Subject: Studies in the News 05-16 (June 7, 2005)


CALIFORNIA RESEARCH BUREAU
CALIFORNIA STATE LIBRARY
Studies in the News:
Revenue, Taxation and Budgeting Supplement


Contents This Week

Introductory Material ECONOMY
   Rethinking social insurance
   Savings accounts and state revenue growth
   Tax trends among high-income taxpayers
   Erosion of sales tax base
   America celebrates tax freedom day
   California's poorest families pay the most taxes
   State sales tax as applied to services
   Streamlined sales tax project
GENERAL GOVERNMENT
   Unfunded federal mandates
   Congress' power to regulate state taxation
   Federal budget spending and tax programs
   Federal long-term fiscal challenge
   Federal budget reductions
   Federal budget cuts to domestic programs
   Federal budget provisions
   Summary of congressional budget resolutions
   Designing personal income taxes
   Alternative methods for forecasting capital gains
   Overview of the federal tax gap
   Strategies to reduce the income tax gap
   Taxpayers' thoughts about taxes
   Unreported income
   Property tax revenue
   LAO overview of May budget revision
   May revision to Governor's budget
   States' early responses to the fiscal crisis
   Rainy day funds
   Tax and expenditure limits
   Revenue volatility in California
   State taxation ranking
   Tax cuts and consequences
   How and how not to tax business
   Quality index for state sales tax structure
   States' tax revenues in solid shape
   Options for tax reform
   Resolving the structural deficit
   State corporation taxes and tax reform
   Reflections on tax reform
   Increase in state revenue
   Untaxed businesses
   Federal tax rates
   National retail sales tax
   Federal value added tax
PREVIOUSLY IN STUDIES IN THE NEWS
   Studies in the News, December 2004 - May 2005
Introduction to Studies in the News

Studies in the News is a very current compilation of items significant to the Legislature and Governor's Office. It is created weekly by the State Library's Research Bureau to supplement the public policy debate in California's Capitol. To help share the latest information with state policymakers, these reading lists are now being made accessible through the State Library's website. This week's list of current articles in various public policy areas is presented below.

Service to State Employees:

  • When available, the URL for the full text of each item is provided.

  • California State Employees may contact the State Information & Reference Center (916-654-0206; cslsirc@library.ca.gov) with the SITN issue number and the item number [S#].

  • All other interested individuals should contact their local library - the items may be available there, or may be borrowed by your local library on your behalf.

The following studies are currently on hand:

ECONOMY

ECONOMIC POLICY

Rethinking Social Insurance: By Martin Feldstein. IN: The American Economic Review, vol. 95, no. 1. (March 2005) pp. 1-24

["The impetus for broader social insurance reform comes from the recognition that existing programs have substantial undesirable effects on incentives and therefore on economic performance.... Governments are driven by a desire to reduce the economic waste and poor macroeconomic performance that these disincentives create and to avoid the resulting tax consequences, as well as the increased tax cost, of an aging population."]

[Request #S51640]

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PERSONAL INCOME

How Will Additional Savings Incentives in Federal Tax Policy Affect State Revenue Growth? By William W. Beach. Presented to Federal Tax Reform and the States Symposium. (The Author, Washington, DC) May 2005.

Full Text at: www.taxadmin.org/fta/FS_Symposium/beachsummary.pdf

["State and local governments will, of course, closely follow what Congress does to advance savings generally and retirement savings particularly. The current tax code discourages savings through the multiple layers of taxation applied to labor and capital income and the cumulative effect of the tax wedge on savings over time. Thinning or reducing these layers of taxation promotes economic growth, and few factors are as important to state and local revenue change as the pace of economic activity."]

[Request #S51607]

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TAXATION

Recent Tax and Income Trends Among High-income Taxpayers: Treasury Department Release Creates Misleading Impression About Taxes that High-income Taxpayers Pay. By Joel Friedman and others, Center on Budget and Policy Priorities. (The Center, Washington, DC) April 13, 2005. 9 p.

Full Text at: www.cbpp.org/4-13-05tax.pdf

["For a small but growing group of upper-income Americans, higher taxes are the far more probable course. Over the next five years, upward of 25 million tax filers could become new victims of the Alternative Minimum Tax, which for many will have the effect of negating the beneficial effects of Bush's original tax cuts." Sacramento Bee (April 11, 2005) A1.]

[Request #S51601]

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"Will the State Sales Tax Future Be Like the Past?" By Benjamin Russo. IN: State Tax Notes, vol. 35, no. 2 (January 10, 2005) pp. 115-122.

["This analysis suggests that absent structural fiscal reform, sales and use tax bases will continue to erode, and the erosion is likely to accelerate. Options for preventing eventual fiscal stress are limited. State and local governments can cut government services. Politics are an impediment to that alternative, but they are not the only impediment."]

[Request #S51602]

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America Celebrates Tax Freedom Day: Special Report. By the Tax Foundation. (The Foundation, Washington, DC) April 2005. 16 p.

Full Text at: www.taxfoundation.org/files/e8afd1a65e424c1bc7f859c408175905.pdf

["Tax Freedom Day, the date when average Americans have earned enough money to pay their 2005 federal, state and local taxes, falls on April 17 this year.... This year's Tax Freedom Day arrives two days later than in 2004, which, due to recent tax cuts, was the earliest arrival in 37 years." ABC News (April 14, 2005) 1.]

[Request #S51603]

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Who Pays Taxes in California? By California Budget Project. (The Project, Sacramento, California) April 15, 2005. 3 p.

Full Text at: www.cbp.org/2005/0504_whopaystaxes2005.pdf

["Measured as a share of family income, California's poorest families pay the most in taxes. The poorest fifth of the state's non-elderly families, with an average income of $11,100, spent 11.3 percent of their income on state taxes in 2002. In comparison, the wealthiest one percent, with an average income of $1.6 million, spent 7.2 percent of their income on state taxes."]

[Request #S51604]

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"Are You Being Served?" IN: Tax Administrators News, vol. 67 no. 1(May 2005) pp. 34-38.

["During the past several decades the U.S. economy has shifted in configuration, redefining itself as an economy where increased activity is based on service-related transactions.... While sales tax systems in most states were originally designed to tax transactions of tangible goods, a number of states have been able to incorporate various types of services into their sales tax bases.... This article discusses FTA's recent update of their service taxation survey to include services taxed as of July 1, 2004."]

[Request #S51605]

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U.S. ECONOMY

"The Streamlined Sales Tax Project ... An Initiative Whose Time Had Not Come." By Thomas M. Lenard and Stephen McGonegal. IN: The Milken Institute Review (Second Quarter) vol. 7 no. 2 pp. 18-26.

["Do you shop out of state to avoid the tax bite? A whole bunch of state legislators and governors would like to change that. Under current case law, out-of-state vendors cannot be required to collect sales taxes unless they have a physical presence in the purchaser's state. Such a requirement, the Supreme Court reasoned in a 1992 decision, would unduly burden interstate commerce. With the growth of e-commerce, however, state governments have become increasingly concerned about the loss of sales and use taxes on their residents' out-of-state purchases. Accordingly, most states with sales taxes have joined the Streamline Sales Tax Project (SSTP), whose objective is to simplify and harmonize the relevant tax code provisions in order to convince Washington that interstate sales tax collection is no longer an undue burden."]

[Request #S51606]

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GENERAL GOVERNMENT

FEDERAL / STATE RELATIONS

Unfunded Mandates: Parties' Feedback on UMRA and Federal Mandates. AND Unfunded Mandates: Views Vary About Reform Act's Strengths, Weaknesses, and Options for Improvement. By U.S. Government Accountability Office. GAO-05-497 and GAO-05-454. (The Office, Washington, DC) March 31, 2005.

["The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to address concerns about federal statutes and regulations that require nonfederal parties to expend resources to achieve legislation goals without being provided federal funding to cover the costs. GAO was asked to consult with a diverse group of parties familiar with the act and to report their views on (1) the significant strengths and weaknesses of UMRA as the framework for addressing mandate issues and (2) potential options for reinforcing the strengths or addressing the weaknesses."]

Parties' Feedback on UMRA and Federal Mandates. GAO-05-497. 55 p.:
http://www.gao.gov/new.items/d05497sp.pdf

Views Vary About Reform Act's Strengths, Weaknesses, and Options for Improvement. GAO-05-454. 54 p.:
http://www.gao.gov/new.items/d05454.pdf

[Request #S51608]

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"The 10th Amendment: Generally Applicable Laws and Congress' Power to Regulate State Taxation." By Bradley W. Joondeph. IN: State Tax Notes, vol. 35 no. 3 (January 17, 2005) pp. 205-208.

["Court opinions have suggested a possible basis for harmonizing the Court's 10th Amendment decisions.... A constitutional requirement that any federal regulation of the states could only be accomplished through laws applying to both private persons and state governments would completely disable Congress from regulating state and local taxation."]

[Request #S51609]

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FEDERAL BUDGET

21st Century Challenges Reexamining the Base of the Federal Government. By U.S. Government Accountability Office. GAO-05-325SP. (The Office, Washington, DC) 2005. 81 p.

Full Text at: www.gao.gov/new.items/d05325sp.pdf

["This report is intended to help the Congress in reviewing and reconsidering the base of federal spending and tax programs. It is intended as one input among many that Congress will receive as it decides what its agenda will be for oversight and program review.... [The report] covers discretionary spending, mandatory spending including entitlements, as well as tax policies and programs."]

[Request #S51610]

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The Long-term Fiscal Challenge: Highlights of a GAO Forum. By the U.S. Government Accountability Office. (The Office, Washington, DC) 2005. 90 p.

Full Text at: www.gao.gov/new.items/d05282sp.pdf

["The forum and this report address prospects for leaders to connect with the public on our long-term fiscal challenge. Simply put, the long-term fiscal challenge is that current fiscal policy is unsustainable. As the baby boom generation retires, longevity and rising health care costs mean that federal spending for retirement and health programs-Social Security, Medicare, and Medicaid-will put increasing and ultimately unsustainable pressure on the federal budget."]

[Request #S51611]

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Unpublished Administration Budget Documents Show Domestic Cuts Would Significantly Reduce Funding for Most Public Services. By Sharon Parrott and others, Center on Budget and Policy Priorities. (The Center, Washington, DC) 2005. 6 p.

Full Text at: www.cbpp.org/2-9-05bud.pdf

["The Administration's budget calls for $214 billion in reductions over five years in nonentitlement domestic programs outside homeland security, compared to current funding levels adjusted only for inflation."]

[Request #S51612]

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Where Would the Cuts Be Made Under The President's Budget? By Sharon Parrott and others, Center on Budget and Policy Priorities. (The Center, Washington, DC) 2005. 42 p.

Full Text at: www.cbpp.org/2-22-05bud-reportandtables.pdf

["The Bush Administration's budget calls for substantial reductions in a wide range of 'domestic discretionary' programs.... These programs encompass a broad array of public services such as education, environmental protection, transportation, veterans' health care, medical research, law enforcement, and food and drug safety inspection. Many of these programs provide funding to states and localities and are essential to the services that states provide to their residents, as well as to the soundness of state budgets."]

[Request #S51613]

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Guide to President Bush's Budget Request for Fiscal Year 2006. By Citizens Against Government Waste. (Citizens Against Government Waste, Washington, DC) 2005. 12 p.

Full Text at: www.cagw.org/site/News2?page=NewsArticle&id=8616

["Deficits from 2005 through 2010 will total $1.82 trillion. Bush proposes cutting or eliminating 150 programs for savings of $15 billion in 2006. (He proposes) $54.7 billion in net reductions in mandatory spending over five years and $60 billion in Medicaid reductions over ten years."]

[Request #S51614]

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Summary of Congressional Budget Resolutions for FY 2006. By Federal Funds Information for States. FFIS Budget Brief 05-04. (FFIS, Washington DC) April 6, 2005. 5 p.

["Both the House and Senate have passed fiscal year 2006 budget resolutions.. This Budget Brief provides an overview of the House and Senate budget resolutions and their potential impact on states."]

[Request #S51615]

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INCOME TAXES

The Personal Income Tax Equation: Rate Structure and Tax Base. By Ralph B. Tower and Fred M. Scully. IN: State Tax Notes, vol. 35, no. 11 (March 14, 2005) pp. 779-791.

["Poilcymakers continue to debate the most appropriate way to tax personal income. Because these taxes are a major revenue source, the strategy adopted has important political implications. Unfortunately, public discourse can be clouded by a lack of understanding of rate structure and tax base design.... The purpose of this report is to identify the defining characteristics of rate structure and tax base design and to explore the ways the states link them together."]

[Request #S51616]

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Testing Alternative Methods for Forecasting Capital Gains. By Larry Ozanne, Tax Analysis Division, the Congressional Budget Office, U.S. Congress. (The Office, Washington, DC) March 2005. 81 p.

Full Text at: www.cbo.gov/ftpdocs/61xx/doc6149/2004work8.pdf

["At the beginning of each year, the Congressional Budget Office (CBO) provides the Congress with a forecast of how the economy will perform during the coming decade and a projection of how that forecast will affect federal revenues and spending under current laws. As part of projecting revenues, CBO projects the amount of capital gains individuals and corporations will realize and report on their tax returns. This paper focuses solely on the gains reported by individuals."]

[Request #S51617]

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Overview of the Federal Tax Gap. By Alan Plumley. California Income Tax Gap Symposium. (The Author, Los Angeles, California) May 19, 2005. 16 p.

[Includes: " Tax Gap Concepts;" "Current Estimates of the Tax Gap;" "Tax Gap Components;" "Individual Income Tax Underreporting Gap;" and "Growth in the Individual Income Tax Gap."]

[Request #S51618]

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Strategies to Reduce the Income Tax Gap. By John Chiang. California Income Tax Gap Symposium. (The Author, Los Angeles, California) May 19, 2005. 3 p.

[Includes: "Attack Nevada Incorporations;" "Publicize Audit Targets;" "Investigate Fraudulent Preparers;" and "Increase Conformity."]

[Request #S51619]

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Why Do Taxpayers Cheat? By Joshua D. Rosenberg. California Income Tax Gap Symposium. (The Author, Los Angeles, California) May 19, 2005. 6 p.

["Includes: "The Standard Cycle of Interactions;" "Changing the Response of Others;" and "Changing Taxpayers' Thoughts About Taxes."]

[Request #S51620]

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California Income Tax Gap - Focus on Unreported Income. By Joe Bankman. California Income Tax Gap Symposium. (The Author, Los Angeles, California) May 19, 2005. 7 p.

[Includes: "California Income Tax Gap - Focus on Unreported Income;" "Two-Tier Tax Structure;" and "Do Employees and Investors Benefit From Nontaxation?"

[Request #S51621]

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PROPERTY TAXES

The Property Tax: Key Local Revenue. By Judy Zelio, National Conference of State Legislatures. NCSL Legisbrief. Vol. 13, No. 5. (NCSL, Denver, Colorado) 2005. 2 p.

["Like most state, local governments and school districts have struggled with their budget in recent years. However, their main source of tax revenue -- the property tax -- has demonstrated its reliability. Even though the proportion of property taxes in state and local tax collections has steadily declined since the 1940s, local governments and school districts still depend more on property taxes than on any other revenue source. The property tax contributed 73 percent of local tax revenues and 45 percent of all local own-source revenues in 2002."]

[Request #S51622]

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STATE BUDGET

Overview of the 2005-06 May Revision. By Elizabeth G. Hill, Legislative Analyst's Office. (The Office, Sacramento, California) May 16, 2005. 20 p.

Full Text at: www.lao.ca.gov/2005/may_revision/051605_may_revision.pdf

["The report complimented the governor for a 'sensible' plan to deal with the state's chronic budget problems by cutting programs and reducing debt.... But Hill warned that the $115.7-billion revised budget plan for 2005-06 would rely on government employees agreeing to forgo hundreds of millions of dollars in salary owed under existing contracts, a proposal to take money from schools that may be unconstitutional and a pension bond that is legally dubious." Los Angeles Times (May 17, 2005) B3.]

[Request #S51436]

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Governor's Budget, May Revision, 2005-06. By the California Department of Finance. (The Department, Sacramento, California) May 13, 2005. 79 p.

Full Text at: www.dof.ca.gov//HTML/Budget_05-06/MayRevision2005-06/MayRevision2005-06Menu.htm

['Governor Arnold Schwarzenegger released a revised budget that would use more than $4 billion in new cash to reduce deficit borrowing, would spend more money on transportation projects and local governments but would not increase education spending significantly. Schwarzenegger said the state's growing economy shows there is no need to raise taxes for the fiscal year that starts July 1, but he acknowledged that the state is still looking at a $4 billion deficit in 2006-07." San Francisco Chronicle (May 14, 2005) A1.]

[Request #S51455]

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STATE BUDGETS

New Census Data Offer Glimpse of States' Early Responses to the Fiscal Crisis. By Donald Boyd, The Nelson A. Rockefeller Institute of Government. State Fiscal Brief. No. 73. (The Institute, Albany, New York) April 2005. 12 p.

Full Text at: rfs.rockinst.org/exhibit/1483/Full%20Text/SFB73.pdf

["States increased tuition and other fees and charges, and reduced capital spending in 2003 to offset a second consecutive year of tax revenue declines. Real per capita Medicaid-related payments rose sharply, leading overall spending to rise despite a decline in other areas, suggesting that Medicaid may have crowded out other spending."]

[Request #S51623]

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Rainy Day Funds: Opportunities for Reform. By Robert Zahradnik, Center on Budget and Policy Priorities. (The Center, Washington, DC) March 9, 2005. 12 p.

Full Text at: www.cbpp.org/3-9-05sfp.pdf

["As states slowly emerge from the fiscal crisis, policymakers can evaluate how well their state reserve funds worked to cushion deficits during the downturn. This is an opportune time to strengthen state reserve policies and to begin to rebuild depleted state reserve funds.... Policymakers have an opportunity to enact some critical policy changes to improve their reserve policies so that they are better prepared for the next fiscal crisis."]

[Request #S51624]

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STATE FINANCES

The Flawed "Population Plus Inflation" Formula: Why TABOR's Growth Formula Doesn't Work. By David H. Bradley and others, Center on Budget and Policy Priorities. (The Center, Washington, DC) 2005. 14 p.

Full Text at: www.cbpp.org/1-13-05sfp3.pdf

["Limiting the growth of state revenue collections and state expenditures to a population growth-plus-inflation formula is a central provision of a new generation of tax and expenditure limits (TELs) now being promoted by national anti-government groups. Under such proposals, state constitutions would be amended to bar state and local expenditures from rising at a percentage rate that exceeds the rate of growth of state population plus an inflation factor."]

[Request #S51625]

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STATE REVENUE

Revenue Volatility in California. By Brad Williams, Office of the Legislative Analyst. (The Office, Sacramento, California) January 20, 2005. 20 p.

Full Text at: www.lao.ca.gov/2005/rev_vol/rev_volatility_012005.pdf

["The report provides statistical proof for what followers of state budgetary politics have known for years: California's state and local tax system is a mess and lies at the heart of its chronic budget crisis.... The report lays out some of the options, such as extending the sales tax to services or reducing the income tax's reliance on high-income taxpayers with fluctuating incomes by taxing more middle-income Californians, but all are politically perilous." Sacramento Bee (January 21, 2005) 1.]

[Request #S51626]

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STATE TAXES

States Ranked by Total Taxes and Per Capita Amount: 2004. By U.S. Census Bureau. (The Bureau Washington, DC) April, 2005. 1 p.

Full Text at: www.census.gov/govs/statetax/04staxrank.html

["All states collected more tax revenues last year, up 8.1 percent from 2003 for a total of $593 billion in 2004, the report showed. The last time all states showed increases in total tax revenue over a prior year was 2000." Stateline.org (April 29, 2005) 1.]

[Request #S51627]

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Tax Cuts and Consequences: The States that Cut Taxes the Most During the 1990s Have Suffered Lately. By Robert Zahradnik, the Center on Budget and Policy Priorities. (The Center, Washington, DC) 2005. 12 pages.

Full Text at: www.cbpp.org/1-12-05sfp.pdf

["This analysis serves as a caution to state policymakers who may be tempted to begin another round of tax cuts as state revenue performance improves over the next few years. States would do well to assess carefully their long-term revenue projections and the assumptions behind those projections. Claims that tax cuts might boost jobs and wages in a state should be scrutinized with a great deal of skepticism. In addition, states should strongly consider filling their depleted rainy day funds before embarking on new rounds of tax cuts."]

[Request #S51628]

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How -- and How Not -- to Tax Business. By Charles E. McLure, Jr., Hoover Institution, Stanford University. IN: State Tax Notes, vol. 36, no.1 (April 4, 2005) pp. 29 - 34.

["A good tax system is understandable, stable and predictable, economically neutral, fair, and competitive. Without downplaying the importance of predictability and stability, I will concentrate on the other four principles because I believe they are paramount in the design of sensible business taxation.... I will describe a few salient features of the current sales tax, corporate franchise tax, and property tax to provide background for the discussion."]

[Request #S51629]

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"A Quality Index for State Sales Tax Structure - Measuring the States Against an Ideal Standard." By John L. Mikesell. IN: State Tax Notes, vol. 35, no. 2 (January 10, 2005) pp. 129-136.

["Two points are clear in this evaluation of states sales tax structures according to the standards of sound tax policy. First, no states achieve the policy standard of a uniform, neutral tax levied on households' consumption expenditure, and even those with the best structures fall considerably below the ideal.... Second, the indices vary widely across the states for the simple reason that state sales tax structures vary widely."]

[Request #S51630]

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State Tax Revenue Ends 2004 in Solid Shape. By Nicholas W. Jenny, The Nelson A. Rockefeller Institute of Government. State Revenue Report. No. 59. (The Institute, Albany, New York) March 2005. 16 p.

Full Text at: rfs.rockinst.org/exhibit/1313/Full%20Text/RR_59.pdf

["States finished 2004 in good shape as far as tax revenue growth is concerned.. However, states are going to need every dime of this growth, and possibly more, to deal with other problems and pressures. States made use of many one-time or temporary measures to balance their budgets in the lean years during and after the recent recession. They now need to find ongoing revenue to replace these measures. In addition, some parts of state budgets, such as Medicaid, are growing even more rapidly than revenues. Finally, there is not much good news for states, and potentially many expensive challenges in the latest proposed federal budget."]

[Request #S51631]

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TAX REFORM

Options for Tax Reform. By Chris Edwards, Cato Institute. (The Institute, Washington, DC) February 24, 2005. 44 p.

Full Text at: www.cato.org/pubs/pas/pa536.pdf

["This study . identifies three goals for tax reform: simplification, efficiency, and limited government.. This study examines reform options including a flat tax, a national retail sales tax, and a savings exempt tax.. It also proposes a new option: a 'dual-rate income tax'. This revenue-neutral option would convert the individual income tax to a two-rate system that eliminates most deductions and credits and allows nearly all families to pay a low 15 percent rate. A 27 percent rate would kick in for earnings above ($90,000) for single and ($180,000) married."]

[Request #S51632]

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Tax Policy for the 21st Century: Resolving California's Long-term Structural Deficit. By the California Tax Reform Association. (The Association, Sacramento, California) January 6, 2005. 26 p.

Full Text at: www.caltaxreform.org/TaxReformsReport2005CTRA.pdf

["To maintain a high productivity economy and society, California must have a tax system that provides sufficient revenues for education, infrastructure and vital public services, and raises revenues in an efficient, effective, and equitable manner. Facing large deficits and a burden of debt, the state must engage in rigorous analysis of both its government spending and its tax system."]

[Request #S51633]

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What Will Happen to State Corporation Taxes After Federal Tax Reform? By Martin Sullivan and David Brunori. Presented to Federal Taxation and States Symposium. The Author, Washington, DC) May 2005. 11 p.

Full Text at: www.taxadmin.org/fta/FS_Symposium/mclure_pres.pdf

["Four types of tax reform include: 1) replacement consumption taxes; 2) add-on consumption taxes; 3) income tax reform; and 4) move income tax further toward consumption tax."]

[Request #S51637]

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Sisyphus Had It Easy: Reflections on Tax and Budget Reform. By Eugene Steuerle. IN: The Milken Institute Review, First Quarter (March 2005) pp. 18-27

Full Text at: /www.milkeninstitute.org/publications/review/2005_3/18_27mr25.pdf

["A wholesale transformation of the income tax system isn't about to happen quickly or painlessly. In fact, only painstaking bottom-up planning could do the trick.... Real tax reform can't begin until policymakers understand the implications of change for everyone from caffeine empires like Starbucks to farmers who make a living selling their corn to make ethanol additives for gasoline. Saying that one is for tax reform is like saying that one is for eliminating wasteful government expenditures; it's just not very informative."]

[Request #S51641]

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TAX REVENUES

State Tax Revenue on Upward Track. By Nicholas W. Jenny, Nelson A. Rockefeller Institute of Government. State Revenue Report. No. 58. (The Institute, Albany, New York) December 2004. 12 p.

Full Text at: rfs.rockinst.org/exhibit/28/Full%20Text/RR_58.pdf

["State tax revenue increased 8.6 percent in the July-September quarter of 2004 compared to the same quarter the year before. Without the contribution of net enacted tax increases, this growth would have been 8.2 percent. If we also take into account the effects of inflation, real adjusted state tax revenue grew 4.3 percent. This is the fourth straight quarter of real adjusted growth, after nine straight quarters of decline. State tax collections are now growing strongly. All three major state taxes - personal income tax, corporate income tax, and sales tax - showed significant growth this quarter."]

[Request #S51634]

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TAXES

The Untaxed Business Sector: Statement. By Douglas Holtz-Eakin, Congressional Budget Office. Presented before the Committee on Ways and Means, U.S. House of Representatives. (The Office, Washington, DC) April 20, 2005. 10 p.

Full Text at: www.cbo.gov/ftpdocs/63xx/doc6301/04-20-TaxTestimony.pdf

["The ownership structure of untaxed business entities differs significantly from that of conventional for-profit firms in that there are no separate claimants, such as shareholders, for the entities' residual profits. Instead of seeking to return profits to owners, the entities' managers have incentives to lower prices, increase costs, or bolster retained earnings. Accordingly, taxation of these entities might not generate as much revenue as initially anticipated. Taxation would bolster managers' incentives to reduce or eliminate entities' tax liabilities by using more of any surplus to cut prices, boost costs, or both."]

[Request #S51635]

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Historical Effective Federal Tax Rates: 1979 to 2002. By the Congressional Budget Office. (The Office, Washington, DC) March 2005. 30 p.

Full Text at: www.cbo.gov/ftpdocs/61xx/doc6133/03-01-EffectiveTaxRates.pdf

["The tables show effective tax rates for the four largest sources of federal revenues -- individual income taxes, corporate income taxes, payroll taxes, and excise taxes -- as well as the total effective rate for the four taxes combined. The tables also present average pre-tax and after-tax household income; counts of households; and shares of taxes, income, and households for each fifth (quintile) of the income distribution and for the top percentiles of households."]

[Request #S51636]

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A National Retail Sales Tax: Consequences for the States. By Bill Fox and Matt Murray. Presented to Federal Taxation and the States Symposium. (The Authors, Washington, DC) May 2005. 17 p.

Full Text at: www.taxadmin.org/fta/FS_Symposium/fox.pdf

["(The authors proposed: a national retail sales tax to be administered by states in exchange for a fee equal to 1 percent of total collections; states to have authority over in-state examination and audit; information sharing compact to be established by the federal government to facilitate enforcement, but only among conforming states."]

[Request #S51638]

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Coordinating State Sales Taxes with a Federal VAT: Opportunities, Risks, and Challenges. By Charles E. McLure, Jr. Presented to Federal Taxation and the States Symposium. (The Author, Washington, DC) May 2005. 11 p.

Full Text at: www.taxadmin.org/fta/FS_Symposium/mclure_pres.pdf

["Federal value added tax (VAT) would create: 1) opportunities to improve state sales taxes; 2) risks that things could become worse; 3) challenges to coordinate state and federal taxes."]

[Request #S51639]

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PREVIOUSLY IN STUDIES IN THE NEWS
[This section links to items in Studies in the News since the last Revenue, Taxation and Budgeting Supplement.]

"General Government." IN: Studies in the News 04-80 - 05-14 (December 2004 - May 2005)

[Includes: "Reforming state budget process;" "LAO overview of May budget revision;" "May revision to Governor's budget;" "Unfunded federal mandates;" "Long-term federal budget simulations;" "Legislative Analyst's analysis of 2005-06 budget;" "Overhauling California sales tax;" "California state-federal balance of payments;" "Fiscal survey of the states;" "Projected shortfalls in states' budgets;" "States' budget outlook;" "Consumption patterns and sales tax revenue;" "Corporate tax strategies;" "California fiscal outlook, 2009-2010;" "State business tax climate index;" and others.]

[Request #S51637]

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