Input Please
The Legislative Tax Reform Task Force is touring the state to solicit input on tax reform proposals. A schedule and some background information are included in this article.
I am pleased that the Governor's office (1) seems to be warming to the idea of a tax cut and (2) that it seems to identify personal income as the specific tax to be cut. In my opinion, the personal income tax has a greater effect on economic development than any other tax. Also, most of the State's current surplus (about 80%) is coming from the income tax. Therefore, the personal income tax would appear to be the proper place to seek a reduction.
The article highlights some differences that Speaker Curtis and I have with the Governor's plan. In my opinion, we should look for the quickest, clearest way to move from point A to point B. Too often, government gets caught up in fanfare. If we're not going to have a flat tax, it seems the best way to provide income tax relief would be to simply readjust the brackets and lower the top rate. Tweaking this and poking that (to frontload taxable income) would allow us to claim (on the back end) that we have a top tax rate of 5% and, then, use that as an economic development tool. But, I'd hope the people and businesses we are courting are smart enough to calculate effective tax rates, which wouldn't be much different under either scenario, except for those groups to whom the burden would be shifted under the Gov's plan (which, as the plan currently stands, would be parts of the State with the highest relative housing costs, like Washington County).
We're 3 months away from the session, and I'm pleased that the deliberations are becoming more focused. Last week, a colleague on the task force expressed frustration along these lines: "Wouldn't it be waste of time, if we held all these meetings and simply lowered the personal income tax rates." Not at all. I don't think people are looking for us to perform art or poetry with the tax code. They'd probably be pretty happy, if we simply left a few more bucks in their pockets.
I am pleased that the Governor's office (1) seems to be warming to the idea of a tax cut and (2) that it seems to identify personal income as the specific tax to be cut. In my opinion, the personal income tax has a greater effect on economic development than any other tax. Also, most of the State's current surplus (about 80%) is coming from the income tax. Therefore, the personal income tax would appear to be the proper place to seek a reduction.
The article highlights some differences that Speaker Curtis and I have with the Governor's plan. In my opinion, we should look for the quickest, clearest way to move from point A to point B. Too often, government gets caught up in fanfare. If we're not going to have a flat tax, it seems the best way to provide income tax relief would be to simply readjust the brackets and lower the top rate. Tweaking this and poking that (to frontload taxable income) would allow us to claim (on the back end) that we have a top tax rate of 5% and, then, use that as an economic development tool. But, I'd hope the people and businesses we are courting are smart enough to calculate effective tax rates, which wouldn't be much different under either scenario, except for those groups to whom the burden would be shifted under the Gov's plan (which, as the plan currently stands, would be parts of the State with the highest relative housing costs, like Washington County).
We're 3 months away from the session, and I'm pleased that the deliberations are becoming more focused. Last week, a colleague on the task force expressed frustration along these lines: "Wouldn't it be waste of time, if we held all these meetings and simply lowered the personal income tax rates." Not at all. I don't think people are looking for us to perform art or poetry with the tax code. They'd probably be pretty happy, if we simply left a few more bucks in their pockets.
posted by steve u. at 10/15/2005
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3 Comments:
I like the idea of keeping it simple. It seems that the more complexity we build in under the guise of attempting to achieve utopian equity usually makes matters worse.
I'm with you and reach upward. The more complex a policy, the less transparent it is for the public. Complexity helps politicians seem distant and 'in the know' about issues that feel beyond the regular citizen, then the political posture quickly becomes "trust me because I know about these complex issues" rather than "trust me because I am helping/representing you"
Like everyone that has commented so far, I'm all for simplicity in the tax system. As far as input regarding the tax reform proposal, I would have to argue for either a true flat tax (minus the poor excuse of a tax credit for charitable giving, and child exemptions) or keeping the current system with various cuts.
As a tax practitioner I really only see one benefit to the "flat tax" -- an increased perception of fairness in the system. I feel that the state could give a much more meaningful tax break by simply lowering the tax rates and/or offering more and better personal tax credits (e.g. a child tax credit comparable to the fed, retirement savings credits...)The only state personal tax credit I see on a regular basis is the at-home parent credit, 100 dollars and limited to people with income under 50k.
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