Cory Booker gave the speech Democrats needed

Oct 09, 2018

Great speech

I have been impressed with Booker but hadn’t heard him give an extemporaneous speech. It was very impressive. I heard a lot of my Democrat friends at the event (who are not an easy crowd to please) say it was the best speech they had heard by anyone – ever.

Given the attention the Republicans are paying to him in responding to his speeches, it would appear they take him seriously – for good reason.

Angels falling from the sky

May 29, 2018

A cogent cautionary tale

Dennis eloquently articulates some of what I had suggested were concerns about the Boulton campaign for Governor. State Senator Boulton is not the first ‘fresh face’ to capture the imagination, hearts and minds of Democrats but then to ‘fall back to earth.’ US Senator Gary Hart was a notable past example. Even Joe Biden had a significant mis-step earlier in his career. Biden is an example that it is possible to attain a form of political absolution and redemption. If it is warranted, I for one will keep an open mind in the future.

Iowa Senate Ways & Means chair concealed role in drafting tax plan

Dec 21, 2017

Sales tax on services - past and present

There was little interest in tax law changes to raise additional revenue from the Republican controlled-legislature in 2003. This was right after Vilsack was re-elected and the economy was just recovering from the effects of the 2001 recession. Instead, a variety of other funds were shifted.

In many respects, we were a bit ahead of the curve in pushing for sales tax broadeners in 2003, but even later efforts have had a hard time. For example, Ohio Republican Governor John Kasich made an attempt in 2013 to significantly broaden the sales tax base while reducing the sales tax rate and reducing individual income taxes but was unable to get the legislature to go along.

In the end the primary vehicle for Ohio tax reform was reductions in individual income tax, and the sales tax was seen primarily as a method to help reduce the fiscal impact of those reductions – albeit not through a broad-based expansion of taxed services. The individual income tax reduction package included some minor revenue raisers (freezing indexing of brackets for three years, an additional $37.0 million; eliminating the $20 exemption credit for taxpayers with taxable income of $30,000 or more; eliminating the gambling loss deduction, an additional $30.0 million; freezing the personal exemption for three years, an additional $17.0 million).

In return, there were significant income tax rate reductions phased in over three years for all nine individual income tax brackets – reductions of 8.5 percent in the first year, and 9 percent and 10 percent in the following two years. There were also increases in deductions for small businesses and an earned income tax credit equal to five percent of the federal credit. All told, the income tax reductions totaled $2,426.5 million for FY2014.

During her 2017 State of the State speech and in her proposed budget, Oklahoma Governor Mary Fallin proposed a sweeping set of changes to Oklahoma’s tax structure. Characterizing it as a way to modernize the state’s tax laws, the centerpiece of the plan was a broadening of the state sales tax base to include a broad array of approximately 160 services, which was estimated to raise an additional $839.7 million. At the same time, the Governor’s proposal would have provided a full sales tax exemption for the purchase of groceries, which are fully taxable in the State. That exemption was projected to reduce sales tax revenue by $234.7 million. The Governor’s proposal would have also eliminated the state’s corporate income tax, which would have reduced revenue by an estimated $140.2 million.

It is notable that Governor Fallin had opposed a proposal the prior year to increase the state sales tax. That plan was put to a vote of the people and defeated. However, as a revenue raising alternative to a rate increase, Governor Fallin’s proposal to expand the tax on services was met with significant resistance. Besides stakeholder group resistance, the plan was also criticized by the State’s Lieutenant Governor, Todd Lamb, who resigned from the Administration in protest of the proposal. In the end, the Legislature did not approve the Governor’s expansion of the tax on services, and also did not act on the recommendation to exempt groceries from the sales tax.

While states have broadened their sales tax bases in recent years, they are mostly small-scale adds of a few specific items at a time rather than widespread base broadening. One of the key issues here is that most state sales tax statutes are constructed to presumptively tax tangible goods unless specifically exempted, while services are presumed to be exempt from tax unless specifically enumerated. Until states are willing (and able) to change this standard, I’m not very sanguine on broad changes to state sales tax bases.

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