Tax and Budget

NOW, THEREFORE BE IT RESOLVED, The Council of State Governments supports efforts by Congress to regulate e-commerce through legislation that allows States to enforce their existing sales and use tax laws, regardless of the method of transaction, and to collect taxes under state law.

The use of electronic cigarettes—or “vaping”—has exploded in recent years among both youth and adults. In the absence of clear federal regulations, state policymakers have struggled with how best to approach the taxation and regulation of the devices. Attendees heard from state leaders, experts, law enforcement and federal representatives who will discuss how states are currently taxing e-cigarettes and restricting their sales to minors. The presenters also described what the future may hold for regulating consumption and marketing and manufacturing devices.

This Act provides that neither the state nor a political subdivision may impose, assess, collect, or attempt to collect a tax on Internet access or the use of Internet access.

CSG Midwest

In the final weeks of this year’s legislative session, Minnesota Rep. Bob Barrett worked successfully to secure $100,000 in state funds for a city in his home district. The money, which came from an existing economic development program, aims to help the city lower taxes and be more competitive within the state, as well as with neighboring Wisconsin. But as Barrett’s appropriations request made its way to final passage, he had to answer questions from colleagues. What will prevent you, the Minnesota Senate chair asked Barrett during conference committee, from coming back next year and requesting even more money? “If this money doesn’t do what it’s intended to do, then I won’t be coming back,” Barrett told fellow legislators. “But if it works, and we [create] new jobs, new businesses, new property taxes in my area, that would be telling you that it was money well spent, and I will be coming back and asking for more.”

In late October, outgoing Speaker of the House John Boehner of Ohio announced his intention to “clean the barn” as much as possible before his successor took the gavel. In keeping his promise, Boehner succeeded in brokering a bipartisan, two-year budget deal to avoid a government shutdown and prevent a government default on its debt. To offset the increased spending caps for defense and discretionary programs, the budget deal included cost-saving provisions for certain programs, some of which—including the following—will have an impact on state governments.

CSG Midwest
Every state uses tax and financial incentives to attract, retain and expand businesses. The benefits are the jobs and economic activity that these firms bring to a state, but what are the costs? In 2012, New York Times investigation put the price tag for states and local governments at more than $80 billion, but to a large degree, policymakers have been establishing and continuing these incentive programs without a firm handle on the costs.
That may begin to change in 2017, when a new rule of the Governmental Accounting Standards Board takes effect. It will require state and local governments to report how much revenue they are losing or willingly not collecting as the result of their tax-abatement agreements with businesses.

Congress returned from the August break facing the challenge of having to address a long list of critical issues in the dwindling legislative year. These important issues include reaching agreement on the budget and debt ceiling; addressing the expiring highway funding authority; overhauling federal education policy; and discussing cybersecurity legislation.

The federal reimbursement rate in 2015 is 57.5 cents per mile, up 1.5 cents per mile over the 2014 rate and up 17 cents over the rate ten years before–37.5 cents per mile on Jan. 1, 2005. Thirty-three states have a reimbursement rate that is the same as the federal rate. For those 17 states whose rates differ from the federal rate, reimbursement rates range from 31 cents to 57 cents per mile. No state reimburses at a rate higher than the federal rate.

Fiscal conditions for states were somewhat mixed in the 2014 fiscal year as state general fund revenue growth declined due to the impact of the federal fiscal cliff, while total state spending growth accelerated due to increased federal Medicaid funds from the Affordable Care Act. The number of states making midyear budget cuts remained low and states maintained stable rainy day fund levels. In the 2015 fiscal year, states are expecting both revenue and spending to grow slowly, but below the historical rate of growth. It is likely that budget proposals for the 2016 fiscal year and beyond will remain mostly cautious with limited spending growth.

Fiscal conditions for states were somewhat mixed in the 2014 fiscal year as state general fund revenue growth declined due to the impact of the federal fiscal cliff, while total state spending growth accelerated due to increased federal Medicaid funds from the Affordable Care Act. The number of states making midyear budget cuts remained low and states maintained stable rainy day fund levels. In the 2015 fiscal year, states are expecting both revenue and spending to grow slowly, but below the historical rate of growth. It is likely that budget proposals for the 2016 fiscal year and beyond will remain mostly cautious with limited spending growth.

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