The Way We Tax A 50-State Report

THE GOVERNMENT PERFORMANCE PROJECT ^ | 2/03 | KATHERINE BARRETT & RICHARD GREENE,

[GailA]

THE GOVERNMENT PERFORMANCE PROJECT

The Way We Tax A 50-State Report

By KATHERINE BARRETT & RICHARD GREENE, MICHELE MARIANI and ANYA SOSTEK

he vast majority of state tax systems are inadequate for the task of funding a 21st-century government.

Most of those tax systems are also unfair. They break the golden rule of tax equity: collect the lowest possible rates on the widest possible base of taxpayers.

In addition, at a time when states are desperate to collect every dime they’re owed, many are short-changing their tax-collection departments, cutting revenue agency budgets with a heavy hand.

These conclusions and others are the culmination of a year’s effort by a team of Governing staffers researching the tax structures and tax management of the 50 states. Scores of reports, hundreds of interviews and thousands of hours of analysis went into this effort to evaluate the way each state raises its revenues.

Of course, the burden a tax system must carry varies from state to state. There is no such thing as a perfect structure, no template that all, or even most, of the states could use. One of the glories of the American system of governance is that states are free to offer different degrees of service to their citizens. The main commonality is that they must raise whatever revenue they need to meet their chosen level of service. Raising money to meet irresponsible spending doesn’t make for a good tax system. But utilizing well-balanced streams of revenue and avoiding unsupportable tax cuts are critical, regardless of whether a state wants to have a Cadillac government or a Chevy.

Creating and maintaining a high-quality tax system — and balancing it against the demands of its citizenry — may be one of the most difficult tasks any state, or any government for that matter, faces. The two sides of the equation are often out of whack. Consider this: When Pennsylvanians were surveyed last summer, the majority favored higher prescription drug subsidies for the elderly, more money for public education and better funding for higher education. They also, however, opposed any increase in the state’s sales tax or income tax. Gambling was the only new revenue source people favored.

Of course, this is unrealistic. But it’s the nature of the implausible and inscrutable world of state taxation, a world in which hyperbole is the native language and nitty-gritty politics trumps common sense. “It’s the old classic,” says Arkansas Governor Mike Huckabee. “Everyone wants to go to heaven, but nobody wants to die.”

It’s also a world of pliable statistics, where reality is a relative concept. “There are 50 states, 50 education governors, 50 bad states for taxes,” says Randy Hodgins, who’s on the staff of the Senate Ways and Means Committee in Washington State. “You can make statistics do whatever you want.” Maine, for example, is 17th in its per-capita state tax burden. Mix in local taxes and the state has the 10th-highest per-capita tax burden. But look at taxes as a percentage of personal income, and the state zips up to third place.

States with unbalanced tax systems are particularly ripe for misinformation and misconception. In Texas, sales and property taxes are high because there is no income tax. Even though Texas ranks near the bottom in tax burden — per capita or otherwise — its citizens “think of themselves as overtaxed,” reports Judith Stallmann, a professor at the University of Missouri.

[GailA]

I'm sure this is an UNBIASED report (wink, wink)

This is a LONG report with graphs, and links to individual states.

[xzins]

ONE tax for the nation.....a sales tax.

ONE tax for the state.....a sales tax.

ONE tax for the locality.....a sales tax.


All of these can be collected at ONE time with NO PAPERWORK on the part of the person making a purchase at a cash register.

NRST ... the only fair tax system.

[Huck]

I would support a repeal of 16th, an amendment banning income tax, and a move to a flat consumption tax

[xzins]

You and me both.

And one of the deadliest enemies would be H&R Block and their ilk and a legion of accountants and tax lawyers.

Where will the legislative courage come from?

[GailA]

Me too. You can see how UNBIASED the report is TN tax system among WORST in the Nation...we don't have a state income tax..Texas is bad too..NO income tax. TN TAX SYSTEM among WORST in Nation

[Blood of Tyrants]

That is the worst piece of pro-income tax propaganda I have ever read. For example, the author throws out the following

sales tax receipts have not been hit nearly as hard as income tax revenues. But the problem with the sales tax is that its base has not moved forward with the times. “Nearly every state has a defective sales tax in terms of dealing with the economy of the 21st century,”

In one sentence he admits that a sales tax is much more stable than an income tax and in the next he derides it as being "defective" and "not moving with the times". By which he obviously means that we have refused to become Marxists!

How DARE we refuse to implement an income tax like the rest of the lemmings!

[Blood of Tyrants]

It really burns my @$$ when they call the sales tax "unreliable" when in fact thay KNOW that the income tax is FAR more unreliable!

[HitmanLV]

My own beloved Nevada ranks poorly - one star each for Adequacy of revenue, Fairness to taxpayers, & Management of system. We have no income tax here and most other taxes are managable.

They reluctantly note: "One of seven states without any tax on income, including income from dividends; property tax burden among the lowest in the country; fastest growing state in the country; population has increased tenfold since 1960."

I guess all those droves of people are deliberatly coming to a state that treats them profoundly unfairly in taxation!

[GailA]

Neveda like Texas and Tennessee are INCOME TAX FREE which is why they ranked POORLY in this pro-income tax study.

[lodwick]

consumption tax bttt

[isthisnickcool]

The "report" says that Texas has no corporate income tax. Well, that's essentially what the "franchise" tax is since it's based on a percentage of "net taxable capital" or "surplus". It is true, as they say, that this can be circumvented by simply using a linited partnership or adding one to mix.

So, they may call it a "franchise tax" in Texas but it is a corporate incomen tax.

I LOVE THIS! Simple and it will fit on a tee shirt:

ONE tax for the nation.....a sales tax.

ONE tax for the state.....a sales tax.

ONE tax for the locality.....a sales tax.

[Taxman]

Good find, good post, Gail.

Here is all you need to know about Governing:

***********************************

Governing is a monthly magazine whose primary audience is state and local government officials: governors, legislators, mayors, city managers, council members and other elected, appointed and career officials. They are the men and women who set policy for and manage the day-to-day operations of cities, counties and states, as well as such governmental bodies as school boards and special districts.

The magazine has a circulation of about 86,000. Besides public officials, its readers include journalists, academics, companies that provide products and services for government, and involved citizens with an interest in the governments closest to them.

Governing is published by Congressional Quarterly, Inc., a subsidiary of the Times Publishing Co. of St. Petersburg, Florida. In 1994, Governing acquired City & State magazine, and the two publications were merged into Governing.

Governing’s offices are located at 1100 Connecticut Ave. N.W., Suite 1300, Washington, DC 20036. Phone: (202) 862-8802. Fax: (202) 862-0032. E-mail: mailbox@governing.com

Send letters to the editor to any of the above addresses. Include a daytime telephone number. Letters are subject to editing.

**************************************

Written by big government pogues for big government pogues!

Why should we expect any other outcome or recommendations from a group of people determined to grow the power and reach of government?

[Taxman]

Exactly correct, my FRiend.

[mpreston]

Definitely pro-tax. These people are idiots. From the Colorado section:

"For the past decade, a constitutional amendment has crippled Colorado's representative government when it comes to fiscal issues. Dubbed TABOR , for the Taxpayer's Bill of Rights , it strangled officials' ability to raise taxes by adding to the state's constitution the requirement that voter approval be obtained for any tax increase.
TABOR also limits annual revenue growth to the sum of inflation and population increase. Any revenues collected beyond that ceiling must be refunded to the state's residents. What if the treasury is starved for cash? Too bad. The voters have to grant permission for the government to retain the money. This was tried. It failed. (Interestingly, TABOR also applies to local governments, and they?ve been successful in the majority of their attempts to retain extra funds.)"

In the first sentence they say TABOR is bad, then they say it works. I say it works. TABOR hasn't crippled representative government, it has just restrained the spending habits. Sure we have a deficit. I'd rather we have a deficit and have to cut programs, like businesses have to in a recession, than insulate government from economic cycles by raising taxes.

- Mark

[Forgiven_Sinner]

I read the whole article and couldn't believe how pro-tax and out of touch it was with reality, ie voters paying taxes. One of their charming misbeliefs was "state governments should never cut taxes during temporary revenue increases". Why not?

Another one was, "voters never accept a cut in services". I'm not aware of that! For example, wouldn't Tenn. be balanced if they cut back on Tenn Care? Has anyone proposed that? Say an income test?

The article reads as if it were written by a pro-tax, pro-big government pork spending bureaucrat.

[Blood of Tyrants]

To the left, anything that checks ulimited government spending is bad.

[Taxman]

And, if I am not mistaken, Mark, Colorado is in the best financial condition of any state government in the US, except of course, Alaska and Wyoming, which have substantial mineral resource revenues.

Am I wrong about the state of Colorado's finances?

[Taxman]

See post #12.

[Hermann the Cherusker]

So ... we'd pay about 40% in sales tax when we go to the store. That sure sounds like a recipe for a black market.

[Henrietta]

"Governing is a monthly magazine whose primary audience is state and local government officials: governors, legislators, mayors, city managers, council members and other elected, appointed and career officials. They are the men and women who set policy for and manage the day-to-day operations of cities, counties and states, as well as such governmental bodies as school boards and special districts."

you all know these folks... they are the ones that keep trying to raise your taxes!