Perspectives Into Tax Reform at the State Level
It's easy to think of tax reform at the federal level. The American tax system is notoriously complex. There is more to America than the federal government, however. There are states and local governments as well. Any comprehensive discussion of tax reform must include these levels of government too.
|Thousands of executives with financial reporting responsibilities use the Comperio on-line library to access the type of information and interpretive guidance PricewaterhouseCoopers' own professional audit staff use around the world. Key content areas include guidance from the FASB, EITF, PCAOB, SEC, and others as well as PwC's interpretive guidance. Get more information and sign up for a complimentary 30-day trial.|
Oregon’s current governor has proven that he can’t manage the state without tax reform and that’s giving Ben Westlund a major plank for his platform. Running as an independent for governor, Westlund is currently a moderate senator from Bend. The Oregonian reports that a better health care delivery system is another aim of Westlund’s, but tax reform is his vehicle for the future of the state.
Ben Westlund told the Oregonian, “The most fundamental issue that needs to be discussed in this state is how revenues are raised. The greatest Supreme Court justice, John Marshall, said, ‘the power to tax involves the power to destroy,’ and right now our current tax structure is destroying Oregon.”
“We need to fundamentally and systematically reform the most volatile revenue structure in America ... and no one will even talk about it. All anyone wants to do is nibble on the outside of the apple. It’s time to stop nibbling and start making apple pie,” Westlund continued.
Rep Mark Hass (D-Beaverton) told the Oregonian, “It’s one of those issues where the solutions are not rewarded in the political marketplace. Any solution is not going to be an easy one; therefore, it’s bad politics and the consultants say, ‘Don’t do it.’”
Westlund finished in the Oregonian, “It’s a lack of leadership. It’s extreme partisanship. And it’s a lack of courage to look over the horizon, when just looking down the street will get you by. I don’t know if it’s right to run like this or wrong to run like this, but it’s the right thing to do.”
The gubernatorial race in Oregon is just one battleground for tax reform, but other states are dealing with similar difficult situations. For one situation affecting multiple states, Florida Tax Watch raised the issue of the threat that e-commerce is presenting. Florida, like other states, has “remote sellers” in Internet auctions that are not required to collect or pass on state sales or use taxes, leaving the state seeking solutions. Words in a 2001 prepared statement exemplify almost any states’ situation.
Dominic M. Calabro, Florida Tax Watch’s president, said in the 2001 prepared statement, “Because Florida relies on sales tax for 73 percent of its general revenue, the equation is simple – no collection of sales tax on the Internet means less money for new schools, teacher salaries or textbooks. Florida has taken an important step toward tax reform by joining the Streamlined Sales Tax Project, a multi-state effort to examine the problems posed by e-commerce, and work toward solutions.”
Calabro finished in his prepared statement, “Freeing Internet sellers from collecting state sales taxes not only erodes the tax base but also creates an unfair advantage over the bricks-and-mortar retailers on every street corner in Florida. Government must do its part to facilitate a sales and use tax system that is transparent and as easy as ABC to taxpayers, or it simply won’t happen.”
Still the paths to tax reform can be slippery. Maine’s new tax reform law has proved to be “fiendishly complicated”, according to the Portland Press Herald. Approved in early 2005, spending caps were established for the state municipalities, counties, and schools. A formula was also set up to allow town and city governments a method to override limits established in LD1, made law in early 2005. This formula has been difficult for explain to townspeople at town meetings, even with the help of the Maine Municipal Association.
“It’s going to be very hard to explain. It’s a complicated formula. That’s why the key is to present it in a simple format so everyone understands it, if that is at all possible,” Mark Turner, Belgrade town manager, told the Portland Press Herald.
Their need to use the formula came as increases in fixed costs for items like heating oil, prompted town officials to exceed their spending limit by $185,000. Turner told the Portland Press Herald, “Urban towns have more flexible ways to generate money than smaller towns that have limited resources. If we can get through this year, next year will be a little bit better.”
Maryland is seeking to achieve tax fairness, tax simplification, and tax reduction by implementing a proposal used worldwide, according to Maryland Property Tax Project. Marylandlandtax.org reports that land value taxation (LVT) is a re-interpretation of property tax. LVT taxes land values only as this is the only part of the property that is created by the community. Taxes on structures built on the property, or any improvements, are reduced or eliminated. LVT supports a stream of needed revenues, rewards those with initiative, land banking and speculation is discouraged, and market force distortions caused by taxation are reduced. Learn more about LVT at the Maryland Property Tax Project Foundation web site http://www.urbantools.org/.
Property taxes are definitely a hornet’s nest of conflicting ideas, too. The Nevada Journal reports that property taxes are the unfairest taxes of all and “confiscatory.” Although assessments and tax rates climb at unreasonable rates, there is nothing property owners can really do to defend themselves. Laws enacted without limits mean counties and cities can exact taxes and assessments without regard to the property holders’ income or even ability to pay.
The right to own property is a foundation of free society. The Nevada Journal reports that the founding fathers did not allow property taxes, as they knew the ability to tax property would allow the government power to seize private property. Property is not truly owned under the current property tax system when owners are assessed annually for the privilege of occupying their own houses. Imagine not paying your assessment and keeping your house. Constitutional initiatives have been passed to limit property taxes but the nothing occurred until voters took matters in their own hands to get past the political lip service. Tax reform has benefits for all taxpayers.