Posted on 2/4/2003, 4:32:38 PM by mykdsmom
The 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.
This kind of veracity vertigo wouldn’t be such a bad thing if complaining about high taxes were like complaining about the weather. But politicians who want to stay in office regularly disregard their better instincts and follow their citizens on a path to misbegotten policies. Tennessee’s tax structure, with its over-reliance on high sales taxes, is, for instance, famously dysfunctional and inadequate to state needs. Well-informed observers have long argued in favor of adding a state income tax to the mix. “Many in the legislature believed the income tax was the right approach to funding government,” says Bill Fox, a nationally known tax expert and professor at the University of Tennessee. “But the percentage who was willing to vote for it was different.”
Over the past couple of years, the states have found themselves beset by so many financial problems that the word “fiscal” appeared to be married to the word “woes.” The National Governors’ Association dubs the current crisis “the most dire fiscal situation since World War II.” In the months following the 2002 elections, many states discovered their fiscal problems were even worse than anticipated and headed into the January legislative sessions facing huge budget shortfalls.
Of course, most states will first look to cutting expenses in order to make their books balance. But it’s inevitable that over the next few months, many legislatures are going to be forced to make hard decisions about new revenue streams. They will have to take a close look at their tax systems — as well they should.
Truth is, many states’ current maladies are rooted in long-diseased tax systems. And although some state leaders are still living in denial, today’s problems were nothing if not predictable. In July 1999, while money was rolling into state coffers, the late Hal Hovey, one of the most perspicacious observers of state finances, wrote, “While spending for current services will grow at about the same pace as personal income, state and local revenues from existing taxes will not do so.” The result, he noted, would be a shortfall in state and local budgets “that is almost entirely attributable to the characteristics of state and local tax systems.”
(Excerpt) Read more at governing.com ...
MKM
There is also an article on TN being among the WORST in tax structure in the Nation...surprise NO INCOME TAX. TX and NV are also sited as being worst in nation..again surprise NO IT.
Describing PA's flat income tax: "In order to reduce the regressivity of the income tax ..."
Our income tax isn't regressive! It's a flat 2.8% on all income with no deductions or exemptions. There is a state program which refunds some or all of this tax to those of lesser means, but none of this makes the tax regressive.
Am I wrong? I've never seen it before.
Taxes are our friends, right? ; )
I did find it rather interesting in reading the ratings, tax percentages that some of the other states have though. I've not read all of it but bookmarked it for later.
Basically NC has a TON of hidden taxes called "fees", I think they did say this in the article however.
And don't even get me started on the lottery.
MKM
MKM
The up shot of this is that this is a GOVERNMENT mag about GOVERNMENT taxation.
It's as unbiased as the WP, NYT, ABC, CNN, CBS, PBS, NPR etc.
We have a NEW Tax Study Commission to study our tax structure over the next 2 years...guess what? It's LOADED with ALL PRO-Income Tax people. All white men to boot.
I cut and paste everything too, oh well. FR was messing up big time last night, could have been a glitch in the system I guess.
MKM
What services would those be? More at Four? PhD at Three? Global Transpork?
How about some GRAMMAR lessons for our Guvnah?!?
"NC Gov Mike Easley (D): "Four-year-olds don't have but one chance to be 4."
As someone said on that thread: "I wonder if he has a coat that says "Gov" on the back?"
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