I am going to periodically call out bad tax policy ideas as they are introduced in the states. Here are three:
1. Legislators in Nebraska would like to cut property taxes and allow local governments to impose a local option income tax to replace the revenue. This is a terrible idea. Although citizens tend to hate the property tax, it remains the best way to fund local government services. Local option income taxes exacerbate intergovernmental competition. The proposal in Nebraska is worse because it targets agricultural property. The measure, by Sen. Al Davis, would reduce the percentage of agricultural land value that school districts can tax from 75 percent to 65 percent. It would impose a local income tax of 19.4 percent of a person's state income tax bill, but districts would have the option to increase it to 30 percent with a supermajority vote or by putting the question on the ballot. If we know one thing in 2015, taxing mobile tax bases, like wages, doesn't work.
2. One of the most cynical and asinine ideas is to tax cigarettes and use the proceeds to fund education. But Virginia Del. Rob Krupicka (D) would do just that. He wants to raise Virginia's cigarette tax from 30 cents a pack to $2 a pack to fund education. Someone should ask Krupicka whether he thinks education is important enough that it should be funded by broad-based taxes on income, sales, and property. Perhaps he thinks it is only important enough to be funded by a minority of poor, addicted residents. And what the heck kind of message does that send? We need to keep smoking because our education system needs the money?
3. Anti-gun Rep. Brandon Ellington (D) of Missouri is proposing legislation that would impose a special 1 percent sales tax on guns and ammunition and dedicate the money to pay for police body cameras. All special taxes on guns and ammunition are driven by political agendas.
Special taxes -- those on narrow bases -- should be imposed sparingly and only for good reason. The best reason is to pay for externalities. But unlike, say, cigarettes, 99 percent of gun purchases produce no externalities. So they should not be subject to special taxes -- unless you really hate guns, gun owners, and the guys from Duck Dynasty. I am all for police body cameras. I think every officer should wear one. But we should ask whether they are important enough to pay for with real, broad-based taxes.
A correction: Last week, I erred when writing about the Michigan sales tax referendum. I said incorrectly that all of the increased sales tax revenue would be earmarked for roads. What actually happens is that the sales tax increase triggers an increase in the state fuel tax -- which would be used for the roads. An astute reader brought that to my attention. I regret the error.