18 States Cut Taxes In 2013
A new report by the American Legislative Exchange Council’s Center for State Fiscal Reform found 18 states made a total of 25 meaningful tax cuts during the 2013 legislative session. The report found, “Almost one-quarter of the 25 tax cuts were to the personal income tax, followed by reductions to various state specific taxes and reductions to the corporate income tax. Sales tax reductions were the least-enacted form of tax cuts in 2013.”
Many tax policy experts believe the trend of states implementing tax reform and tax cuts will continue in 2014 and beyond. Georgia, Louisiana, Nebraska, Nevada, South Carolina, and Wisconsin, to name a few, are expected to consider major tax reform proposals in 2014.
In its guide to fair, simple, and pro-growth tax reform for Nebraska, the Tax Foundation explains, “Creating sound tax policy is more than a question of how much revenue should be raised. Public finance experts and economists generally agree that not all taxes are created equal, and certain types of taxes are more damaging to the economy than others. The idea that good tax systems are simple, neutral, transparent, and stable—first outlined by economist Adam Smith in 1776—continues to serve as the cornerstone of tax reform discussions everywhere.”
Steve Stanek, a Heartland research fellow and managing editor of Budget & Tax News, echoes that sentiment, pointing out, “academic literature is clear that over the long term states that control spending and have a low tax burden will outperform those states with a high tax burden and those who depend on a state income tax. Other studies document that corporate and personal income taxes on capital are more damaging than a consumption tax.”
States should follow the lead of the18 that were successful in passing meaningful tax cuts in 2013. Doing so would put them in a much better position to attract businesses and entrepreneurs from states like Illinois and California, which continue to move in the opposite direction with their tax systems and are paying both economically and budget-wise for it.
This week’s edition of The Leaflet features research and commentary addressing Nebraska tax reform, 10 Obamacare talking points to ruin your holiday, Michigan’s scalping law, online travel taxes, scholarship tax credits and critiquing the IPCC’s summary for policymakers.
Director of Government Relations
The Heartland Institute
Research & Commentary: Nebraska Tax Reform
Budget & Tax
At first glance, Nebraska’s tax system appears competitive. According to the Tax Foundation, state residents pay $3,853 per capita in state and local taxes, ranking the state 17th highest in the nation and comparable to neighboring Colorado and Kansas. However, Nebraska’s tax rates are much higher than those in nearby states.
Nebraska’s top individual tax rate of 6.84 percent is higher than those of Colorado, Kansas, Missouri, and Oklahoma and far behind the zero income tax states of South Dakota, Texas, and Wyoming. Nebraska’s state government relies heavily on personal income taxes, which compose 41 percent of its tax revenue.
The state’s corporate tax rate is high as well. At 7.81 percent, Nebraska’s top corporate tax rate is higher than those of neighbors Colorado, Kansas, Missouri, Oklahoma, South Dakota, and Wyoming. At that high rate, Nebraska does not collect as much revenue per capita as many other states in its region. The Tax Foundation attributes this deficiency to the tax incentives given to businesses to counteract the higher rate and prevent companies from leaving the state.
Personal and corporate income taxes are generally considered to be the most destructive taxes because economic growth arises from production, innovation, and risk-taking, which are stunted when individual and corporate income taxes take dollars out of the hands of businesses and individuals.
The legislature has taken several positive steps towards reforming Nebraska’s tax system, including the repeal of the state’s alternative minimum tax and new limits on cell phone taxes. In 2013, Gov. Dave Heineman made two bold tax reform proposals that would have eliminated one or both of the major state income taxes while eliminating billions of dollars of sales and personal property tax exemptions. Neither proposal made it out of committee.
A new joint report from the Tax Foundation and Platte Institute has proposed several tax reforms The primary plan would reduce income tax rates while cutting tax incentives and broadening the tax base. The plan also would simplify how the tax is administered and provide additional tax relief by increasing the earned income tax credit and personal exemption and indexing tax rates. Additional variations of the plan would take the income tax cuts even lower.
States across the country have experienced dramatic economic improvement, with population and job growth, by lowering or eliminating their income taxes. The Tax Foundation/Platte Institute plan, which is designed to be revenue-neutral, would move Nebraska toward a tax system that keeps dollars in the pockets of taxpayers and encourages new companies to enter the state, creating more jobs. Nebraska could be the next state to benefit from such sound tax policies.
Ten Obamacare Talking Points To Ruin Your Thanksgiving
Heartland Senior Fellow Benjamin Domenech addresses the push for families to talk about the benefits of Obamacare over the Thanksgiving holiday. The article goes through the 10 talking points often used to promote Obamacare. Domenech ends by explaining, “we can subsidize the poor inefficiently (and create all sorts of access problems) through the existing broken programs, or we can subsidize them more efficiently through funded HSAs or direct delivery of services – treating low-income Americans as consumers, not as wards of the state. The Obamacare Medicaid expansion actually goes against this line of thought: it crams large numbers of healthy able-bodied childless adults into a program originally meant to serve the poorest of the poor and sickest of the sick … which is what a true safety net should do, after all.”
Research & Commentary: Michigan's Scalping Law
Finance, Insurance, and Real Estate
Michigan state Rep. Tim Kelly recently introduced a bill that would allow buyers and sellers of event tickets to negotiate in a free market. Since 1931, it has been illegal in Michigan to sell any ticket above its face value without the express consent of the event and venue operators. Over the past decade many states have begun deregulating the secondary ticket market and repealing these so-called “scalping” laws. Michigan is one of only 15 states that still ban such sales.
In this Research & Commentary, Heartland Director of Government Relations John Nothdurft argues the current restrictions on ticket resale in Michigan are bad for buyers and sellers; repealing this regulation would be a common-sense solution that helps fill seats and brings buyers and sellers out of the black market and onto trusted, transparent, and competitive online marketplaces.
Research & Commentary: Online Travel Taxes
A new debate over how to tax hotel rooms could have a strong negative effect on the popular online travel services many consumers use to locate affordable hotels. According to StatisticBrain.com, of the 148.3 million travel bookings made on the Internet each year, 19.5 percent are through online travel providers such as Orbitz, Travelocity, and Expedia.
In August the National Conference of State Legislatures passed a resolution calling for states to “consider rules that would require online travel companies to pay hotel occupancy taxes on the full rental price paid by customers, and not simply the wholesale rate they have negotiated with hotels,” according to Bloomberg.com.
Senior Policy Analyst Matthew Glans argues in this Research & Commentary that increasing taxes on hotels in this manner would hurt online travel companies, whose profits would be significantly eroded after providing a valuable service to hotels and consumers. “Discriminatory and high travel and tourism taxes prop up poor state and local spending habits while placing an unnecessary tax burden on the backs of out-of-state individuals and businesses. Shifting this tax to online retailers disrupts a vibrant market and poses a real risk of hurting customers and hotels by increasing prices and keeping hotel rooms empty.”
Research & Commentary: Scholarship Tax Credits
Corporate K-12 education tax-credit programs, also known as scholarship tax-credit programs, are becoming a popular school choice option. In 2012 alone, three states established such credits. Eleven 11 states are operating corporate tax-credit programs: Arizona, Florida. Georgia, Iowa, Indiana, Louisiana, New Hampshire, Oklahoma, Pennsylvania, Rhode Island, and Virginia.
Heartland government relations intern and educational law student Kellie Slappey writes, “Corporate tax-credit programs save states money because private school tuition is normally significantly cheaper than the per-pupil cost of a traditional public school. An analysis of the Florida corporate tax-credit program by the Office of Program Policy Analysis and Government Accountability revealed that for every $1 spent on the tax-credit program, Florida taxpayers saved an estimated $1.49.”
Scientific Critique of IPCC's 2013 'Summary for Policymakers'
The Summary for Policymakers released in September by the United Nations’ Intergovernmental Panel on Climate Change is filled with concessions that its past predictions were too extreme and misleading and unscientific language, according to a team of scientists from the U.S. and Australia.
Regarding the claim the IPCC is “95% confident” global warming is man-made, they write, “It has been used improperly to create a false impression of increasing statistical certainty through the most recent IPCC assessment reports. ... IPCC’s quasi-numeric confidence statements represent considered ‘expert opinion,’ reflecting a process not very different from a show of hands around a discussion table. The terminology confers an impression of scientific rectitude onto a process that is inescapably subjective and has been widely criticized as misleading.”
Make Heartland Your Very Own Think Tank!
The Heartland Institute has been delivering exactly what state legislators need since 1984.
Now for as little as $99 you can join more than 150 elected officials and begin receiving even more great benefits from The Heartland Institute.
Budget & Tax News
The December issue of Budget & Tax News reports California Gov. Jerry Brown signed a bill to give 100 percent relief to approximately 2,500 small business investors who had been threatened with retroactive collection of $120 million in capital gains taxes. “The sense of relief is indescribable,” said Brian Overstreet, who spearheaded efforts to protect the state’s innovators from the tax.
Health Care News
Environment & Climate News
School Reform News
FIRE Policy News
Government Relations Dept.
Follow, Email, Like
Director, Government Relations
Senior Policy Analyst
Government Relations Coordinator
Use Heartland's PolicyBot search engine to access more than 25,000 studies and commentaries from more than 350 think tanks and advocacy groups.
PolicyBot contains a
large collection of the best research and commentary on environmental regulation, health care reform, school
reform, taxes, and telecommunications issues.