Multi-State

Options for Progressive Sales Tax Relief

Read the Policy Brief in PDF Form Sales taxes are one of the most important revenue sources for state and local governments—and are also one of the most unfair taxes. In recent years, policymakers nationwide have struggled to find ways...

State Estate and Inheritance Taxes

For much of the last century, estate and inheritance taxes have played an important role in helping states to adequately fund public services in a way that improves the progressivity of state tax systems. While many of the taxes levied by state and local governments fall most heavily on low-income families, only the very wealthy pay estate and inheritance taxes. Recent changes in the federal estate tax, however, culminating in the "fiscal cliff " deal of early 2013, have forced states to reevaluate the structure of their estate and inheritance taxes. Unfortunately, the trend of late has tended toward weakening or completely eliminating state estate taxes. This policy brief discusses inheritance and estate taxes and how states can adopt these important components of a progressive tax structure.

Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform

Sales taxes are an important revenue source, comprising close to half of all state revenues in 2013. But sales taxes are also inherently regressive because the lower a family's income, the more of its income the family must spend on things subject to the tax.

Pay-Per-Mile Tax is Only a Partial Fix

The gasoline tax is the single largest source of funding for transportation infrastructure in the United States, but the tax is on an unsustainable course. Sluggish gas tax revenue growth has put strain on transportation budgets at the federal and state levels, and has led to countless debates around the country about how best to pay for America's infrastructure.

STAMP is an Unsound Tool for Gauging the Economic Impact of Taxes

The Beacon Hill Institute (BHI), a free-market think tank located at Suffolk University, frequently uses its State Tax Analysis Modeling Program (STAMP) to perform analyses purporting to show that lowering taxes, or not raising them, will benefit state economies. But STAMP suffers from a number of serious methodological problems and should not be relied upon by anybody seeking to underĀ­stand the economic impacts of state tax policies.

The Federal Gas Tax: Long Overdue for Reform

The federal gas tax is a critical source of funding for the nation's transportation system, but its design is fundamentally flawed. In recent years, the consequences of those flaws have become increasingly obvious, as the federal government has struggled to fund a 21st century transportation network with a gas tax that has predictably failed to keep pace with the nation's growing infrastructure needs. This ITEP Policy Brief explains how the federal gas tax works, its importance as a transportation revenue source, the problems confronting the gas tax, and the reforms that are needed to overcome these problems.

State Gasoline Taxes: Built to Fail, But Fixable

Every state levies taxes on gasoline and diesel fuel, usually just called "gas taxes." These taxes are an important source of state revenue--particularly for transportation--but their poor design has resulted in sluggish revenue growth that fails to keep pace with state infrastructure needs. This ITEP Policy Brief explains how state gas taxes work, their importance as a transportation revenue source, the problems confronting gas taxes, and the types of gas tax reforms that are needed to overcome these problems.

Improving Tax Fairness with a State Earned Income Tax Credit

The simplest, most effective, and most targeted way to begin to counteract regressive state tax codes is a refundable state Earned Income Tax Credit (EITC). Twenty-five states and the District of Columbia already have some version of a state EITC. Each one is modeled on the federal credit, making it easy for taxpayers to claim and simple for state tax officials to administer. This report explains how all states - even those who already have some form of the credit - can use the state EITC as a tool for improving the fairness of their state tax code.

Gas Tax Hits Rock Bottom in Ten States

In most states, the gasoline tax is set at a fixed number of cents per gallon of gas. South Carolina drivers, for example, have been paying 16 cents per gallon in state tax for more than a quarter century.1 But while this type of fixed-rate gas tax may appear to be flat over time, its lack of change in the face of inflation means that its "real" value, or purchasing power, is steadily declining. In ten states, this decline has brought the state's inflation-adjusted gas tax rate to its lowest level in the state's history.

Most Americans Live in States with Variable-Rate Gas Taxes

The federal government and many states are seeing shortfalls in their transportation budgets in part because the gasoline taxes they use to generate those funds are poorly designed. Thirty-two states and the federal government levy "fixed-rate" gas taxes where the tax rate does not change even as the cost of infrastructure materials inevitably increases over time. The federal government's 18.4 cent gas tax, for example, has not increased in over twenty years. And almost half the states (24) have gone a decade or more without a gas tax increase.

How Long Has it Been Since Your State Raised Its Gas Tax?

Many states' transportation budgets are in disarray, in part because they are trying to cover the rising cost of asphalt, machinery, and other construction materials with a gasoline tax rate that is rarely increased. A growing number of states have recognized the problem with this approach and have switched to a "variable-rate" gas tax under which the tax rate tends to rise over time alongside either inflation or gas prices. A majority of Americans live in a state where the gas tax is automatically adjusted in this way.

90 Reasons We Need State Corporate Tax Reform

As states struggle with tough budget decisions about funding essential public services, profitable Fortunate 500 companies are paying little or nothing in state income taxes thanks to copious loopholes, lavish giveaways and crafty accounting, a new study by Citizens for Tax Justice and the Institute for Taxation and Economic Policy reveals.

The Sorry State of Corporate Taxes

Many of America's Most Profitable Corporations Pay Little or No Federal Income Taxes; Multinationals Pay Higher Rates Abroad Than in the U.S.

A Federal Gas Tax for the Future

Gas tax revenues are on an unsustainable course. Over the last five years, Congress has transferred more than $53 billion from the general fund to the transportation fund in order to compensate for lagging gas tax revenues. By 2015, the transportation fund will be insolvent unless an additional $15 billion transfer is made. Larger transfers will be needed in subsequent years.

Low Tax for Who?

Annual state and local finance data from the Census Bureau are often used to rank states as "low" or "high" tax states based on taxes collected as a share of state personal income. But focusing on a state's overall tax revenues overlooks the fact that taxpayers experience tax systems very differently. In particular, the poorest 20 percent of taxpayers pay a greater share of their income in state and local taxes than any other income group in all but 10 states (including DC). And, in every state, low- income taxpayers pay more as a share of income than the wealthiest top 1 percent of taxpayers. Arizona, Florida, South Dakota, Tennessee, Texas, and Washington are six states touted as "low tax" that have especially high taxes on poor residents. To learn more about how low tax states overall can be high tax states for families living in poverty, read the state briefs below.

State Tax Codes As Poverty Fighting Tools

New Census Bureau data released this month show that the share of Americans living in poverty remains high, despite other signs of economic recovery. The national 2012 poverty rate of 15 percent is essentially unchanged since 2010 , but still 2.5 percentage points higher than pre-recession levels. This means that in 2012, 46.5 million, or about 1 in 6 Americans, lived in poverty.1 The poverty rate in most states also held steady with five states experiencing an increase in either the number or share of residents living in poverty while only two states saw a decline.2

Tax Expenditure Reports: A Vital Tool with Room for Improvement

State and local tax codes include a huge array of special tax breaks designed to accomplish almost every goal imaginable: from encouraging homeownership and scientific research, to building radioactive fallout shelters and caring for "exceptional" trees. Despite being embedded in the tax code, these programs are typically enacted with tax policy issues like fairness, efficiency, and sustainability only as secondary considerations. Accordingly, these programs have long been called "tax expenditures." They are essentially government spending programs that happen to be housed in the tax code for ease of administration, political expedience, or both.

Tax Incentives: Costly for States, Drag on the Nation

Tax incentives are intended to spur economic growth that would not have otherwise occurred. More specifically, these narrowly targeted tax breaks are usually offered in an attempt to convince businesses to relocate, hire, and/or invest within a state's borders.

Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform

Sales taxes are an important revenue source, comprising close to half of all state revenues in 2012. But sales taxes are also inherently regressive because the lower a family's income, the more of its income the family must spend on things subject to the tax.

Undocumented Immigrants' State and Local Tax Contributions

In the public debates over federal immigration reform, much has been made of the argument that undocumented immigrants would be a drain on federal, state and local government resources if granted legal status under reform. But it is also true that the 11.2 million undocumented immigrants living in the United States are already taxpayers, and that their local, state and federal tax contributions would increase under reform.

Don't Blame the Gas Tax for High Gas Prices

American consumers are keenly aware of the price of gasoline, but uninformed about what drives that price. When asked about the federal gas tax, for example, six in ten Americans said the tax rate goes up every year. In reality, the federal gas tax hasn't budged from its 18.4 cent rate in almost twenty years, and roughly half the states haven't seen their gas tax rates change in a decade or more.

States with "High Rate" Income Taxes are Still Outperforming No-Tax States

Lawmakers in about a dozen states are giving serious consideration to either cutting or eliminating their state personal income taxes. In each case, these proposals are being touted as a way to boost economic growth.

Laffer's New Job Growth Factoid is All Rhetoric and No Substance

A new talking point printed on the opinion page of The Wall Street Journal is proving irresistible to state lawmakers looking for an excuse to reduce or eliminate their states' income taxes: A new analysis by economist Art Laffer for the American Legislative Exchange Council finds that, from 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax, though these states account for only about 20% of the national population.

Who Pays? (Fourth Edition)

Major tax overhauls are on the agenda in a record number of states, and “Who Pays?” documents in state-by-state detail the precise distribution of state income taxes, sales and excise taxes and property taxes paid by each income group as...

Previewing Tax Reform in the States: National Trends and State-specific Prospects for 2013

Following an election that left half the states with veto-proof legislative majorities, 39 states with one-party rule and more than a dozen with governors who put tax reform high on their agendas, 2013 promises to be a big year for changes to state tax laws.

Five Steps Toward a Better Tax Expenditure Debate

Almost without exception, state lawmakers do not closely scrutinize special tax credits, exemptions, and other "tax expenditures" on a regular basis. A recent report by the Pew Center on the States found, for example, that half the states have done nothing even remotely rigorous in the last five years to determine if even a single one of their economic development tax incentives is working.

State Tax Codes As Poverty Fighting Tools

The tax systems of virtually every state are pushing poor families deeper into poverty. But state tax systems also have the potential to play a role in fighting poverty. The four low-income tax credits discussed in this report are among the most cost-effective anti-poverty strategies available to lawmakers: the Earned Income Tax Credit, property tax circuit breakers, targeted low-income tax credits, and child-related tax credits. This report identifies the states in which each of these credits is offered, and provides specific recommendations tailored to policymakers in each state as they work to combat poverty.

Four Tax Ideas for Jobs-Focused Governors

As the nation's governors gather in Williamsburg, Virginia this week, their focus is on their Chairman's initiative, Growing State Economies. Too often, however, a governor's knee-jerk response to a lagging economy is to start cutting taxes, even though state tax cuts offer a demonstrably low economic bang-for-the-buck, for a number of reasons.

How Federal Tax Reform Can Help or Hurt State and Local Governments

Federal tax reform can affect state and local taxes in several ways. The federal government can create, repeal or change tax expenditures in a way that is passed on to the states because virtually every state has tax rules linked...

Arthur Laffer Regression Analysis is Fundamentally Flawed, Offers No Support for Economic Growth Claims

A November 2011 report from the Oklahoma Council for Public Affairs (OCPA) in partnership with Arduin, Laffer & Moore, a consulting group headed by Arthur Laffer, explains the method that Laffer has been using to make the case that tax...

"High Rate" Income Tax States Are Outperforming No-Tax States

Don’t Be Fooled by Junk Economics With the economy lagging, lawmakers seeking to reduce or eliminate state personal income taxes are touting their proposals as tools for boosting economic growth. Of particular note are the governors of Kansas and Oklahoma,...

Building a Better Gas Tax

State gas taxes are currently levied in every state, and are the most important source of transportation revenue under the control of state lawmakers. In recent years, however, state gas taxes have fallen dramatically relative to the rising cost of...

Corporate Tax Dodging In the Fifty States, 2008-2010

In October, South Carolina Governor Nikki Haley suggested that gradually repealing the state’s corporate income tax should be a priority for lawmakers in 2012. Haley’s idea was alarming, but hardly surprising: in the past year, governors in Arizona and Florida...

Corporate Taxpayers & Corporate Tax Dodgers

Earlier this year, Berkshire Hathaway Chairman Warren Buffett made headlines by publicly decrying the stark inequity between his own effective federal tax rate (about 17 percent, by his estimate) and that of his secretary (about 30 percent). The resulting media...

State Tax Codes As Poverty Fighting Tools (2011)

This report presents a comprehensive view of anti-poverty tax policy decisions made in the states in 2011 and offers recommendations every state should consider to help families rise out of poverty. States can jump-start their anti-poverty efforts by enacting one...

Sales Tax Holidays: A Boondoggle

Sales taxes are among the most important--and most unfair--taxes levied by state governments. Sales taxes accounted for a third of state taxes in 2011, but sales taxes are regressive, falling far more heavily on low- and middle- income taxpayers than on the wealthy. In recent years, lawmakers thinking they might lessen the impact of these taxes have enacted "sales tax holidays" that provide temporary sales tax breaks for purchases of clothing, computers, and other items. This policy brief looks at sales tax holidays as a tax reduction device.

States Should Not Allow Amazon.com to Bully Them into Forgoing Sales Tax Reform

In just the last few weeks, Arkansas and Illinois joined New York, North Carolina, and Rhode Island in enacting legislation requiring some online retailers, like Amazon.com, to collect sales taxes on purchases made by their state’s residents. Vermont’s House of...

Don't Give Up on Pease: States Can Decouple from Recent Federal Tax Cuts for Wealthy Itemizers

In 2011, thirty one states and the District of Columbia allow a group of income tax breaks known as “itemized deductions” (Figure 1). Itemized deductions are designed to help defray a wide variety of personal expenditures that affect a taxpayer’s...

In It for the Long Haul: Why Concerns over Personal Income Tax "Volatility" Are Overblown

The precipitous drop in state tax collections during the recent recession has prompted some observers to argue that relying on volatile state taxes is a recipe for budgetary disaster. The most recent version of this argument, made by the Wall...

Topsy-Turvy: State Income Tax Deductions for Federal Income Taxes Turn Tax Fairness on its Head

The budget outlook for state governments is bleak. Despite evidence that revenues are rebounding, there is a general acknowledgement that ?broad fiscal conditions remain fragile. The need for public investments—particularly health care for low-wage or unemployed workers and their families—is...

The ITEP Guide to Fair State and Local Taxes

The ITEP Guide to Fair State and Local Taxes, released in March of 2011, offers citizens, activists, journalists, and policymakers a detailed primer on state and local tax policy. The guide explains the differences between progressive, flat, and regressive taxes...

A Capital Idea

The budget outlook for the states is improving, but uncertain. In this context, states must find ways to generate additional revenue that create neither additional responsibilities for individuals and families struggling to make ends meet nor additional distortions in the...

How the Bush Tax Cuts Affect State Revenues

Less than one month from now, federal tax cuts pushed through by President George W. Bush are scheduled to expire—and Congressional tax writers have spent much of this year debating how these tax cuts should be extended. This debate has...

The Good, the Bad and the Ugly: 2010 State Tax Policy Changes

Compared to previous years, the budget outlook for the states improved only slightly in 2010 and virtually every state continued to face a budget shortfall. As a result, the overwhelming majority of state policymakers were put in the unenviable position...

Credit Where Credit is (Over) Due: Four State Tax Policies Could Lessen the Effect that State Tax Systems Have in Exacerbating Poverty

The ongoing recession has had an unrelenting impact on families and communities in every state across the country. Millions of Americans are without work and in many cases those with jobs are experiencing reduced work hours and wages. New poverty...

"Writing Off" Tax Giveaways: How States Can Help Balance Their Budgets by Reforming or Repealing Itemized Deductions

"Writing Off" Tax Giveaways examines options for reforming itemized deductions in the thirty-one states, plus DC, that offer such deductions. The study, released on August 24, 2010, focuses on five potential reforms: repealing itemized deductions entirely, capping the maximum size...

Leaving Money on the Table: "Federal Offset" Provides Incentive for States to Rely on Progressive Income Taxes

Seven states—Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming—have chosen to make up for the lack of an income tax by increasing their reliance on general sales taxes.1 The result is an “upside down” state tax system, which imposes...

Who Pays? A Distributional Analysis of the Tax Systems in All 50 States

Who Pays? is a comprehensive analysis of state and local tax systems in all fifty states. The study, released on November 18, 2009, shows that on average, state and local tax systems require the poorest taxpayers to pay the highest...

Recent Assertions about State Tax Increases Don't Hold Much Water [Revised Aug 7, 2009]

A more careful examination of Internal Revenue Service (IRS) data for the period from 1997 to 2006 reveals a far different picture, however. They show that the number of “rich” taxpayers (federal income tax filers with adjusted gross incomes (AGI)...

A Capital Idea: Repealing State Tax Breaks for Capital Gains Would Ease Budget Woes and Improve Tax Fairness

This report explains what capital gains are, how they are treated for tax purposes, and who typically receives them. It also details the consequences of providing preferential tax treatment for capital gains income for states’ budgets, taxpayers, and economies in...

Latest IRS Data Reveal Fundamental Mismatches in the States

Data released late last week by the Internal Revenue Service (IRS) indicate that 10 states have greater concentrations of reported income among their very wealthiest residents than the country as a whole. Unfortunately, the tax systems in those ten states...

Combined Reporting - How Does Your State Stack Up?

Over the past few years, a number of states, seeking to address longstanding flaws in their corporate income taxes and significant declines in the revenue they yield, have instituted a major reform: combined reporting. Combined reporting requires multi-state corporations to...

Why Large Corporations Can Do Business in Your State Tax-Free - The "Substantial Nexus" Test

The holiday season is in full swing — and chances are you’re buying gifts on the Internet or over the phone, from people you will never meet and companies that will never set foot in your state. These companies are...

State Corporate Income Taxes 2001-2003

Last September, Citizens for Tax Justice and the Institute on Taxation and Economic Policy published Corporate Income Taxes in the Bush Years, an in-depth look at the taxes that 275 large, profitable corporations paid, or failed to pay, on their...

Corporate Income Taxes in the Bush Years

This study details which companies have benefitted the most from the decline in corporate taxes over the past three years, and which have been less fortunate. It also measures the effects of loopholes in our corporate tax laws that predated...

The Effects of Replacing Most Federal Taxes with a National Sales Tax

Recently, there has been renewed discussion of the possibility of replacing most federal taxes with a national retail sales tax. Such an idea was broached in the 1990s, but political interest waned when it was discovered that it would take...

Federal Taxation of Earnings Versus Investment Income in 2004

How do personal taxes on total investment income compare to taxes on earnings right now? This paper addresses that question. The analysis includes both the individual income tax, which applies in varying degrees to both earnings and investment income, and...

Who Pays? A Distributional Analysis of the Tax Systems of All 50 States [2003 Edition]

State governments are facing a profound fiscal crisis. In the past year, states have grappled with mounting budgetary shortfalls, as tax revenues have slumped while spending pressures have continued to grow—and these problems will probably get even worse in the...

Who Pays? A Distributional Analysis of the Tax Systems of All 50 States [1996 Edition]

This study looks at taxes paid by income group, as shares of income, for every state and the District of Columbia. Our primary finding is that by an overwhelming margin, most state and local tax systems take a greater share...

The Hidden Entitlements

In short, while not all “tax expenditures” are evil, many of them undermine tax fairness, impede economic growth and divert scarce tax dollars away from better uses. If we hope to “reinvent government” to make it more effective and less...