Tax Policy

Before adjourning for a two-week recess last week, the U.S. House of Representatives passed a budget proposal along party lines. The bill, sponsored by Rep. Paul Ryan of Wisconsin, outlines the House majority’s funding priorities for the 2013 fiscal year. The legislation paints a much different picture than many expected, and took a sharp turn from last summer’s debt ceiling wrangling. The proposal also could forecast dark days for states.

Late last week, the U.S. House of Representatives passed a bipartisan bill ending the stalemate over the payroll tax cut and assorted entitlement programs, and the Senate quickly followed suit. But the details of the bills paint an interesting picture of the political landscape as we approach the 2012 election cycle, and what may be even more important to states, the Lame Duck session of Congress that will follow it.

The bill passed by Congress would keep the payroll tax rate at 4.2 percent through 2012, instead of springing...

In the last few days, Congress has moved forward on two sizable agenda items, the payroll tax cut extension and a long term surface transportation bill. As always, however, the devil is in the details and the details are open for interpretation. 

First, the payroll tax cut extension. House and Senate negotiators are slowly making progress toward a deal on extending the payroll tax cut, which has been extended repeatedly over the past few years. The package also would stave off a massive cut to Medicare and extend long-term...

The Marketplace Fairness Act (S. 1832) would allow states to require sales and use tax be collected on remote sales, provided: (i) the state belongs to the Streamlined Sales and Use Tax Agreement (SSUTA), or (ii) the state meets a series of tax simplification requirements prescribed in the legislation.

Yesterday, Colorado voters overwhelmingly defeated a measure (Initiative 25) that would have increased taxes to raise over $3 billion for education.   Denver voters also soundly defeated a measure (Initiative 300) that would have required businesses to provide all employees with paid sick leave.

This year, Colorado was the only state with an initiative to increase income taxes on the ballot.

NOW, THEREFORE BE IT RESOLVED, that The Council of State Governments opposes the State Video Tax Fairness Act of 2011 (H.R. 1804).

As members of the new Joint Select Committee on Deficit Reduction of the U.S. House and Senate meet to consider ways to slash the federal deficit, they’ll likely look to the work of the National Commission on Fiscal Responsibility and Reform, which last year recommended ways to cut federal spending.

Former U.S. Sen. Alan Simpson of Wyoming, who co-chaired that commission with former Sen. Erskine Bowles, told Capitol Ideas last winter that states should be prepared for major changes if the federal government is to get its fiscal house in order. Simpson will offer the fiscal keynote during The Council of State Governments National Conference and North American Summit.

President Barack Obama on Sept. 8 addressed a joint session of Congress to roll out the American Jobs Act. In the wake of a still stagnant recovery, the bill includes a combination of tax breaks and new spending designed to give the economy a booster shot and hopefully put more people back to work.  If passed by Congress, the bill would provide more than $35 billion to state and local governments to retain or rehire teachers and public safety officials. The tax measures used to pay for the bill, however, may ultimately come back to bite the very state and local governments it is designed to support.

In the competition for business and job growth, most Midwestern states fare better than the U.S. average on at least one measure — the burden that their overall tax structures place on businesses.

States have received over $160 billion in budget relief since the beginning of the Great Recession both through the Recovery Act of 2009 and the Education Jobs and Medicaid Assistance Act of 2010.  The Obama administration is doubling down on this approach in its proposed American Jobs Act which includes $30 billion in direct state budget support and billions more in infrastructure and other program spending that would flow through the states over the next two years.  However, the deficit proposal revealed by the President today calls upon states to shoulder billions in long-term costs as part of a broader effort to set the nation on sounder fiscal footing. 

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