Carroll County Circuit Judge Thomas Stansfield yesterday dismissed a lawsuit challenging Maryland's recent tax increases. The suit alleged that during the special session called to enact the tax increases, the Senate violated a constitutional requirement to obtain consent of the House before adjourning for more than three days. The case turned on what the state constitution means by "consent."
Submitted into evidence was a letter dated November 9, from the Senate Secretary to the House, requesting permission to adjourn. However, depositions revealed that the letter had actually been written to memorialize an oral agreement after November 12—already well into the adjournment—and backdated.
This angered the judge, but he ultimately concluded that this constitutional violation does not justify invalidating the legislation:
Although the court is inclined to agree with the plaintiffs regarding the reprehensible nature in which the legislature conducted itself, the remedy they seek in redress is too drastic a notion to accept. The court can simply not agree that when a technicality in procedure is violated, the entire slate of lawfully enacted legislation should be invalidated.
The judge was worried that interpreting the "consent" provision literally would allow "one chamber of the legislature...to defeat the actions of the other by simply refusing to participate in the legislative process." Of course, that's probably the purpose of the provision, which has now been effectively nullified.
The legislators who backed the tax increases are of course miffed at any challenge to what they wrought:
"This is ... one of the biggest abuses of taxpayer dollars that I have seen here," said House Speaker Michael E. Busch, who estimated the cost of defending the suit was more expensive than holding the three-week special session.
Well considering the legislative session approved nearly $2 billion a year in tax hikes, that's not likely.
The Tax Foundation is pleased to announce that Dr. Robert Carroll had joined its staff as Vice President for Economic Policy. Dr. Carroll will oversee the Tax Foundation's tax research program, with a special focus on business taxation and the need for corporate tax reform.
"As someone who has often used and always respected the Tax Foundation's work, I'm excited to now take part in that work," said Dr. Carroll. "This position is a great fit for me, as I will be able to continue doing what I've always done: making the case for sound tax policy."
Dr. Carroll most recently served as the Deputy Assistant Secretary for Tax Analysis in the Office of Tax Policy at the Department of the Treasury, a position he began in December of 2003.
Previously, he was a Visiting Scholar in the Tax Analysis Division of the Congressional Budget Office. From July 2002 to June 2003 he served as a Senior Economist (Public Finance) with the President's Council of Economic Advisers.
He holds a Ph.D. and a master's degree in economics from Syracuse University and a B.S. in economics from State University of New York.
"We're delighted to have Bob on our team," said Scott Hodge, president of the Tax Foundation. "His wealth of experience and keen intellect will make him an invaluable asset for our organization. I look forward to working with Bob in continuing our 70-year tradition of advocating sound tax policy at the state and federal level."
Yesterday, former New York City mayor and GOP presidential candidate Rudy Giuliani unveiled his plan for tax reform and relief. It's built largely on the ideals that Giuliani has espoused throughout the campaign but never fleshed out in any detail.
The highlights of the plan:
- cut the corporate tax rate to 25% from 35%
- make the Bush tax cuts permanent
- lower the capital gains and dividends rate to 10% from 15%
- add an opt-in, simpler tax system — the "Fair and Simple Tax (FAST)." It would save many deductions (mortgage interest, charitable donation, state and local taxes paid and child tax credit). It would have 3 rates: 10% on first $40,000; 15% on $40,000-$150,000; 30% on income over $150,000.
- index the AMT to inflation (short-run) and then eliminate it (long-run)
- eliminate the estate (death) tax
- index capital gains for inflation
- re-instate the research and development tax credit
- implement Giuliani's proposed healthcare deduction
We're still digging through the details (finally, candidates offering details!), but one thing that immediately jumped out at us was the dramatic cut in the corporate tax rate. As we've pointed out time and time again, this is a critical move for American competitiveness moving forward. The U.S. currently has the world's second-highest corporate tax rate, meaning investments and jobs that should be coming to America are not.
Giuliani joins a growing list of politicians that support corporate tax reform. Fellow GOP candidate Fred Thompson's tax plan includes a big corporate rate cut, and Mitt Romney has also called for lower corporate tax rates. Congressman Charlie Rangel (D-NY) proposed a corporate rate cut in his "mother of all tax reforms" legislation. And Treasury Secretary Hank Paulson has been a tireless advocate for dropping the corporate rate.
Check back soon for more detailed analysis of the Giuliani plan, but our kudos to him for understanding the importance of lowering the corporate tax rate.
The Tax Foundation is often asked which states exempt certain items from their general sales taxes, especially as they relate to food. The following is a list of the states that do tax groceries, and if applicable, which ones apply a special rate on grocery items. All other states do not tax groceries.
States that tax groceries (rate if not fully taxed): Alabama, Arkansas (3%), Hawaii, Idaho, Illinois (1%), Kansas, Mississippi, Missouri (1.225%), Oklahoma, South Dakota, Tennessee (5.5%), Utah (1.75%), Virginia (1.5% + 1% local option tax), and West Virginia (5%).
Notes: Idaho's income tax provides a $20 credit per person that is designed to partially offset the impact of taxing groceries. Also, our source for this data, CCH, cites a Kansas law that allows for a "limited tax refund available to disabled, elderly, and low-income households."
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