Texas, that’s the key part,” Ginn points out. “You’re cutting the property tax dramatically, and actually lowering the rate from 8.25 percent today for state and local taxes down to 8.21%.”

These two property tax reform options recently proposed in the Texas Legislature would stimulate economic growth and job creation, according to economists at Rice University’s Baker Institute. Just the first year of gradually replacing property taxes with sales taxes could contribute to a $14.3 billion increase in economic output and 217,000 new jobs. Meanwhile, Texas could see a $12.5 billion increase in economic output and 183,000 new jobs after the first year of buying down M&O property taxes using the dollars saved from limits on government spending.

Reduced property taxes in Texas would lead to greater household after tax income, lower rent payments, and other economic benefits for Texas residents. By rectifying onerous property tax burdens, Texas lawmakers can fix one of the two greatest flaws – the other being the imposition of the margins tax – in what is otherwise one of the most competitive business tax climates in the U.S.

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Maine's New Recycling Law Is a Regressive Tax That Will Harm Consumers

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Posted by Dennis Hull on Monday, July 19th, 2021, 12:35 PM PERMALINK

Low-income Mainers are already struggling with record high inflation and the twelfth highest state and local tax burden in the country. But a recycling law signed by Governor Janet Mills on Tuesday will make matters worse for those residents with higher prices at the grocery store and on other goods, doing the most harm to families who can least afford the higher costs.

The new program, known as Extended Producer Responsibility (EPR), will charge packaging manufacturers for collecting and processing recyclable materials, in addition to fees for discarding non-recyclable packaging. The Maine Department of Environmental Protection will set a packaging fee schedule on producers based on the per-ton costs of recycling their materials.

While environmentalists and other proponents of the program claim it will lead to funding for new recycling equipment and more efficient procedures, there is no evidence the new law will reduce the amount of trash in landfills. Nor will it improve recycling technology or allow for local tax relief, as some backers of the EPR program have claimed.

Instead, the EPR program will serve as a regressive, hidden tax as producers shift their higher costs onto consumers. Dr. Calvin Lakhan, a researcher at York University in Toronto, estimates that consumer prices will skyrocket anywhere from $99 million to $134 million every year as a result of the EPR program. For a family of four in Maine, monthly costs are estimated to rise between $32 and $59, thanks to higher costs on products that use disposable packaging.

Though the burden is concealed and indirect, all Maine residents will ultimately bear the economic consequences of the EPR legislation. But for low-income individuals and families, who already struggle to afford basic necessities, higher prices at the grocery store will have a far weightier impact.

From May 2020 to May 2021, Maine saw inflation of 6.6% – the largest rise in the final demand index since the Bureau of Labor Statistics started tracking the figure in 2010. Compared to a national rate of 4.9% over that same period, low-income Mainers are already struggling more than their friends and family in other states. The EPR program will cause even further price inflation during a period when those residents would be better served with tax relief.

At the same time that Governor Mills is imposing what is effectively a regressive tax hike, she’s shunning efforts to tax upper income filers. Lawmakers considered several bills to increase taxes on the wealthy during this year’s legislative session in Maine. LD 498 would have hiked the top income tax rate from 7.15% to 10.15%, an increase of more than 41%, while another bill would have raised the corporate tax rate from 8.93% to 12.4%. But even if they had passed, those bills would never have become law due to Governor Janet Mills’ firm opposition to the proposals.

While she won’t support a direct, progressive tax hike on the wealthy, Governor Mills takes little issue with imposing a hidden, regressive one that harms her poorest residents the most. Mills will have a tough time defending that duplicitous decision against her potential Republican challengers in 2022.

Maine was the first to impose an EPR fee scheme, but it may soon have company. Oregon lawmakers recently passed a similar EPR program under SB 582, which is awaiting Governor Kate Brown’s signature. That bill would raise recycling costs by 30% while only raising the recycling rate by 3%, according to a letter signed by nearly 40 manufacturing and business groups. Like in Maine, those higher costs will be passed on to consumers with higher prices for basic goods, many of which use disposable packaging. If Governor Brown blesses the program with her signature, Oregon will become the second state in the nation to impose a regressive recycling tax on its residents.

Expect lawmakers and governors in other states will continue to pursue EPR legislation in the coming years. This effective regressive tax first enacted in Maine should serve as a cautionary tale to avoid, and not a model for other states to emulate, though progressives will certainly try.

Photo Credit: Blahedo

Washington State Prohibits Voters From Having a Say Over Unconstitutional Income Tax

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Posted by Dennis Hull on Wednesday, July 14th, 2021, 4:40 PM PERMALINK

Washington state legislators are making their latest attempt to impose an unconstitutional income tax on its residents. With the passage of S.B. 5096, Washington residents may soon be subject to a 7% tax on the sale of stocks, bonds, businesses, and other investments whose profits exceed $250,000. 

Progressives have long tried to impose an income tax on Washingtonians. However, since the passage of a 1930 constitutional amendment that made all taxes “uniform upon the same class of property,” with property defined as “everything, whether tangible or intangible, subject to ownership,” Washington has successfully evaded every attempt to impose an income tax. Just two years after the passage of the 1930 amendment, a graduated income tax was ruled unconstitutional by the state supreme court – a precedent that holds today. Courts also struck down a 2017 Seattle ordinance establishing a progressive income tax. 

That hasn’t stopped legislators from repeatedly proposing an income tax to voters. Since 1930, Washington voters have defeated 10 ballot measures to impose a personal or corporate income. Most were rejected by a resounding 2/3 majority. Voters expressed their opposition most recently in 2010 with a 64-36% vote against a state income tax – even though it would only have affected income higher than $200,000 and reduced other taxes in return. 

Washingtonians have frequently made their preferences clear. But this year, politicians have shrewdly labeled their capital gains tax legislation as an excise tax. Excise taxes are imposed on the sale of specific goods and services. They’re legal under the state constitution – in fact, the state already imposes a real estate excise tax that ranks as the highest in the region. Democrats insist that the labeling ploy will allow the capital gains tax to withstand scrutiny in the courts, where several lawsuits have already been filed by the Freedom Foundation and the Opportunity for All Coalition. 

But capital gains are already considered income in every other state that taxes them. According to the IRS, capital gains are taxable as income since “almost everything you own and use for personal purposes, pleasure, business or investment is a capital asset” – including your home, stocks, jewelry, and business property. 

“The Washington Constitution is unambiguous,” said Freedom Foundation CEO Aaron Withe. “Taxpayers can’t be treated differently based on the amount of their income.  It’s both punitive and illegal.” Indeed, besides its unconstitutional status as an income tax, the capital gains tax would not be uniform, as is required under the constitution. Moreover, the Freedom Foundation points out in its lawsuit that the capital gains tax is unlawful under the Commerce Clause of the United States Constitution because it treats all sales of capital by Washington residents as taxable gains – including sales that occurred out-of-state. 

Democrats have also carefully worded their legislation to ensure that voters will not have the opportunity to consider it as a referendum. Allowing voters to have a say could seriously endanger the capital gains tax proposal – judging by history, voters would likely make it the 11th consecutive income tax proposal to fail. So, Democrats wrote an emergency clause into the law, thereby prohibiting voters from collecting signatures and mobilizing against the new tax in a referendum movement. With the inclusion of the phrase that the bill is “necessary for the support of state government and its existing public institutions,” Democrats have insulated the proposal from the likelihood that it will appear on the ballot in November. The courts, not the people, are now left to decide the validity of the tax. 

Rather than tiptoeing around the state constitution to create an income tax, Washington legislators should look to their record state revenues to advance their priorities. Washington has more than $3.8 billion in surplus funds, primarily as a result of Covid-era policies. 12 states across the country, including regional competitors like Arizona, Wisconsin, and Montana, used their surpluses to cut taxes across the board, often on both income and property. 

If enacted, a capital gains tax will ultimately create a less competitive business environment in the state of Washington. Entrepreneurs in Washington will start looking to business-friendly states like Florida, Texas, and regional competitors, rather than subject themselves to a high capital gains tax on their burgeoning profits. Rather than hobbling their competitive advantage and burdening their residents with a historic new tax, Washington should follow the example of these states and promote pro-growth, low-tax policies to facilitate a flourishing economy. 

Photo Credit: Masaccio

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