Tax Policy

Forty-five states levy a general statewide sales tax, with rates ranging from 2.9 cents to 7.5 cents per dollar. During the past decade, sales tax rates have remained relatively stable, with few states making significant changes to them. While rates have remained stable, depressed consumer spending has led to declines in total sales tax revenue and many states continue to struggle to get back to pre-recessionary levels of revenue.

In a legal setback for states seeking to collect taxes from Internet sales, the Illinois Supreme Court in October struck down the legislature’s 2011 Main Street Fairness Act. According to USA Today, the decision marks the first time a state’s Internet sales tax law has been invalidated. Illinois’ measure is known as an “Amazon” law, named after the online retailer.

Stateline Midwest ~ July/August 2013

The start of new fiscal years across the Midwest is also marking a new era in tax policy for many states as the result of actions taken during the 2013 legislative sessions.

Stateline Midwest ~ 2013 MLC Annual Meeting Edition

When it comes to economic development, investment does not necessarily equal performance. This was one of the themes heard at the Midwestern Legislative Conference’s Economic Development Committee meeting in July.
A topic of particular interest was the value of state business incentives. States spend up to $80 billion on incentives in hopes of attracting or keeping businesses — and the jobs and economic activity that come with them.
But Peter Fisher, research director for the Iowa Policy Project and professor emeritus at the University of Iowa, cautioned that these incentives (such as tax cuts and credits) are often arbitrary and possibly unnecessary.

This year seventeen states will hold brief sales tax holidays in order to attract back-to-school shoppers and boost the economy. However, according to a recent report by the Tax Foundation, sales tax holidays do not promote economic growth or significantly increase consumer purchases. The report concludes that sales tax holidays simply shift the timing of purchases, and some retailers raise prices during the holiday, reducing consumer savings.

Standard & Poor’s Ratings Services has public ratings on all 50 states and certain U.S. territories based on an analysis of a range of factors as outlined in its U.S. State Ratings Methodology. In addition to the ratings provided on general obligation bonds or ratings linked to the general credit rating of a state, such as appropriation secured bonds, hundreds of other state tax and revenue-supported obligations are rated. Similar to the broader municipal bond market, the range of bond security types issued by states is very diverse and runs the gamut of sales tax, gas tax, hotel tax, income tax, lottery revenue, liquor profits, and insurance premium assessments. The diversity of issuance in the state sector reflects the broad service and infrastructure responsibilities each state is responsible for funding.

While the economy has slowly started to rebound and state fiscal positions are getting stronger, high unemployment rates stubbornly remain and state leaders are still struggling to find ways to bring jobs to their states. According to a new Stateline article, states are once again turning to big incentive packages to either retain or lure companies into their states. In addition, states are experimenting with other creative solutions - such as work share - to help usher recovery in to a still-fragile economy.

Stateline Midwest ~ June 2013

Every Midwestern state offers property tax breaks to certain disabled veterans, though the scope and amount of these credits and exemptions vary.

On a previous blog post I took a look at a Washington Post article that highlighted how arguments across state legislatures are heating when it comes to how best to spend surplus revenue due to the recent rebound in state revenue levels. It was noted that Republican-leaning states tended to use the surplus to cut taxes while Democrat-leaning states tended to use the surplus for social welfare benefits like education. This new Stateline article picks up where that Washington Post article left off and details how some of these states are going about their business. 

Stateline Midwest ~ May 2013

Indiana lawmakers have decided to hasten the demise of the state’s inheritance tax.