Doug Kellogg

With Many States Near Finish Line on Sports Betting, TN & IL Show What Not to Do

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Posted by Doug Kellogg on Tuesday, July 9th, 2019, 4:29 PM PERMALINK

With 14 states and counting having at least passed legislation to legalize sports betting, most have done a decent job on taxes, and avoiding too much regulation. But that doesn’t mean they all have.

Recently enacted legislation in Tennessee and Illinois flop on taxes, and perhaps more importantly, include government mandates that mess with the market unnecessarily.

With some states, like North Carolina, close to passing legislation, and others thinking about what sports betting may look like in their state, like Ohio and California, now is the time for legislators to learn from the bad examples.

What did Tennessee and Illinois do wrong?

High tax rates. The Volunteer State will impose the second highest tax rate on bets in the nation at 20 percent. Illinois’ rate is 15 percent. Pennsylvania still leads the pack with an absurd 36 percent effective tax rate (Rhode Island has a 51 percent revenue share, a significant burden, but technically different than a tax on bets).

Government mandated usage of league “official” data. Tennessee imposed a mandate that puts government in the role of telling private operators who they must do business with. There are already plenty of services that offer stats and data. Requiring use of official data is a giveaway to sports leagues using government authority. Illinois did not fall as deeply into this trap, but did impose a similar league data mandate for in-play betting, as well as prop bets.

A data mandate also tramples on the long-held precedent that sports statistics are public information, like news. That’s why newspapers can report on sports events without paying royalties.

Legislators who crafted these bills may point to language that requires operators and data providers to come to a “commercially reasonable” agreement. Commercially reasonable agreements happen when there is competition and choice. Illinois and Tennessee have already barred that from happening, and instead put government in the middle as a referee.

The states that are doing best on sports betting have reasonable-to-low tax rates, allow mobile betting, and allow betting statewide. This is how New Jersey has succeeded, and even begun to surpass Nevada’s sports betting market.

Sports books are sensitive to taxes because if they try to pass on costs to customers, it impacts the value of their bet. Too high and betting activity goes down, and government revenues along with it. A Copenhagen Economics study showed this effect: “Denmark, with a tax-rate less than half that of France, has a growth in gambling volumes approximately five times larger.”

In the U.S., high tax sports betting states like Rhode Island and Pennsylvania have seen disappointment with lower than expected revenues, or delays in operations even starting.

As more competition comes online, consumers will have more options. States with high tax rates, and overbearing policies that help leagues at the expense of bettors and in-state operators, risk losing the long game.

The good news is states still working on legislation can learn from these bad examples. Iowa sure did, enacting sports betting with just a 6.75 percent tax rate. Maine's legislation is stalled at the Governor's desk, but it is solid, allowing statewide online betting and a competitive market.

It would be too bad if good policies didn't make it across the finish line while bills that needed more work made it through.

Photo Credit: Flickr- Steve Selwood

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What’s Worse than One Carbon Tax Proposal? Two.

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Posted by Doug Kellogg on Tuesday, June 18th, 2019, 5:46 PM PERMALINK

New York State’s new Democrat majority is working hard to make New York the most expensive, unfriendly place to live and build a future.

The state is already unattractive. More people left New York State than any other from 2017 to 2018. Worse, 42 of 50 upstate counties lost population since 2010. Even New York City, which has grown, has nearly half of residents saying they can’t afford it.

But the cost of electricity, driving, heck, everything we buy could skyrocket if either of two live carbon tax proposals reaches the finish line.

New York may be even closer to getting hit with a carbon tax – done in the name of compensating for the “social cost” of carbon.

Legislation from Assemblyman Kevin Cahill (D) would impose a $35 per ton tax on carbon which would rise to $185 over time. And that may not be the most immediate carbon tax threat!

New York’s Independent System Operator has released a proposal that includes a $50 per ton tax on carbon. This proposal has a long bureaucratic path in front of it before the Federal Energy Regulatory Commission (FERC) renders a decision, but could happen without the legislature taking action.

The state is already part of the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade regime. But a carbon tax goes far beyond the burdens imposed by RGGI, driving costs over 50 percent higher than the cap and trade regime.

“The prices in this scheme (RGGI) have never exceeded $5-6/ton on an annual basis. We estimate an initial impact on wholesale energy prices of $21/MWh… This would represent a 50-75 percent increase in NYISO wholesale energy prices,” an ICF analysis states.

Regional cap and trade in the northeast has imposed billions of dollars in costs which get passed on to consumers and businesses. The program decreased goods production 12 percent, and “energy intensive goods” production dropped 34 percent in the region, according to a CATO Institute analysis.

This is just an inkling of the damage a carbon tax would do to New York. All that extra cost, and for what?

“The EPA reports that the aggregate emissions of six common toxic pollutants (carbon monoxide, lead, nitrogen oxide, volatile organic compounds, particulate matter, and sulfur dioxide) have declined by 67 percent since 1980. Meanwhile, gross domestic product is up 160 percent and population is up 42 percent. Energy-related carbon emissions are down to near 1992 levels,” writes Texas Public Policy Foundation senior economist Vance Ginn and ALEC chief economist Jonathan Williams.

The way New York’s proposal is unfolding could shield legislators from some of the political consequences we’ve seen in other states and other countries. But perhaps it could be a problem for Governor Cuomo, who has already indicated he will run for a fourth (!) term as governor.  

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Climate Protection Act Could Be Lights Out for NY

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Posted by Doug Kellogg on Tuesday, June 18th, 2019, 12:11 PM PERMALINK

Democrats in the New York State legislature and Governor Cuomo have agreed on a massive climate bill, the Climate Leadership and Community Protection Act (built off the Climate and Community Protection Act), which will deal a fatal blow to affordable energy in the Empire State.

Under Governor Cuomo, New York’s energy policy is a political mess. Largely in pursuit of costly 50-by-30 renewable energy mandates (50% renewable energy by 2030), the state forces consumers and taxpayers to subsidize renewable energy, rams through wind turbine projects in communities that don’t want them, and bails out aging nuclear power plants that even their operators wanted to close.

Cuomo has also blocked multiple natural gas pipelines because… reasons. Natural gas has brought down carbon emissions, yet environmental activists have fought tooth and nail against extraction and any gas infrastructure in the state. Meanwhile, New York City is mostly powered by natural gas, but from Pennsylvania.

The results have New Yorkers paying high energy prices, in February 2019 New Yorkers were paying 30 percent more than the national average.

With Democrats now in complete control of state government, the situation could get even worse.  

The initial Climate and Community Protection Act (Senate Bill S7971A and Assembly Bill A8270B) received massive backing from left-wing groups, and it was passed in the Assembly. Now a tweaked bill negotiated in a deal with the Governor has passed both houses.

This measure would impose an 85 percent cut in carbon emissions in the state, compared to 1990 levels. 50 percent is unrealistic, 85 percent is a dangerous and costly for energy producers and manufacturers. The compromise bill will also call for 100 percent renewable energy by 2040.

“Numerous scientists, climate activists, and environmental organizations believe achieving zero greenhouse gas emissions in New York by 2050 seems to be physically impossible” writes Business Council of New York’s Darren Suarez in the Buffalo News.

According to an American Action Forum (AAF) analysis, a 100 percent renewable energy requirement, similar to the federal Green New Deal, is estimated to cost $423.9 billion annually, just to build and maintain the renewable energy capacity. “Merely building and operating the required number of renewable electric power plants would cost more than what Americans pay for electricity today,” AAF’s report states.

This would unfold on a smaller, but no less damaging scale in New York under the CCPA. New Yorkers already struggling to afford the cost of living will have to throw in the towel.

Also, manufacturers produce carbon dioxide in the manufacturing process. The National Association of Manufacturers states that manufacturing makes up nearly 5 percent of the state’s economic output and workforce.

The measure creates a council to develop reports and plans to get the state to those goals. A council that must include “environmental justice” advocates.

The plan includes a prevailing wage standard for projects  – a big wink toward big labor. It also means these projects will be as expensive as humanly possible.

Initial bills also included language calling for a low carbon fuel standard buried in it. This policy requires fuel producers to compensate for higher carbon fuels they deliver to the state by either producing lower carbon fuels, or buying credits. California’s low carbon fuel standard will add an estimated 69-cents to the cost of gas by 2030, if not changed.

The Governor’s bill is expected to send less than the 40 percent of revenues earlier bills promised to help disadvantaged communities. The council will have to map out more details on that, it could mean subsidized jobs for an area, or plastering solar panels all over rough neighborhoods.

Hammering New York businesses with a costly, and impossible demand will kill more jobs and growth in the state. The ironic side effect could be that overall carbon emissions go up because businesses with a carbon footprint flee New York’s onerous regulations.

Photo Credit: Flickr - Chris Ford

To the Surprise of No One, CT Budget Deal Looks Bad for Taxpayers

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Posted by Doug Kellogg on Friday, May 31st, 2019, 12:28 PM PERMALINK


Under the leadership of “New Tax” Ned, Connecticut lawmakers announced a budget deal that includes a number of tax hikes, though it could have been worse.

An income tax increase on the so-called wealthy, a capital gains “surcharge”, and a soda tax were left out of the deal. Great news, but that’s where the good news ends.

The budget (now available here) will include a “mansion tax”, a tax hike on small businesses through the reduction of a tax credit, and a myriad of Governor Lamont’s sales tax expansions have survived. Get ready to pay more for your parking, dry cleaning, and movies and video games purchased online.

A tax hike on meals, beverages, and alcohol is included as well, so nights out in Connecticut are getting more expensive too.

Reportedly, this will amount to a $60 million tax hike. Connecticut already has the 47th-ranked business tax climate in the country, and the 4th-heaviest state-and-local tax burden, according to Tax Foundation.

The budget also reveals how unaffordable the state’s pension obligations are – as it moves forward with a move to kick contributions to the teachers’ pension system down the road. This could cost future generations over $27 billion to pay back. Reform is clearly needed, but with Democrats in total control of state government, that seems unlikely.

On the spending side, the budget marks an agreement between the Governor and legislators on a new entitlement program, paid family leave (FMLA). This will take more money out of the paychecks of Connecticut workers whether they use the program or not.

Now that the budget is live, it appears real-time sales tax collection is not part of it.

Real-time sales tax is a fantasy concept, that could cost over $1 billion as stores, banks, and payment processors would be required to invent an entirely new system for processing credit card payments and remitting taxes. That cost would be passed to consumers in one way or another.

These changes would have very limited benefit even for government, as the Yankee Institute points out, “All of these massive expenses, all these demands to do the impossible, are for pretty much to no benefit. The “real time” sales-tax collection would speed up remittances to the state by about one month, one time.”

This amounts to a short-term advance in revenue for government, that’s it.

However, the budget deal unfortunately does not mean Hartford is done advancing this, or other bad policies.

The massive statewide toll proposal is still alive, as is a host of disastrous health care policy pitched by Governor Lamont and legislative leaders last week. That push could still lead to a misguided tax on opioid pain relief medication, and importation of prescription drugs from Canada – and socialist price controls with it. Though, it is good news neither are in the budget itself.

As ATR continues to point out, a tax on pain medicine punishes patients who are legitimately using medication under the supervision of a doctor. Then everyone in the state pays more as the costs from the tax and compliance are passed on to everyone in the state through higher insurance premiums.

After federal courts threw out language in New York’s first opioid tax law, costs must be passed on.

Worse, a tax on legitimate opioid medicine makes illegal synthetic drugs more attractive to people suffering from addiction. CDC data show it is illegal drugs that are killing people.

Even after avoiding some of the tax hikes that were on the table, Connecticut taxpayers are not out of the woods until legislators go home without rushing through more bad ideas.

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Real-Time Sales Tax Collection Is a Costly Fantasy

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Posted by Doug Kellogg on Friday, May 24th, 2019, 12:40 PM PERMALINK

Government is not thought of as innovative, but when it comes to getting ahold of your hard-earned money, officials can start getting very creative. So creative in fact, that they come up with fantastical policy ideas more fitting for a futuristic dystopia than enactment by state lawmakers.

Connecticut is the latest state to consider such an idea in real-time sales tax collection.

Real-time sales tax collection demands businesses collect sales taxes and remit them to government as transactions happen. This policy is completely divorced from reality, as the way merchants and financial institutions currently process payments does not allow for the instant, detailed calculations real time sales tax collection demands.

Here are a few key reasons why real-time sales tax collection is a really bad policy:

Real-time sales tax collection is a fantasy.

The capability and technology to separate sales tax and remit it directly to government does not exist. Payment processors only get the most basic information needed to approve a sale.

Real-time sales tax collection would impose massive costs.

Demanding real-time sales tax collection means sellers, payment processors, and credit card companies all have to agree upon and create new technology at a massive cost. A study of the impact of such a proposal in Massachusetts estimated costs to be north of $1 billion. That burden would be passed on to consumers. 

Real-time sales tax collection has been rejected multiple times.

Arizona, Missouri, and Massachusetts have examined the concept and given it up. Even a National Conference of State Legislators task force did not recommend it.

Real-time sales tax collection would slow transactions, raise security questions.

There is a web of security measures in place to protect information transmitted in sales transactions, overseen by multiple government agencies. Remitting sales taxes would require more information that would require more security – not to mention waiting for all this to process would be a pain for customers.

The bottom line: this is a misguided policy that will create a tax compliance mess and hurt local businesses and job-creators who are already paying their taxes and complying with the law.

On top of all the negatives, governments would not end up with much additional revenue, if any. Better to leave real-time sales tax in the realm of taxpayers’ futuristic nightmares, and bureaucrats’ wildest dreams.

Photo Credit: Pixabay

Ohio Senate Should Clean Up Costly Policies in House Budget

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Posted by Doug Kellogg on Wednesday, May 22nd, 2019, 5:13 PM PERMALINK

The Ohio House recently passed a two-year budget (HB 166). It has rightfully earned praise for its solid income tax cut.

However, a deeper look reveals some bad policies that would make it more expensive for small business owners, visitors to the state, and people hailing a rideshare. And it also includes a measure that would punish innovation in medicine by bringing socialist price controls to the Buckeye State.

For starters, small businesses face some big changes under the House budget.  

The plan reduces the amount of income small businesses can deduct from $250,000 to $100,000. It also removes a 3 percent cap on the tax rate for income over $250,000 – meaning businesses earning more than that could face a tax rate over 4.67 percent, a significant increase. It is also retroactive, which can be very difficult for small business owners who now will face unexpected costs.

The Ohio chapter of the National Federation of Independent Businesses (NFIB) has raised concerns over the changes.

The House budget also includes a tax hike on booking travel. It imposes occupancy tax on service fees for online travel agent services.

These services, like Expedia, Travelocity, and others – make it easier for people to book hotels or other accommodations online. They attract travelers, which are a boon for restaurants, shops, and other local businesses.  

The thing is, the cost of your hotel room is already taxed. The House proposal adds taxes to service fees, driving up costs for Ohioans and out-of-state visitors when they use travel booking services.

That’s not the end of the taxes in the House plan. Ridesharing would also get more expensive.

Legislation that would require online marketplaces to collect and remit sales taxes will, perhaps unintentionally, ensnare for hire vehicles. The straightforward impact is the state sales tax will hit ridesharing.  

It’s not only bad if unintentional, but this is also a form of double taxation. Ridesharing drivers are already paying income tax on their earnings, and now will have to deal with sales tax. This burden will only make life tougher for drivers, and more expensive for Ohioans.

Another part of the budget would bring foreign price controls to Ohio by allowing countries with socialist health care systems to influence prescription drug reimbursement rates for Medicare Part B.

As Americans for Tax Reform wrote in submitted testimony:

“The Department of Health and Human Services (HHS) recently proposed the “International Pricing Index” (IPI) payment model for drugs administered under Medicare Part B. Essentially, this payment model imports foreign price controls into the United States by calculating the Part B reimbursement rate based on the prices set by 14 other countries.”

The bottom line: the progress the House is making with their income tax cut is weighed down by the harmful proposals in the very same budget.  Senate leaders can help the House’s income tax cut become even better by detaching it from tax hikes and socialist drug pricing controls.

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End of Session Apocalypse in Albany

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Posted by Doug Kellogg on Monday, May 13th, 2019, 3:36 PM PERMALINK

The Empire State is in decline. It hasn’t been sacked by barbarians, but plundered from within by special interests looting taxpayer dollars.

Now, after passing a budget loaded with taxes and fees, legislators are pushing a dangerous, and unaffordable list of progressive priorities with a couple months left in New York’s legislative session.

That means single-payer socialized medicine is on the table in Albany. That, despite the fact it would cost $159 billion, which would nearly double the state’s already bloated budget.

The New York Health Act would eradicate private health insurance - far from giving people a choice in their health care, perhaps the most personal choice people have. And it would do so to help around 5 percent of New Yorkers who don’t have any insurance. When you consider some of them may not have insurance by choice, it makes it even more clear single payer is not about helping people who need insurance, but finding an excuse to put government in charge of a huge aspect of peoples’ lives.

A hearing is reportedly going to be held soon, though there is still resistance to the bill in the Senate, even though Democrats took over the chamber last election cycle.

Energy is already incredibly expensive in New York, at nearly 30 percent higher than the national average in February 2019. And that is with costs dipping since last year.

The state continues to make matters worse on energy. Governor Cuomo continues to block pipelines like Dikembe Mutombo blocked shots, halting the Williams pipeline recently. This is a blow to downstate, Long Island and New York City.

If that's not bad enough, legislation to impose a carbon tax is a threat in Albany.

A bill from Assemblyman Kevin Cahill (D) would impose a $35 per ton tax on carbon which would rise to $185. In an acknowledgment of how regressive a carbon tax is, the legislation aims to pay most of the money to low-income residents to compensate for the cost of the tax - the rest of course would go to politically-connected renewables.

Americans for Tax Reform continues to track carbon tax proposals, and analyses. The tax would take a significant bite out of the economy, causing a loss in GDP unless all the revenue is used to reduce tax burdens.

Carbon taxes also continue to be political losers, with voters in the U.S. and Canada consistently rejecting carbon taxes when given the choice.

New York lawmakers are also considering a bill that would destroy family farms. Farm workers are not able to unionize and strike, and are exempted from certain labor rules like overtime because the nature of farming requires peak work periods.

Now, some lawmakers want to undo that, with a bill that would allow collective bargaining, and mandate overtime pay, called the Farm Labor Fair Practices Act.  This would impose crushing burdens on farms that already operate on thin margins, forcing them to engage in convoluted hiring practices to try to avoid new costs. Overtime pay alone is estimated to cost farms nearly $300 million (Farm Credit East).

Further, the “New York Farm Bureau, which opposes the legislation, say their farm workers do not want the 8-hour workday instituted because there are only limited times of the year when they can work.”

This, like the Department of Labor’s never-ending consideration of eliminating the tipped-wage credit, represents government doing workers a favor that they don’t want. Workers are smart enough to figure out that if government gets too involved in their industry, their jobs are at risk and they won’t make any money. Given that New York lost 9 percent of the state’s farms in five years, this proposal could be the final nail in the industry’s coffin.

Adding insult to injury, the bill is being pushed by a city politician, Queens Senator Jessica Ramos.

Also on the labor front, an absurd bill would let striking union workers immediately claim unemployment benefits, instead of after seven weeks. This would make taxpayers subsidize union strikes, instead of the unions themselves which would otherwise dish out strike pay.

According to Empire Center, “Other labor-friendly state governments—including California, Illinois, Washington, Ohio, Hawaii and Pennsylvania—all prohibit strikers from collecting any UI benefits.”

With government like this, it’s no wonder New York has lost not just taxpayers, but overall population in two of the past four years.

This session, the state legislature has already passed new tax and fee hikes, including a devastating new tax on pain medicine, and a tax on driving to work in the city. They’ve also senselessly banned shopping bags. Now, before the clock runs out, they’ll push for more damaging policies.

New York is in already in decline, and these damaging policies would make sure the Empire State falls for good.

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New Leadership, New Wins for Taxpayers in Florida's 2019 Legislative Session

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Posted by Doug Kellogg on Thursday, May 9th, 2019, 11:43 AM PERMALINK

Under the leadership of new Governor Ron DeSantis, Florida’s 2019 legislative session resulted in some key wins, as the Sunshine State continued to keep pace as one of the most taxpayer-friendly states in the nation.

The headline-grabbing victory is passage of a criminal justice reform package, the first major reforms passed in Florida in decades.

The Florida First Step Act introduced by Senator Jeffrey Brandes in January capitalized on the momentum of the federal FIRST STEP Act, signed late last year by President Trump. The bill was built around incentivizing people in the prison system to train and prepare to reenter society as productive citizens. The vast majority of people in prison will be released one day, ensuring they can contribute and thrive afterwards improves public safety.

The initial package included sentencing reforms, allowing judges to deviate from mandatory minimum sentences that often put away people for inordinate periods of time for nonviolent, drug-related crimes.

In the end, these reforms were lost in the House. Still, the legislation was the broadest reform package passed in 20 years. In addition to reentry programs, it reduces barriers to occupational licenses, and limits driver’s license suspensions.

This is a very promising sign the dam has finally broken on criminal justice reform in Florida, and more progress can be made next session.

There is plenty more for taxpayers to be happy about.

A measure requiring a two-thirds majority popular vote for local governments to increase sales taxes via ballot referenda passed. The legislation, HB 5, also requires the vote to be held on a general election day, not a primary day. This is a big win for local taxpayers, ensuring their voice is heard when their tax dollars on the line, and potentially avoiding many tax increases across Florida communities in the future.

Also with an eye on local governments: the legislature passed a bill to protect consumers against localities attacking plastic straws, HB 771. Plastic straw bans have become popular, despite little evidence they help the environment, and plenty of evidence they hurt area jobs and businesses.

Get ready to freely ride your electric scooters following passage of HB 453. Florida will now put into place sensible statewide rules to define and regulate scooters, which should avoid a patchwork of damaging local government regulation.

On the health care front, Floridians will get more options and innovation. Thanks to HB 21, which repealed the state’s certificate of need requirement, hospitals will no longer need a government permission slip to build or expand.

House Speaker Jose Oliva, who championed the bill, said, “we must get rid of policies like certificate of need, which have only served to create local and regional monopolies."  

Federal tax reform has been a big win across the country, putting money back in Americans’ pockets, driving new job creation, and sparking rising wages. Still, some provisions of federal reform don’t translate to states, and can create new unintended burdens if states conform their codes to the federal tax code. The Global Intangible Low-Taxed Income piece of federal reform is one such measure. Florida legislators smartly acted to avoid charging businesses this federally-focused tax at the state level with HB 7127.

Often defeating bad ideas is the most important thing lawmakers can do to protect taxpayers. Renewable energy mandates cost everyone more money through higher energy costs and subsidies for favored energy sources. Still, these misguided measures have been spreading across the nation. Florida lawmakers however smacked down bills to impose these mandates in Florida, defeating HB 1291/SB 1762.

Governor DeSantis deserves credit for spearheading a major occupational licensing reform effort as part of his “Deregathon.” This plan would have addressed on the few areas of free market policy where Florida has not been a leader. Unfortunately, the legislation (SB 1640) did not pass before the clock ran out, but the Governor’s efforts should earn more support next time. 

The session certainly was not perfect, with the notably disappointing passage of legislation that would open the door to imported Canadian medicine – and price controls with it. Still there are many more positives to point to.

DeSantis also signed House Bill 7123 on Wednesday, which will reduce the tax on commercial leases in the Sunshine State. The bill calls for a .2% reduction in the commercial lease tax for renters, dropping the rate from 5.7% to 5.5%.

DeSantis said in a press release Wednesday,  “I’m pleased to be signing HB 7123 today, which includes temporary tax relief to help the people of Northwest Florida. Statewide, we remain committed to ensuring that communities impacted by recent hurricanes are able to make a full recovery.” H.B. 7123 is projected to save taxpayers nearly $65 million annually, according to the Gov.

Governor DeSantis and Florida Senators and Representatives deserve credit for their successes this session – and an openness to pursue new reforms. The Sunshine State has new leadership that is keeping it around the head of the class among the states.

Photo Credit: StevenM_61

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NE: Trading Guaranteed Tax Hikes for Promised Local Property Tax Relief is High Risk

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Posted by Doug Kellogg on Tuesday, April 30th, 2019, 4:58 PM PERMALINK

Property tax reform has been a big focus in Nebraska this session. This makes sense given the state’s high property tax burden.

The Tax Foundation ranks Nebraska 12th-highest for property tax collections per capita, and 8th-highest as a percentage of home value. Their taxes are way too high, especially for a lower cost of living state.

The state also faces an issue as the cost of agricultural land, and thus the tax burden for that land, has been driven up as people purchase the land for purposes other than farming. This is putting pressure on farmers as their baked-in costs rise.

So you could say the pressure for action in Lincoln is significant.

Governor Ricketts has championed a couple great reforms: a constitutional property tax cap, and a measure (LB 103) that requires that any additional revenue taken in as local property values rise is returned to taxpayers or there is a vote held before local government can keep it.

These are solid policies to protect taxpayers. Massachusetts, New York, and most recently, Iowa, have passed effective property tax caps.

Yet, in the Cornhusker State, while the control on rising revenue from values has been enacted, the cap legislation has stalled.

Both bills were introduced by Senator Lou Ann Linehan. The cap’s difficulties would be bad enough, but a third bill from Senator Linehan (LB 289) is really complicating the situation.

The idea of the bill is to provide immediate property tax relief. However, it attempts to do so by imposing a $200 million-plus tax hike, then sends the money largely to school districts in exchange for them lowering property taxes.

The tax hikes include increasing the sales tax overall, eliminating various sales tax exemptions (including for bottled water, soda, various moving-related services), and a hike in the cigarette tax rate over 30%. Monday, the legislature worked on expanding the expansion, but trimmed the rate of the sales tax hike. The bill will head to a full vote in the Senate, which will need 33 votes to override a Governor Ricketts veto.

There are good measures to limit property taxes in the legislation – chaining future growth to inflation and reducing the percentage of a property’s value that can be assessed for tax purposes.

The problem is that even with those limitations, the complex bill is likely to amount to trading a massive guaranteed tax hike for fleeting property tax relief.

Tax Foundation’s Joe Henchman testified to the committees that at best their reform would move Nebraska up two places in the state property tax burden rankings. Meanwhile the proposed 1% increase in the state sales tax would give Nebraska the 17th-highest sales tax rate in the country. Worse, it would become higher than neighboring Iowa’s, incentivizing people to shop across the border.

The sales tax hike and expansion is regressive, driving up the cost of living for everyone in the state. The cigarette tax hike is regressive as well, and compounding the damage is the strong likelihood that revenue falls short.

Less than 10 percent of state cigarette tax hikes from 2009 to 2016 met revenue projections. So relying on a cigarette tax hike in creating a new state aid program is likely to drive demand for other tax hikes in the future.

Those pushing this approach may well realize this, but they say they are getting desperately needed property tax relief in exchange.

However, Nebraska itself has imposed tax hikes to increase state aid and limit property taxes in the past and it has not worked out, as Governor Ricketts explains:

“In 1990, the Legislature passed LB 1059 which created the school aid formula known as the Tax Equity and Educational Opportunities Support Act (TEEOSA).  With this bill, the Legislature raised the sales and income tax over the veto of Governor Kay Orr. This did not reduce property taxes, which continued to increase in the following years.

“Subsequent attempts to achieve property tax relief have continued to involve the TEEOSA formula.  For example in 1998, the Legislature increased state aid through TEEOSA by about $125 million, or a 27 percent increase. In 1999, property taxes still went up about $48 million. In 2005, the Legislature boosted state aid another $70 million, or 10 percent in one year. In 2006, property taxes went up $161 million statewide.”

It is not only Nebraska that has seen this spend-to-save approach fail.

New York attempted to deal with its sky-high property taxes under Governor Pataki by implementing a property tax relief program, STAR. STAR created tax exemptions up to a certain amount of home value – with the state paying out to compensate school districts for lost revenue.

The result?

“From 2001 to 2005, however, property taxes per pupil shot up by 28 percent even after deducting STAR savings,” (Empire Center, NY Torch blog).

This session, New York State enacted a permanent 2% cap on property tax increases, at the behest of Governor Cuomo. This straight up property tax cap has proven to be an effective protection for taxpayers, having helped New Yorkers avoid over $20 billion in new taxes since its original implementation.

Nebraska can do better than Democrat-dominated New York, and must keep pace with Iowa. Governor Ricketts has put the right reforms on the table. It’s up to the legislature to pass them and avoid the high-risk attempt to trade tax hikes for relief.

House of Pain? Delaware House Must Stop Tax on Pain Medication

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Posted by Doug Kellogg on Friday, April 19th, 2019, 2:36 PM PERMALINK

The Delaware State Senate recently passed a direct tax on opioid-derived pain medication in the name of solving the opioid crisis. It's now up to the House to stop this dangerous policy.

The problem is, this policy won’t solve the opioid crisis. But it will tax patients who are legitimately using medicine they need.

The costs of a tax get passed on to consumers.

A report by economist Alex Brill, and Women In Government, shows the damage a tax would cause: “the tax would do little to discourage inappropriate use, could have the unintended consequence of promoting illicit opioids for some, and would raise the cost of health care generally.”

Insurance costs will be driven up for everyone, as the Women In Government study shows, as does an analysis by two Union College economists that focused on New York’s first opioid tax proposal.

People without health insurance feel these costs as well, since they have no way to deflect higher costs if they need to buy medication.

You pay more, but the crisis doesn’t get better, and may even get worse.

A tax on legitimate opioid medicine ironically makes illegal synthetic drugs more attractive to people suffering from addiction.

New CDC data show that illicit fentanyl is what is killing people today.

Government cannot tax away this crisis. However, community-based solutions have been shown to help those suffering from addiction.

One example is Little Falls, Minnesota, which focused on addiction treatment for users, instead of just jail time. According to PBS, the Minnesota Health Commissioner reported the local hospital “has seen patient pill use decrease by 724,000 pills per year and have tapered about 670 patients off of controlled substance prescriptions.”

Delaware Representatives should stop the Senate’s misguided, dangerous tax before it punishes patients, and makes health care more expensive. There are proven ways to address the opioid crisis.

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