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By Catholic Online (NEWS CONSORTIUM)

1/14/2013 (1 year ago)

Catholic Online (www.catholic.org)

Republicans keen on ending state income taxes with sales taxes compensating for lost revenue

In Washington, plans to overhaul the federal tax system seem to be falling by the wayside. In the meantime, lawmakers in individual U.S. states are planning major tax changes, particularly in the South and Midwest.

U.S. states have long been the vanguard to test reforms too controversial for Washington to tackle.

U.S. states have long been the vanguard to test reforms too controversial for Washington to tackle.

Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

1/14/2013 (1 year ago)

Published in Politics & Policy

Keywords: Tax reform, republicans, sales tax, Kansas, North Carolina


LOS ANGELES, CA (Catholic Online) - Republicans in these states have consolidated control of state legislatures and governorships, giving them the authority to test theoretical tax plans.

Louisiana Republican Governor Bobby Jindal called last week to end the state's income tax and corporate taxes, with sales taxes compensating for lost revenue. A similar plan is supported by Republicans in North Carolina. Cutting its income tax significantly last year, Kansas may trim even further. Oklahoma is expected to try again to cut its taxes significantly.

"When it comes to getting pro-growth tax reform done this year, the only real opportunities are at the state level," director of state affairs for Americans for Tax Reform Patrick Gleason says. The Washington-based anti-tax lobbying group headed by small-government conservative activist Grover Norquist.

Gleason's group and other conservative pressure organizations, such as Americans for Prosperity, have targeted state capitals for tax reform campaigns.

Shifting the overall tax burden to higher sales taxes has been a long-standing goal of some tax theorists. Critics say that this approach is regressive and unfairly burdens the middle class and the poor, who spend more of their earnings on items subject to sales tax.

A state tax expert with the left-leaning Center on Budget and Policy Priorities Nicholas Johnson gave the chances of sweeping tax changes taking hold a low probability.

Johnson said he was concerned the efforts in the states could move the tax discussion in a direction which would be harmful to middle and low-income taxpayers and make balancing state budgets harder. "Even if this is too radical, if it makes other radical schemes seem more reasonable, that's worrisome," he said.

The time may be nigh to put this theory into practice.

Thirty-seven of the 50 states now have single-party control of legislatures and governorships: 25 Republican, 12 Democratic. In those states, unlike Capitol Hill, partisan gridlock is not a big issue, making difficult projects such as tax reform easier. Fresh ideas are becoming more attractive in states that have suffered for years from high unemployment and tight revenue

"We have no choice but to make change," Bob Rucho, a Republican state senator in the solidly Republican North Carolina declares. Rucho is leading a push in that state for major tax changes.

He and other like-minded lawmakers have a plan to do away with all state individual and corporate income taxes. The plan would replace lost revenue with a new business license fee and a higher sales tax on goods and services not now taxed by the state, such as legal, accounting and spa services, and food.

U.S. states have long been the vanguard to test reforms too controversial for Washington to tackle. Although several states, including Texas and Florida, have no individual income tax, Alaska stands out in modern times for having repealed its personal income tax. Alaska was able to replace the lost revenue with its huge state oil income.

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