There are five basic legal forms of business structures found in the United States: C corporations, S corporations, sole proprietorships, partnerships, and Limited Liability Companies (LLCs). In order to understand...
- The Tax Policy Blog
- Voluntary Tax Payments May Soon Be an Option in Maine
Voluntary Tax Payments May Soon Be an Option in Maine
In January Maine Representative Terry Hayes proposed a bill that would allow the state to accept voluntary "tax payments" to fund several services and programs provided by the Department of Health and Human Services. According to Tax Analysts (subscription required) the bill, titled "An Act To Bolster Maine's Social Safety Net through Voluntary Sales Tax Contributions," received a "moderately favorable reception" from Democrats and Republicans on the state's Joint Taxation Committee. Why they chose to designate the payments as sales tax revenue in a mystery to me.
Unless I vastly underestimate the generosity and state unity of Mainers, I think this is unlikely to help the budget situation much, and is probably just a gimmick. Although, it is kind of funny that Maine (and likely many other states) has never before thought to legalize voluntary payments.
Maine would not be the first state to allow taxpayers to pay a little more, if they so desire. California passed a similar bill in 2007, allowing taxpayers to contribute to a list of specific funds (see page 2 of the CA tax return). And we've been asked at least once before to comment on this type of policy when it surfaced in Arkansas regarding fire department funding. My colleague Bill Ahern had this to say:
For any legislature—city, county, state or federal—to say, 'It's voluntary, but you really should give it,' is unseemly and unworthy of rational government operation.[...] If they need the funds, levy the tax. If they don't need it, don't, but in no way should the government beg.
And there may be more states that allow this, although I don't know which they are. At the federal level there is a check box near the top of every tax return that allows taxpayers to designate $3 of their taxes to go toward the Presidential Election Campaign Fund to help fund Presidential races, and about 12% of tax returns check the box annually. Here is some data on the states that have similar campaign funding mechanisms.
There is also a federal fund to reduce the national debt which gets even less attention.
Subscribe to the Tax Foundation Newsletter
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.