Raiding the Piggybank to Start a Business

It may be a great time to start a business, but there are still many difficulties to overcome, not the least of which is finding financing.  Many small business startups are going back to the tried-and-true method of finding money...using their own savings. A recent Wall Street Journal article cited some Federal Reserve data that substantiates this trend:

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Monday Map: State Cigarette Excise Tax Rates

Monday Map: State Cigarette Excise Tax Rates

Today's Monday map shows state cigarette excise tax rates, expressed as dollars per 20-pack.

Click on the image to view full-size.

Two Upcoming Events on State Tax Overreaching

States are increasingly reaching beyond their borders for tax revenue. Two panels coming up will discuss the topic:

On Monday, May 9, tax law experts Paul Frankel, Ron Jacobs, Stephen Kranz, Todd Lard, Art Rosen, and yours truly will describe what's going on and what to do about it. The event is a morning half-day conference (with breakfast) at the Mayflower Hotel; read more or register to attend.

On Wednesday, May 11, I'll be appearing on a panel on state corporate income taxes, hosted by the American Enterprise Institute (AEI). Also on the panel are Joe Crosby of the Council on State Taxation and Michael Mazerov of the Center on Budget and Policy Priorities. Alan Viard of AEI is moderating. More information here.

Indiana Approves Tax Changes, Including Corporate Tax Rate Reduction

Indiana's legislature adjourned Friday after approving a budget that now goes to Gov. Mitch Daniels (R). The $28 billion two-year budget includes a $1 billion surplus. Included in the budget and in other bills enacted this session are several tax provisions:

• Automatic Taxpayer Refund. When the state's rainy day reserves exceed 10% of budgeted spending (about $1.4 billion), the money will be split 50-50 between the teachers' pension stabilization fund and refunds to taxpayers via an income tax credit. (The threshold is unlikely to be reached during the next budget biennium.)
• Corporate Income Tax Reduction. From the current 8.5% rate, the rate will drop in steps to 6.5%, by ending a tax credit for the purchase of out-of-state municipal bonds. Indiana was the only state to offer the credit to all state bonds, not just its own. The rate reduction schedule:
  • July 1, 2012: 8.0%
  • July 1, 2013: 7.5%
  • July 1, 2014: 7.0%
  • July 1, 2015: 6.5%
• Ends net operating loss carrybacks after 2011.
• Modifies the tax on smokeless tobacco to be at a lower rate than the tax on cigarettes, better reflecting the risk associated with the product relative to cigarettes.
• Reduces unemployment insurance benefits by 25 percent to forestall a tax increase and begin repaying $2 billion in loans from the federal government.
• Establishes a commission to study the effectiveness of economic development tax credits and programs.

A Democratic proposal to suspend the state's gasoline tax and sales tax on gasoline during the summer months was not included.