2018 Outstanding Achievement in State Tax Reform
October 30, 2018
Across the country, state policymakers took strides to improve tax codes. In recognition of these efforts, the Tax Foundation honors state legislators, governors, and other individuals with our Outstanding Achievement in State Tax Reform award.
As the name suggests, the honoree’s accomplishments must (1) be outstanding, (2) represent an achievement (not merely a proposal), and (3) reform taxes to make them simpler, more neutral, more transparent, more stable, and more pro-growth. Prior to this year’s awards, 31 individuals from nineteen states and the District of Columbia—and representing both political parties—had received an award, including five governors. This year, our awards reflect achievements in 2017 and 2018. (You can view prior years’ winners here: 2016, 2015, 2014, 2013)
Working for better tax policy is not easy and a piece of glass hardly compares to the efforts the recipients put in, but we do this because some recognition is important for what they achieved for the taxpayers of their states.
This year, we honor twenty-three individuals from nine states and the District of Columbia with our award for Outstanding Achievement in State Tax Reform in 2018:
Arkansas Senator Lance Eads (R) and Representative Andy Davis (R) for championing the repeal of the state’s InvestArk program, replacing it with better treatment of business purchases under the sales tax code. InvestArk, formerly the state’s largest business tax credit, distorted the tax code by favoring some businesses and activities over others. Revenue saved by the repeal of this nonneutral provision of the corporate income tax was put toward the exemption of repair parts from the sales tax base, reducing the “tax pyramiding” associated with taxing business inputs and improving the state’s overall treatment of business investment.
California Governor Jerry Brown (D) for colorful vetoes of targeted tax breaks which have helped California maintain some semblance of a broad tax base and improved its fiscal position. Governor Brown consistently vetoed popular proposed tax breaks, saying legislators should instead work through the annual budget process and balance those wants with other priorities. California has more work to do on fiscal solvency and tax climate, but Governor Brown’s demand for thoughtfulness and process in creating new tax breaks should be emulated by his successors.
Colorado Representative Tracy Kraft-Tharp (D) for creating and chairing the Sales and Use Tax Simplification Task Force, with the mission of identifying ways to simplify Colorado’s exceedingly complex state and local sales tax administration and to reduce compliance costs. The Task Force has already seen results, facilitating voluntary local reforms, and it takes on even greater importance in the wake of the Wayfair v. South Dakota decision regarding the taxation of remote sales.
Delaware Representative Michael Ramone (R) for sponsoring successful legislation to repeal the state’s short-lived estate tax, which had raised little revenue and was widely seen as driving wealthy retirees out of state. The bill, which was based on a tax commission recommendation, passed with bipartisan support.
Cook County, Illinois Commissioner Sean Morrison (R) for spearheading the effort to repeal the county’s highly unpopular sweetened beverage tax. Thanks to Morrison’s efforts, the tax was only in effect for four months prior to its repeal.
Iowa Governor Kim Reynolds (R) and Senator Randy Feenstra (R) for championing and securing passage of legislation beginning a multiyear overhaul of the state’s tax code, which will ultimately include both individual and corporate income tax rate reductions and simplification, along with modest sales tax base broadening. The tax package consolidates individual income tax brackets, eliminates an outmoded policy of federal deductibility, repeals the alternative minimum tax for individual taxpayers, and repeals or reforms several corporate tax credits while reducing the rate. These reforms, which increase the competitiveness of the state tax code, are the culmination of several years of legislative efforts.
Kansas Representatives Steven Johnson (R) and Tom Sawyer (D) for, as chairman and ranking member of the House Taxation Committee, deftly handling difficult negotiations on solutions for closing the state’s recurring budget shortfalls and secured the repeal of the state’s decidedly nonneutral pass-through exemption. That exemption, which excluded all pass-through business income from the individual income tax, improperly distinguished between sources of income and created unnecessary arbitrage opportunities. Its repeal represented the best way for the state to address its revenue shortfall.
Missouri Senators Bill Eigel (R) and Andrew Koenig (R) for shepherding through individual and corporate income tax reform, which could reduce the top individual income tax rate to 5.1 percent (while eliminating a bracket) and adopts the second-lowest corporate income tax rate in the nation, at 4.0 percent. These rate reductions are to be secured through the reduction of tax preferences and the utilization of revenue triggers, and will result in the simplification of Missouri’s tax code.
Rhode Island Governor Gina Raimondo (D) and Speaker Nicholas Mattiello (D) for championing reforms which make the state less of an outlier in state taxation. Governor Raimondo successfully advanced reforms to the state’s unemployment insurance taxes which will save Rhode Island businesses an estimated $30 million. Previously, the state ranked worst in the nation on unemployment insurance taxes on the Tax Foundation’s State Business Tax Climate Index. Governor Raimondo’s reforms improved the state to 29th on that measure. Speaker Mattiello secured the enactment of a budget that will gradually phase out the motor vehicle excise tax over a period of seven years, eliminating a tax which is among the most onerous of its kind in the country.
Nine Members of the District of Columbia Council for voting to fully phase in the District’s successful 2014 tax package, defending it against efforts to suspend the final year’s reforms. The package included corporate and individual income tax reductions, sales tax base broadening, and estate tax reform. These councilmembers are:
- Chairman Phil Mendelson (D)
- At-Large Councilmember Anita Bonds (D)
- At-Large Councilmember Robert White (D)
- Ward 2 Councilmember Jack Evans (D)
- Ward 3 Councilmember Mary Cheh (D)
- Ward 4 Councilmember Brandon Todd (D)
- Ward 5 Councilmember Kenyan McDuffie (D)
- Ward 6 Councilmember Charles Allen (D)
- Ward 7 Councilmember Vincent C. Gray (D)
“Working for better tax policy is not easy,” said Tax Foundation Executive Vice President Joseph Bishop-Henchman. “A piece of glass hardly compares to the efforts the recipients put in, but we do this because some recognition is important for what they achieved for the taxpayers of their states.”
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