Congress hasn’t even granted states the power to collect sales taxes owed on online shopping, but already Tennessee lawmakers are discussing how they might squander the money. On the heels of inheritance tax, gift tax, sales tax, and interest and dividend tax cuts, Governor Haslam says he’s open to the idea of cutting taxes even further if the state sees a bump in revenue from passage of the Marketplace Fairness Act. So far the Governor has said he wants to proceed cautiously, but Tennessee lawmakers have guzzled their share of tax cut snake oil lately.
Uh oh! Watch out for income tax cuts in Iowa in 2014. Already Governor Terry Branstad is looking to next year and potentially reducing income taxes. He recently said, "I think it’s very likely we’ll be looking at reducing the income tax further. When I became governor, the income tax rate in Iowa was 13 percent. We now have it down to 8.98 percent, plus we have full federal deductibility…Remember, the top federal tax is 38.5 percent, so the effective rate in Iowa is only about 5.5 percent. We’d like to see that go lower."
In refreshing news, late last week Missouri Governor Jay Nixon vetoed a radical tax package passed by the legislature that included: a reduction in the corporate income tax rate, a 50 percent exclusion for pass-through business income, an additional $1,000 personal and spouse income exemption for individuals earning less than $20,000 in Missouri adjusted gross income, and a reduction in the top income tax rate from 6 to 5.5 percent. The Governor called the legislation an “ill-conceived, fiscally irresponsible experiment that would inject far-reaching uncertainty into our economy, undermine our state’s fiscal health and jeopardize basic funding for education and vital public services.” Stay tuned. The legislature is expected to come back in September for a veto session during which it’s likely legislators will try to override the Governor’s veto.
Last week, the Nevada Legislature passed AB 1 (PDF), a bill that changes how the state will handle tax abatements for new or expanding businesses. Under current law, the state grants partial abatement of property taxes, business taxes, and sales and use taxes to a business that locates or expands in the State and has 75 employees, or invests $1 million in capital into the state (businesses in smaller counties can qualify with 15 employees or a $250,000 investment). The new bill would lower the employee requirements to 50 in larger counties and 10 in smaller counties. The Institute on Taxation and Economic Policy (ITEP) reminds us that these kinds of tax incentives are costly and their real impact hard to measure, to say the least.
The Connecticut House of Representatives passed a bill, HB 6566 (PDF), which would require public disclosure of specific details about state economic assistance and tax credits for businesses. The bill would call for the creation of an online database that lists information such as the name and location of the recipient, the number of jobs created or retained, and the amount and detailed nature of the tax subsidy. This bill came only a few weeks after a report was released by Good Jobs First that documented how costly economic development subsidy programs often lack any kind of public transparency. “Despite its widespread practice, this use of taxpayer funds remains controversial,” the report said, “but the absence of good information makes it impossible for citizens to weigh the costs and benefits to their communities.” The bill now heads to the State Senate for consideration.