Tax Policy

Chapter 7 of the 2011 Book of the States contains the following articles and tables:

State governments play an important role in national and regional economic conditions and are subject to prevailing economic conditions. The Census Bureau’s official statistics provide a full picture of the early impact of the most recent recession from tax revenues to expenditures to employment.

The state fiscal environment remains very weak despite the turnaround in revenue growth. It  will be at least several years before many states see revenues return to their previous peak levels and several years more before revenues reach similar proportions of the economy. Though states may be less inclined to seek the tax rate increases that occurred after previous recessions, many are examining ways to tax cross-border activity more effectively.

The 2010 fiscal year was another difficult year for states. State revenue collections continued to fall, while general fund spending declined for the second year in a row, marking the first time state spending has declined in back-to-back years. Additionally, 39 states were forced to make midyear budget cuts. Fiscal conditions have improved somewhat for states thus far in the 2011 fiscal year. The number of states making budget cuts has declined and both revenue collections and spending have grown. However, states remain well below pre-recession levels even with the recent increases. States will have to continue to make difficult decisions in the 2012 fiscal year and beyond as Recovery Act funds wind down, spending demands remain high and revenues are slow to recover.

California’s new requirement for online out-of-state retailers to collect state and local sales tax on goods purchased goes into effect tomorrow. While it is estimated to bring in an additional $317 million annually, online retailers such as Amazon and Overstock.com have cleverly taken steps to avoid such collections.

Capitol Ideas #72/June 23, 2011

Hollywood isn’t the catch it once was. Due to the country’s faltering economic recovery, many states are reining in efforts to court moviemakers from the star-studded city.

Take Alaska, for example. Last year, the state offered filmmakers the tax assistance equivalent of 44 cents on the dollar; that’s the most generous state subsidy for moviemakers. This year, legislators postponed debate on a bill to extend...

How should states react to the exponential growth in e-commerce transactions that largely occur without the collection of sales taxes? As states struggle to deal with the sharp drop-off in revenues caused by the Great Recession, the issues related to collecting sales taxes on e-commerce transactions continues to roil state policymakers across the country.

On April 27, 2011, the South Carolina House of Representatives, by a vote of 71-47, defeated an amendment that would have provided a five-year sales tax exemption to Amazon.com  in exchange for the company building a distribution center in Lexington County, in the central part of the state. While this vote resulted in Amazon canceling plans to proceed with an operation in South Carolina, it also raised to the forefront a burning issue confronting state policymakers: how should states react to the exponential growth in e-commerce transactions that largely occur without the collection of invaluable sales taxes? As states struggle to deal with the sharp drop-off in revenues caused by the Great Recession, the panoply of issues related to collecting sales taxes on e-commerce transactions continues to roil state policymakers across the country.

Tax codes empower states to raise revenue.  But they also include provisions – credits, exemptions, deductions, and so forth – that decrease the amount of money for the treasury each year.  It is for this reason that tax-side incentives are often called tax expenditures

How should states react to the exponential growth in e-commerce transactions that largely occur without the collection of sales taxes? As states struggle to deal with the sharp drop-off in revenues caused by the Great Recession, the issues related to collecting sales taxes on e-commerce transactions continues to roil state policymakers across the country.

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