Earlier this week, the Census Bureau released its Quarterly Summary of State and Local Government Revenue for the first quarter 2008. The Rockefeller Institute of Government has parsed through the data and put together a report of findings. Some facts:
- State tax revenue is up 1.7 percent in the first quarter of 2008, as compared to the first quarter of 2007. This is the slowest rate since 2003, but still positive. For this fiscal year, revenue is up 3 percent over last year.
- State personal income tax revenue increased 4.4 percent over first quarter 2007.
- State corporate income tax revenue declined 5.1 percent over first quarter 2007.
- State sales tax collections were flat, declining 0.04 percent over first quarter 2007.
- In total states collected $155.3 billion in the first quarter 2008, comprised of $64 billion (41%) in income taxes, $55 billion (35%) in sales taxes, about $10 billion in corporate income taxes (7%), and $26 billion in other taxes and fees.
At a recent hearing, Rep. John Conyers (D-MI) stated that "many [states] are insolvent." States may not be enjoying the revenue boom of prior years, but they're not quite as bad as that. It must be noted, though, that some of the revenue increase comes from recently enacted tax increases. But reports that states are collapsing financially are a bit premature.
More on state taxes and policy here.
[Homer finds out about the new tax to pay for fixing the town's bear problem]
Homer: Woo-hoo! A perfect day. Zero bears and one big fat hairy paycheck. [opens it up] Hey! How come my pay is so low? ... Bear patrol tax! This is an outrage! It's the biggest tax increase in history!
Lisa: Actually, Dad, it's the smallest tax increase in history.
Homer: Let the bears pay the bear tax. I pay the Homer tax.
Lisa: That's the home-owner tax.
Homer: Well, anyway, I'm still outraged.
[Later, a mob marches on the Mayor's office shouting "Down with taxes!"]
Mayor Quimby: Are those morons getting dumber or just louder?
Assistant: [checks his clipboard] Dumber, sir. They won't give up the bear patrol, but they won't pay taxes for it either.
Quimby: Ducking this issue calls for real leadership.
[at the podium]
Mayor Quimby: People, your taxes are too high because of illegal immigrants![...]
Moe: Immigants! [sic] I knew it was them! Even when it was the bears, I knew it was them.
We're always on the lookout for strange tax policies, and South Carolina has recently supplied two. The South Carolina Legislature assembled on June 25 to reconsider several bills that had been vetoed by Gov. Mark Sanford. Here is the information from South Carolina's revenue website on two of the more interesting vetoes that were overridden by the Legislature:
The $50 Venison Income Tax Credit:
"Section 12‑6‑3750.
(A) Beginning with the year 2008, there shall be allowed a nonrefundable credit against taxes imposed by this chapter for a meat packer, butcher, or processing plant licensed or permitted by this State or the United States Department of Agriculture that, during the tax year for which the credit is claimed, had a valid contract with any nonprofit organization to process deer for donation to any charitable organization engaged in distributing food to the needy. No portion of the donated deer shall be used by a commercial enterprise. The amount of the credit shall be fifty dollars for each carcass processed and donated. The credit must be claimed in the year earned and may not be carried to any other taxable year.
(B) For the purposes of this section, 'process' means to skin, cut, bone, grind, package, or perform any butchering tasks necessary to prepare the meat for distribution and consumption. The processing must take place in a licensed or permitted establishment."
Second Amendment Sales Tax Holiday:
"This two-day sales tax holiday applies to purchases of handguns, rifles and shotguns and will take place every year on the Friday and Saturday after Thanksgiving. This year the Second Amendment Sales Tax Holiday will take place on November 28th and 29th of 2008. Information concerning the Second Amendment Sales Tax Holiday will be published later this year."
We would point out, as we have many times before, that these types of tax benefits only add to the complexity of a state's tax system, and especially in the case of sales tax holidays, are just plain bad tax policies. Read more about tax complexity in our Compliance Cost and Tax Complexity section. Read more about sales tax holidays from our blog, here and here.
A recent article in the Wall Street Journal–Europe discusses the impact that Obama's proposed tax changes would have on Americans living abroad:
Celebrity chef Alain Ducasse insists that his change of citizenship this week from high-tax France to no-income-tax Monaco wasn't a financial decision but an "affair of the heart." Right. But even if he's being sincere, plenty of other Frenchmen have moved abroad to escape their country's confiscatory taxes.
Americans should be so lucky: Theirs is the only industrialized country that taxes its people even if they live overseas. That hasn't been a big problem as long as U.S. tax rates have been relatively low. But with Barack Obama promising to lift rates to French-like levels, this taxman-cometh policy could turn Americans into the world's foremost fiscal prisoners.
And make no mistake, taxes under a President Obama could be truly à la française. The top marginal tax rate, including federal, state and local levies, could approach 60% for self-employed New Yorkers and Californians. Not even France's taxes are that high now that President Nicolas Sarkozy has capped the total that high-earning Frenchmen like Mr. Ducasse can pay in income, social and wealth taxes at 50% of earnings.
For more on the candidates' tax plans, click here and here.
In November, Oregon voters will vote on Initiative 3, which would allow taxpayers full deduction of federal income taxes on Oregon state income tax returns. Currently, the deduction is limited to about $5,500. Petitioners gathered some 82,000 signatures to qualify the initiative for the ballot.
Before 1974, Oregon taxpayers could fully deduct federal income taxes on their state taxes, but that year a $3,000 limit was instituted (which would be about $13,000 in 2008 dollars). In 1980, the amount was increased to $7,000 ($18,000 in 2008 dollars), but reduced to $3,000 in 1987, and increased to $5,000 in 2000 with annual inflation adjustments. Also in 2000, voters rejected a measure 45% to 55% that also would have made federal income taxes fully deductible. (See today's Daily Tax Report article by Tom Alkire for this history.)
The Legislative Revenue Office says that the measure would reduce state general fund revenue by 13 percent, or about $550 million. Read the text of the initiative here (PDF).
More on Oregon here. Past Oregon blog posts:
- Helping Two-Legs Good, Helping Four-Legs Bad, by Joseph Henchman, January 7, 2008
- A Merrier Christmas in Oregon, by Joseph Henchman, December 25, 2007
- News Roundup: Search Federal Spending, AMT Vote, Tax Swaps, Beer Tax, by Joseph Henchman, December 14, 2007
- Oregon Corporate Tax Disclosure Headed to Ballot?, by Chris Atkins, May 31, 2006
