The Tax Policy Blog

December 23, 2008

Tax Watch is the Tax Foundation's quarterly tax policy newsletter, presenting our economic research and analysis in a simple, non-technical format—ideal for the non-economist looking for a clear explanation of current tax issues.

Highlights from the Winter 2009 issue include:

  • Recession Blues:...
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December 23, 2008

We're pleased to announce that the Tax Foundation's website has been chosen as the "Website of the Month" by the CPA Journal. The editors of the CPA Journal cite the recent growth of out website and list some of the features they find useful:

The website contains a variety of resources on tax-related topics that are freely available to the general public. Tax preparers may find the current events focus and state taxation updates...

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December 22, 2008
  • Idaho, New Hampshire, and Washington State specifically exempt Christmas trees from the severance tax on timber. See Idaho Code § 63-1708; N.H. Rev. Stat. § 79:2; Rev. Code. Wash. 84.33.170.
  • The New Hampshire tax exemption comes as a result of a state supreme court decision ruling that Christmas trees were more like "crops" than "timber" for statutory purposes. See Greenhalge v. Town of Dunbarton, 453 A.2d 1295 (N.H. 1982).
  • ...
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December 22, 2008

State-run lotteries are an example of poor tax policy, but they nonetheless enjoy widespread support among legislators, voters, and consumers. One of the reasons supporters use to justify the government monopoly on lotteries is that government oversight supposedly decreases lottery-related crime.

We have addressed the problems with this argument before (here and here), and recently we've seen yet...

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December 19, 2008

From the Associated Press:

Democratic lawmakers on Thursday pushed through an $18 billion package to reduce California's burgeoning budget deficit, but Gov. Arnold Schwarzenegger said he would veto it because it didn't meet his demands for an economic recovery plan.

Schwarzenegger said California will continue on a path toward "fiscal...

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December 19, 2008

On June 13, 2006, driver Donna M. Hall was stopped by Maine police and issued a ticket for having Louisiana license plates. Like many other states, Maine requires that its residents obtain license plates from its state and pay the associated registration fees and excise taxes. Hall faced a fine of at least $500, plus the taxes and fees.

Hall denied she was a Maine resident and took her case all the way to the Maine Supreme Court. ...

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December 18, 2008

I blogged yesterday on Pennsylvania's budget woes and Gov. Ed Rendell's plan to fix the problem, which includes spending cuts, draining half of the state's Rainy Day Fund, and $450 million in expected federal aid. But it seems I have overlooked an important point. Many in Pennsylvania are pointing out that the state Legislature is sitting on $200 million in a reserve account. The...

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December 18, 2008

Earlier this week we mentioned New York Gov. David Paterson's new plan to tax cigarettes sold on tribal lands, and why it is probably unconstitutional. By barring wholesalers from selling cigarettes to tribal retailers who sell to non-Indians, the state would impose a burden on retailers in another sovereign jurisdiction while also illegally disrupting commerce with the Indian tribes.

These facts...

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December 18, 2008

In a Background Paper published last year, we considered the long-term effects of judicial mandates requiring state legislatures to "fix" allegedly inadequate education systems. Billions of dollars in taxpayer money have been ordered spent by judges, and in a few instances judges have ordered tax increases without legislative or public vote.

Far from being a panacea, these mandates have largely failed to sustain recurring...

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December 18, 2008

California legislators and tax activists are in a flurry today after Democratic assembly leaders announced a sudden effort to pass a new budget plan to close the state's enormous shortfall. Here's how the Los Angeles Times summarized the proposal:

California's Democratic leaders were planning a vote today on a brazen proposal to raise gas, sales and income...

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December 18, 2008

The California budget proposal suddenly brought to the floor by Democratic legislative leaders for a simple majority vote is probably unconstitutional, predicted Tax Foundation Tax Counsel Joseph Henchman.

"The first phase of the two-phase plan involves eliminating the gas tax and raising other taxes, the idea being that because the two taxes zero each other out, it's not a ‘tax increase' and can pass the legislature with a simple majority," Henchman explained. "The second...

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December 17, 2008

Governor Mark Sanford, Republican of South Carolina, and one of the few governors to be against the bailouts, has proposed a comprehensive tax reform package that includes a move to an optional flat individual income tax of 3.65% with no deductions starting in 2010, as well as a phase-out of the 5% corporate income tax over the next ten years. (Staff Economist Josh Barro goes into more detail in this December 9...

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December 17, 2008

Kentucky, like many states, is facing a budget shortfall, but of rather modest size. Out of a $19 billion two-year budget, the current budget has a $456 million hole with six months to go. Governor Steve Beshear (D) last week announced a plan to close it with very modest spending cuts ($147 million), using rainy day funds ($179 million), and a 233% hike in cigarette taxes ($81 million).

Kentucky residents today pay 30 cents per pack in state excise taxes, along with a 10...

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December 17, 2008

Pennsylvania is one of many states facing budget shortfalls. Last week Governor Ed Rendell proposed a plan to close the state’s projected $1.6 billion deficit. The plan includes no tax increases, but it does rely heavily on the proposal to bail out struggling state governments. The plan includes the following:

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December 16, 2008

Earlier this month, two state governors penned an op-ed opposing a bailout of state governments:

In Texas and South Carolina, we've focused on improving "soil conditions" for businesses by cutting taxes, reforming our legal system and our workers' compensation system. We'd humbly suggest that Congress take a page from those playbooks by focusing on targeted tax relief paid for by...

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