The anti-property tax fervor that has swept the nation over the past couple of years has registered another victory. This time it was in the State of Florida. On Tuesday night, the voters approved Amendment 1, a measure that would scale back property taxes in the Sunshine State, mostly on primary homes. This was in addition to the property tax cut that the state legislator and Gov. Crist put into law in 2007. For more on the vote, here is an Orlando Sentinel article discussing the vote, as well as providing a good brief overview of the issue in Florida.
An interesting question for local political pundits to answer is what was the role of the importance of the Republican Primary compared to the Democratic Primary in driving turnout and thereby influencing the vote on this measure, given that the former would be more likely to vote in favor of Amendment 1 to cut taxes. To what extent would the final result have been different, and would it have even made a difference?
According to the Atlanta Journal-Constitution:
Rep. Chuck Martin (R-Alpharetta) is pushing legislation co-sponsored by leaders of both parties to make sure Georgians don't have to pay state income taxes on the stimulus checks they might be receiving from the federal government.
The final stimulus plan hasn't been approved by Congress, but President Bush and congressional leaders have supported putting $150 billion into the package. Under the plan, most individuals would get up to $600, couples would get $1,200 and each dependent child would bring families an extra $300.[...]
Without his bill, Martin said recipients would have to pay the 6 percent state income tax on those stimulus checks.
We're not so sure about that. Some states allow residents to deduct federal taxes from their state taxes, so reducing federal taxes would increase state taxes. That's why Missouri enacted a bill similar to Georgia's back in 2001. But Georgia does not allow federal deductibility like Missouri does, so that's not the reason.
We've read the text of the bill (which just adds a one-year income exclusion, without changing any other laws) and the relevant statute, and we can't figure this out. When filing taxes, Georgia instructs filers to start with federal adjusted gross income and then subtract state deductions. The stimulus rebate check, as an advance on the 2008 tax refund, would not increase or decrease federal adjusted gross income, so why would it affect state taxes?
It may well be that Georgia legislators want to give taxpayers a one-year cut in their income tax. But if they're doing that, they might want to get rid of the bottom five income tax rates which apply to income earned under $7,000.
The Senate will likely cave to the demands of AARP and others to expand the stimulus to include rebates to elderly Americans who pay little or no taxes (and the rebates dropping from $600 to $500 to keep the cost the same). As we noted:
When dealing with a policy that is designed primarily to stimulate the economy, any arbitrary policy can almost be justified to some degree. But what this shows is that there is a problem in trying to use the tax code as the main vehicle for fiscal stimulus and/or social policy. Everyone is always going to complain that they are being shortchanged, despite the fact that getting money to everyone is difficult.
On second thought... maybe we should just send helicopters over every major city in the country and drop out $20 bills. And we can even make AARP happy by putting double the money in the helicopters that fly over golf courses in Florida and Arizona.
Because the stimulus bill enjoys such broad congressional support, it's a magnet for all sorts of silliness to be attached to it (the term is a "Christmas tree" bill). The Senate may seek to add additional unemployment benefits. A provision has been added to prevent a Child Death Tax. Some are now insisting on an amendment to prevent illegal immigrants from getting rebate checks. Mike Huckabee and Rep. Brian Baird (D-WA) think we should spend the money on infrastructure. The REALTORS® are happy with the stimulus bill, though. Contrast that with the Coalition [of Economists] Against Fiscal Stimulus, and those normally anti-tax congressmen who voted against it in the House.
AARP's success at amending the bill makes this Canadian cartoon from 1985 seem apt:
In tonight's State of the Union Address, President Bush proposed the right prescription of short-term stimulus to calm American's economic jitters in the near term and long-term confidence-building by challenging Congress to make his signature tax cuts permanent.
But the President missed a golden opportunity to use his bully pulpit to jump-start the debate over the nation's lagging business tax competitiveness in the global economy. With the second highest corporate tax rate among developed counties, the U.S. business tax system continues to fall behind as Washington stands still, thus threatening American jobs and undermining the attractiveness of the U.S. as a place to invest.
Click here for more on corporate taxes.
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