The sales tax is one of the most important sources of tax revenue for state governments. This will provide some basic information about why it’s important and some things you should know about the tax if you are studying, researching, or writing about it for the first time.
Tax Analysts Blog
David Brunori, deputy publisher of Tax Analysts, specializes in tax and government issues. He is also a contributing editor of State Tax Notes and author of its weekly column The Politics of State Taxation. A research professor at George Washington University's Trachtenberg School of Public Policy and Public Administration, Brunori teaches state and local public finance and fiscal federalism. He also teaches state and local tax law at the George Washington University Law School. The author of numerous books on state and local tax policy, Brunori received the 2001 Choice Award for his book State Tax Policy: A Political Perspective. Previously, Brunori served as an appellate trial attorney with the U.S. Department of Justice Tax Division. He also served as a David C. Lincoln Fellow at the Lincoln Institute of Land Policy from 2001 to 2004. Brunori holds an MA in political science from George Washington University and a law degree from the University of Pittsburgh.
Call me old-fashioned. Call me old school. But I still adhere to the belief that a tax system should be based on a broad base and low rates. Tax everything -- a little. That system minimizes economic distortions, makes compliance and administration easier, and ultimately raises more revenue. And political machinations distorting this ideal don't work.
An important proposal is before the North Carolina legislature. The bill (SB 481) would force the North Carolina Department of Revenue to release all private letter rulings issued over the past six years. There is nothing more critical to fair tax administration than transparency. Indeed, there is nothing more critical to democracy than transparency. As a Tax Analysts guy, I am particularly interested in transparency. That's at the core of our organization's mission. We believe that tax laws should be open to public scrutiny. From its beginnings, Tax Analysts has fought for this ideal. You can thank Tax Analysts for your ability to read every private letter ruling issued by the IRS.
There are three tax ideas that may pass in the New Jersey Legislature. They are important because they are good ideas. They are important because, well, New Jersey is not exactly a paragon of sound tax policy.
This will be music to the ears of some incentive-philes. Royal Dutch Shell, the ginormous energy company, has announced plans to build a petrochemical plant in Beaver County, Pennsylvania. Shell will invest billions of dollars in a state badly in need of investment and create thousands of jobs in a state badly in need of jobs. So let's stipulate that Shell building a giant plant that will employ thousands of people is a good thing for my home state of Pennsylvania.
The Oklahoma Supreme Court recently approved a ballot measure (779) that will, if approved by voters, increase the state sales tax by 1 percent. The new revenue would be earmarked to fund $5,000 pay raises for Oklahoma teachers and provide support for the state's colleges and universities. The question before the court was whether the proponents had gathered the requisite number of signatures; the court said yes. But the tax issue is much more interesting.
I am astonished that purportedly smart people in Oregon are pursuing the idea of a gross receipts tax. If you care about sound tax policy, you should be standing up and shouting, "Don't do it!" The labor-backed initiative (IP 28) that's heading to the voters would cap the current tiered corporate minimum tax schedule at $25 million in sales, with a corresponding tax rate of $30,001. After that, companies would start paying the minimum tax, plus 2.5 percent of the value of all additional sales above $25 million. That is a gross receipts tax. Interestingly, the initiative won't get rid of the regular corporate income tax. The gross receipts tax is an additional tax, not a replacement. Nothing says we're open for business like a slew of new taxes on businesses.
Mississippi Gov. Phil Bryant (R) recently signed what people are calling the largest tax cut in state history. The cuts will total about $415 million over the next 12 years. That's a lot, considering Mississippi's overall budget. One aspect of the measure (SB 2858) is good from a tax policy perspective: the phaseout of the state's corporate franchise tax.
Let's be honest. Most people don't. In fact, most people don't think about taxes beyond complaining about them once in a while.
You don't see many due process clause cases arising from state taxation. Nor do you see many victories for taxpayers in those cases. A taxpayer won recently in the Ohio Supreme Court. The case, which was correctly decided, hinges on facts that should be important to anyone doing interstate work.
A few weeks ago the House Republican Study Committee voted overwhelmingly to recommend abolishing the IRS. The committee called the Service "an inefficient behemoth weighing down our economy" and demanded its dissolution. The “work” of the IRS would be transferred to a new, smaller, no comma needed here agency within Treasury. The IRS-bashing is nothing new, of course. And the anti-IRS crowd gets particularly excitable during election years.
Recent events in Tennessee illustrate the danger of mixing social politics and tax policies. Sometimes it gets, well, ugly.
The Nelson A. Rockefeller Institute of Government recently released a report on state revenue generated from gambling, which everyone should read. The use of gambling as a source of state revenue has proliferated over the past three decades. Only Hawaii and Utah don't use any form of gambling to pay for public services. The proliferation of gambling is shameful. Before I explain why, you should know that I don't care whether you gamble -- what you do with your money is your business. I don't care if you smoke, drink, get high, or bet the ponies. But despite my libertarian views on the subject, I don't think gambling is a sound way to pay for government services.
The Tax Foundation recently released its annual Tax Freedom Day report. Tax Freedom Day is the day when the nation has earned enough money to pay its federal, state, and local tax bills for the year. In 2016, that day is April 24.
https://www.law.uconn.edu/faculty/profiles/richard-pomp"Yeah, we're going to study that combined reporting thing," said an Indiana legislator when asked whether he supported combined reporting. In his defense, he's not a tax guy. Perhaps the decision to study combined reporting in Indiana is a good thing. Gov. Mike Pence (R) recently signed legislation directing the Legislative Services Agency to study and report on the feasibility of adopting combined reporting.
Recently, 50 really rich folks wrote a letter to New York Gov. Andrew Cuomo (D), asking him to not only raise their taxes but to raise the taxes of all rich people. Well, maybe they don't want to tax all rich people -- just the top 1 percent of earners in the state. It's always fun to see rich people throw other rich people under the bus.
The first time the issue of the "tampon tax" came up, I stuck my fingers in my ears and started singing la la la. I come from a generation that does not talk about such things in polite company. Actually, men didn't talk about such things in any company. I joked in a previous column that I am uncomfortable talking about such things. And I am.
Since 2002, I have been saying that states should repeal their corporate income taxes. The tax has not raised much money, and it never will. We spend an inordinate amount of time litigating, planning, auditing, and agonizing over it. We should stop pretending the tax matters, because it doesn't.
Have some pride, business people. Let's fight for a tax system with a broad base, low rates, and no special deals. We will all be better off.