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States Ready to Make Driving Even More Expensive
Posted By:  - 06/05/12

With summer rapidly approaching, Americans across the nation will be heading out onto the nation’s highways for vacations, but higher taxes may be lurking for intrepid travelers as cash-strapped states seek to evolve gas taxes into more costly forms.

Currently, states raise revenue for roads and bridges through a tax on fuel levied by the gallon, but the new proposal would tax drivers for miles traveled in addition to the taxes we already pay at the pump. 

The current federal gas tax is 18.4 cents per gallon, whereas states are free to set their own fuel tax per gallon.

Minnesota and Oregon are already exploring technology that will keep track of miles driven, which has included GPS-like boxes which are inserted into people’s vehicles, pre-pay options whereby individuals can “buy” miles ahead of time, and software installed on smartphones to track distance.

These ‘next-generation’ gas and travel taxes, when added to tolls, other taxes, and the price of gasoline, could further empty America’s roads and reduce commerce. Adding to the cost of business, travel, and every day activity is not going to help the economy get back on track, or prove popular with overburdened taxpayers.

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Speaking of Taxpayers, June 1, 2012: Illinois Tax Hike Ambush, WTA, 38 Studios
Posted By: Douglas Kellogg - 06/04/12

Subscribe to NTU's Podcast "Speaking of Taxpayers" via iTunes!
NTU State Affairs Manager Brent Mead joins Doug & a returning Pete Sepp to discuss the continuing tax picture around the country, prop 29, the World Taxpayers Associations 2012 conference, 38 Studios' collapse, and the Outrage of the Week!
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Speaking of Taxpayers (AUDIO): States Have Taxes on the Mind
Posted By: Douglas Kellogg - 05/19/12

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State Affairs Manager Brent Mead has a big state roundup including California tax hikes and budget problems, good new from New Hampshire, and more pain in Maryland.
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Three Facts About Maryland’s Special Session
Posted By: Brent Mead - 05/15/12

Last month, the clock struck midnight on the Maryland Legislature’s plan to pass a broad-based income and excise tax hike. However, because officials in Annapolis really want to confiscate more of their constituents’ money they reconvened for a special session this week.

Here are some quick facts on O’Malley’s job-killing plan;

  • Despite the “doomsday” moniker, the current budget increases spending by $700 million compared to last year. The $500 million in “cuts” cited by Governor O’Malley are a decrease in proposed spending increases, not actual cuts in spending. If Maryland simply held spending level with last year there would be no need to raise taxes.

    The Tax Foundation produced a report on the budget fallacies being perpetuated by the Governor and his legislative allies. Spending has increased every year under O’Malley and shows little sign of abating.

  • On the income tax side, the proposal would raise levies on single filers earning more than $100,000 and joint filers earning more than $150,000. According to the Tax Foundation study, for a couple earning $250,000 in Maryland this means they would pay almost $1,000 more per year in taxes. Additionally, by remaining in the state, the couple would pay higher taxes than in either the District of Columbia or neighboring Virginia.  

    Maryland taxpayers have been to this rodeo before. In 2008, after the first millionaire’s tax went into effect the state saw an exodus of high earners. The results of the current proposal will be no different.

  • Finally, the raising excise tax rates on little cigars and smokeless tobacco will only punish poorer residents, who are more likely to use such products, and will fail to raise revenue. For proof of this phenomenon, in 2009, Washington, D.C. raised its cigarette tax from $2.00 to $2.50 per pack. The District projected the new tax would generate $45 million in revenue, about 20 percent above 2009 levels. Instead, revenues came in $12 million below projections and $4.2 million lower than before the tax was imposed.

    The proposal would also have a real negative effect on small businesses throughout the state. One store owner in Annapolis said; "It will kill the business, and in the end result, it would kill my business," Keller said. "(Our customers) say they'll just go somewhere else."

While Assembly leaders are trying to rush this tax hike through with minimal public input you can still reach out to your elected officials and urge them to oppose these ill-conceived tax increases.

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DC City Councilman Calling for Higher Drink Taxes
Posted By: Brent Mead - 05/07/12

Yesterday, I am sure the sight of Philadelphia Phanatics occupying Nationals Park…again…made some locals want to hit the hard stuff.

Unfortunately, D.C. continues to ban Sunday sales at package stores, so those folks had to struggle through a 6-run ninth inning with nary a drop of liquid comfort. If baseball isn’t your thing, Washington City Paper compiled a list of 10 other reasons to support ending the blue law insanity.

The good news was that for a while it looked like District imbibers might finally be able to have the beverage of their choice, at home, on the day of their choice. Opening up Sunday sales carried the nice side benefit that it would increase revenue for the city government at a time when there are mounting concerns over possible budget cuts.

This posed a conundrum for Councilman Jim Graham (D-Ward 1);

A)     He could repeal onerous regulations, increase economic activity, and raise revenues for the District’s coffers. Or;

B)      He could raise taxes.

When you look at Councilman Graham’s history it should not be surprising he chose option b. Last year, he supported efforts to raise the sales tax rate for liquor stores. This year, short $3.2 million after opposing the Mayor’s proposal to extend bar hours, the Councilman decided on pushing an increase on the wholesalers excise tax rate.

Councilman Graham’s proposal manages to distill everything wrong with government thinking into one bad idea. Raising the wholesale liquor alcohol tax hurts consumers through higher prices, hurts the hospitality industry by driving customers to Virginia or Maryland (both of which would have lower tax rates), and hurts wait staff who will likely see their tips suffer.  

All is not lost. Instead of sitting at home, drinking away the sorrow of D.C.’s latest rejection of common-sense, free-market reform I would encourage you to join the facebook group End DC Blue Laws.  Like them, share them, and join the cause. As they say, it is time to end blue laws, not raise taxes.

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Affiliate Nexus Taxes: Still Unconstitutional
Posted By: Brent Mead - 04/25/12

Good news today out of the Land of Lincoln. Cook County Judge Robert Lopez Cepero ruled Illinois’ affiliate nexus tax, or Amazon tax in layman’s terms, unconstitutional and struck the law in its entirety. This is a great, if not wholly unexpected, win for Illinois taxpayers and sets precedent that other states would be wise to follow when considering such schemes.

For background, following the 1992 U.S. Supreme Court decision in Quill v. North Dakota, all businesses have followed a common set of rules. In order for a state to subject a business to its tax laws, that business must be physically located in the state. This “physical presence” test protects taxpayers from rogue state tax collectors and prevents businesses from shouldering the heavy burden of complying with the rules of thousands of different taxing jurisdictions nationwide.

Affiliate nexus schemes attempt to undermine this standard by creating a false physical presence by linking out-of-state retailers, such as Amazon.com, to in-state websites who advertise for the retailer. Such schemes are constitutionally dubious as they clearly violate the intent of the 1992 ruling and create onerous barriers to interstate commerce.

That simple principle is at the heart of today’s Illinois ruling. The circuit court judge ruled the statute facially unconstitutional and held the state law violated the federal Internet Tax Freedom Act, which prohibits states from unfairly targeting online activity for tax purposes.

Of course, as stated above, none of this should come as new information. In fact, this is what NTU wrote to Governor Quinn during last year’s debate;

States that have attempted to prey upon online retailers beyond their borders through the  “affiliate nexus” route have not raised the desired revenues. In fact, North Carolina officials report that they are not keeping track of collections from their tax scheme. Additionally, Rhode Island’s tax administrators say that their treasury has actually lost revenues following enactment of the tax. What these policies have done is impose high costs on the states through litigation and lost business activity. Both North Carolina and New York have been sued over this issue and the litigation continues to this day. Several major online retailers have also terminated their affiliates programs in Colorado and Rhode Island due to those states’ sales and use tax-reporting requirements for online transactions. If Illinois enacts an affiliate nexus tax, the state’s more than 9,000 affiliates, who earned $611 million and paid $18 million in state income tax in 2009, will suffer the same fate; Amazon.com and Overstock.com have already notified their Illinois affiliates of their intention to terminate the program because of this measure.

I would love for NTU to claim some sort of prescient knowledge that Amazon and Overstock would cancel their affiliate contracts, that companies (notably FatWallet.com) would move out of state, that the law would fail to raise the promised revenue, and that the state would be subject to a successful court challenge. However, the reality is that this information is basic common sense, which the state chose to ignore. Hopefully, after today’s decision Illinois will take a hard look at its overspending problem rather than try to concoct an even more exotic tax scheme.

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Good News Everyone, You Can Now Start Working for Yourself*
Posted By: Brent Mead - 04/17/12

While you are finishing up filing your taxes take a moment to celebrate. Yes, celebrate. For today is Tax Freedom Day! That joyous occasion when the average American worker has finally put in enough hours to pay Uncle Sam’s tax bill.

This year it took 107 days for most families to pay their share, about 29.22% of income for all federal, state and local taxes. That is four more days than last year, primarily due to higher federal corporate and personal income taxes. Americans will also fork over more to the tax man than they spend on food, clothing and housing combined. Tax Foundation, who compiles the Tax Freedom Day numbers, adds the situation could be worse. If you count the $1.014 trillion deficit, Americans would have to work until May 14th before the government is paid for. As it is, residents in New Jersey, New York, and Connecticut will have to wait until at least May 1. You can check out the entire state-by-state breakdown here.

Of course, the hard work of taxpayers did not go unappreciated; Dan Bucks, head of Montana’s Department of Revenue said, “Montana taxpayers have made this a great tax season.” Hear that? It has been a great tax season! Unemployment above 8 percent, the highest corporate income tax in the world, and sluggish growth? Truly a “great” season.

What would make the season “great” in my mind is to move Tax Freedom Day up on the calendar. However, unless we rein in government spending, Tax Freedom Day will continue to fall later and later in the year. Spending pressure from entitlement programs and Obamacare is set to explode over the next ten years posing an increasing threat to taxpayers.

Now is the time to celebrate. After four straight years of trillion dollar deficits and looming tax hikes in December you may not have much time left before the tax collector exacts an even higher toll.

*Offer not yet valid in: CA, CT, DC, DE, IL, MA, MD, MN, ND, NJ, NV, NY, PA, RI, VA, VT, WA, WI, and WY

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Maryland, My Maryland
Posted By: Brent Mead - 04/13/12

Hark to an exiled son’s appeal.

The past four years have been a long lament for Marylanders fleeing the state’s oppressive tax burden for greener pastures. According to Rich States, Poor States, over 95,000 residents have left never to return. These are 95,000 taxpayers no longer helping fill the state’s coffers. In fact, if you do a quick extrapolation using the state’s per capita tax collections, the mass exodus has cost Maryland $218 million per year. These families are fleeing to the low tax havens such as Texas and Florida.

Why do we mention this? Very simply because Maryland has tried and failed to tax its way out of budget deficits before, and this only exacerbates the real problem that people are leaving the state precisely because of the tax burden. Residents pay over $5,200 per year in state and local taxes, roughly ten percent of household income. When you pile federal taxes on top of that burden it becomes an unsustainable situation.

Despite the economic and migration realities Annapolis showed no signs of empathizing with the common Marylander. Earlier this week, Governor O’Malley’s tax hike package fell apart when the clock struck midnight on Monday. Rather than accept the good fortune, the Governor and legislative leaders took turns blaming one another for not raising taxes on their constituents.

Early indications are that a tax deal will be reached without public input and only then with the General Assembly reconvene in a special session. All manners of tax increases will be placed back on the table, income tax increases, property tax shifts, gas tax hikes, tobacco tax increases, etc. Although, of note, one tax will not be debated and that is the “flush tax” as the Assembly managed to double the fee to $60 before adjourning on Monday.

The details of the final tax package become less important in the grand scheme of things. The Governor and General Assembly have had numerous opportunities to close the $512 million budget gap without raising taxes. Last fall, the Assembly was well aware of a growing budget hole. Rather than seek relative austerity, the state decided to increase spending. Furthermore, the Governor pitched hiking the gas tax knowing full well most of the current shortfall, such that it exists, is due to his efforts backed by the Assembly to transfer over $1 billion out of the Transportation Trust into the General Fund.

I can go on and on, but the law of diminishing returns kicks in at a certain point. Annapolis appears to have a single-minded purpose to raise taxes on its citizens. If this is indeed the case, more and more Maryland residents and businesses will flee and the politicians will be left to wonder what happened to Maryland, My Maryland.

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Should Cedar Rapids Taxpayers Still Be Paying For '08 Floods in 2024?
Posted By: Brent Mead - 03/02/12

Cedar Rapids, Iowa residents go to the polls on March 6th to decide on whether or not to extend for 10-years a temporary 1% sales tax to pay for a $375 million flood protection plan. From a purely good governance perspective, there are serious concerns with proposal ranging from poor priorities regarding current spending, an ill-defined flood protection plan, and that the current tax is not scheduled to expire for another two and a half years.

Don’t feel bad if this is all coming as news to you. Supporters of the tax extension planned a “low-key” operation in the hopes that less information in the public sphere would lead to better results than last year, when voters said NO to a similar proposal.  

The current tax was set in place in 2009 to help rebuild from the terrible flood damage suffered in 2008. As approved the measure read;

Ten percent (10%) for property tax relief; The specific purposes for which the revenues shall otherwise be expended are: 90% for the acquisition and rehabilitation of flood damaged housing caused by the flooding of 2008, and matching funds for federal flood dollars to assist with flood recovery or flood protection.

Unfortunately, according to groups like We Can Do Better, there are serious concerns over fund mismanagement and misappropriation of existing revenues. Since the measure passed, Cedar Rapids has spent $130 million on a hotel and convention center complex, $8 million on an outdoor amphitheater and $50 million on a new library. It comes down to priorities. If flood protection and rehabbing the damage from the 2008 flood are a true priority then such activities should come before expensive indulgences like a $130 million convention center.

A 10-year extension of the local option sales tax would cost Cedar Rapids’ households over $3,000. This is on top of $2,500 per household already spent since 2009 on the aforementioned side projects. Moreover, the existing tax was designed to be temporary. The March 6th vote would extend a five-year tax to fifteen years in total. The existing levy does not expire until mid-2014. No doubt strong memories still exist from the 2008 flood. However, supporters of the tax extension think residents in 2024 should still be paying for the damage done 16 years prior.

As to the plan itself, the city of Cedar Rapids’ preferred plan projects costs of $375 million ($200 million for east-side protection, $175 million for west-side protection). The Army Corps of Engineers approved plan covers parts of the east-side at a cost of $104 million with a 65/35 federal to local cost share. For those math majors out there, that means a cost difference to local taxpayers of $339 million between what the Army Corps recommends and what the city is pursuing. If the Corps goes along with the preferred plan for the east-side the cost to local taxpayers would only be $310 million. Before launching into a 10-year extension more questions need to be asked of city leaders if they have fully explored both the existing Corps plans for the east-side and what discussions have been had with federal officials to develop a strategy for the west-side of the river.  

NTU is not so callous that we oppose local efforts to rebuild after major events. But what is being asked here is not reasonable. Voters are being asked to extend a tax that is not set to expire any time soon for an undefined $375 million plan.  All the while serious concerns surround current city expenditures on redevelopment projects. Cedar Rapids needs to think carefully if such a long term commitment is truly necessary at this time.

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