Lunch Links: Pairing Trump Tax Breaks Together Ill-advised; Carbon Tax an Issue in Vermont Governor’s Race; Soft Serve in Many Splendid Tax Forms

August 19, 2016

Today is August 19, which is evidently National Soft Ice Cream Day. I fondly remember getting soft serve with my grandparents and after every dorm meal in college, but it also pops up over and over in state tax decisions. Why? Most states choose to exempt groceries from their sales tax but seek to continue to apply the tax to non-“necessity” food like prepared food or candy, and drawing that line has proven harder than one might expect. Selling a box of ice cream bars is nontaxable groceries, but selling a soft-serve ice cream cone is taxable food for immediate consumption. New York has four pages deciding soft serve is taxable restaurant food; Wisconsin says soft serve is taxable because it’s in a cup; Virginia concludes the sale of prepackaged ice cream is taxable even though it’s not softserve; and Ohio exempts the purchase of a soft-serve ice cream machine (but not an ice cream scoop). Everyone likes a sales tax exemption for stuff they buy, but the upside of a low sales tax on all purchases is you avoid nonsensical rules like these.

Here are some interesting links I came across:

State Tax Revenue Slowdown: State taxes on average are growing 2.3 percent over last year, so while tax revenues are above the peak of the 2007 boom, they’re down from the 5.2 percent growth in 2015. Low oil prices are impacting severance taxes, smoking declines are impacting cigarette taxes, and higher fuel efficiency is impacting the gas tax. (The Hill)

Trump Controversially Pairs Two Tax Breaks: “The Republican presidential nominee appears poised to combine two policies that House Republicans—and tax analysts from both parties—say shouldn’t be paired: letting businesses deduct interest, and allowing expensing, or immediate write-offs, for investments in equipment and buildings. Current law requires businesses to spread those deductions over multiple years. The result would provide negative tax rates for investments financed with debt, creating incentives for companies to pursue projects that wouldn’t make sense economically without the tax benefits.” (The Wall Street Journal)

Senate Dems Push Tax Return Disclosure Bill: Senators Ron Wyden (D-OR) and Chris Murphy (D-CT) said they’ll soon push a bill that would direct the IRS to release tax returns of presidential candidates who decline to do so voluntarily. (Roll Call)

Would Estate Tax Repeal Create a Monarchy in America? My colleague Scott Greenberg responds to some overblown claims. (Tax Foundation)

Vermont Carbon Tax a Governor’s Race Issue: The interestingly close Vermont governor’s race has the carbon tax as an issue dividing the Republican and Democratic candidates. The Republican Party is out with an ad attacking Democrats on the issue. (YouTube)

Alabama Sales Tax Holiday and Tax Foundation Spoilsports: I missed this one from a few weeks ago: “Alabama parents, meet the fine folks of the Tax Foundation, a nonprofit group that started militating for saner tax policy way back in 1937. One presumes its members know a thing or two about Quixotic fights.” Alabama economist Dr. Semoon adds: “Overall, sales tax holidays do not increase sales because the same products will have to be purchased anyway, with or without tax holidays. They simply lower tax revenues and cause tax rates to go up.” (AL.com)

Maine Governor to Push Tax Swap: Gov. LePage (R) “said his next budget will strongly lower the state’s income tax and raise the sales tax.” (Kennebec Journal)


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