Consumption Tax

Taxing Some Services Could Help if It's Fair and Simple

Ron Tang — Sun, 29 Jun 2008 06:39:00 -0400

California State Board of Equalization Chair Judy Chu believes it is time to address our deficit and modernize our sales tax by applying it to services. Her call to modernize our sales tax would be a good start in addressing an underlying cause of our budget problems.

Taxing services is not an outlandish idea. Most states already tax more types of services than does California.

Taxing services is also not a bad idea. Lifestyle changes have led us to spend less on goods subject to California sales tax and more on non-taxable services. For example, two-earner households have greater needs for laundry… more

Goodbye State Tax Deduction

Ron Tang — Thu, 08 May 2008 00:52:00 -0400

The 1984 Treasury Department report (PDF) that laid the foundation for the base broadening and rate reductions of the Tax Reform Act of 1986, called for complete repeal of the itemized deduction for state and local taxes. Citing similar reasons, the 2005 final report of the President’s Advisory Panel on Federal Tax Reform also called for repeal. Yet, there are also proposals to make permanent the ability to deduct either state income or sales tax (for example, HR 3592, 110th Congress).

Below we’ll get some background on the state and local tax deduction and then… more

Throw Out the Tax Code

Ron Tang — Sun, 20 Apr 2008 07:25:00 -0400

Politicians don't like to talk about taxes except to brag about cutting them. But with California's widening budget deficit threatening deep cuts in education and other public services, it's difficult to avoid discussions about raising taxes.

Unfortunately, what's likely to be lost in the upcoming partisan melee over whether new taxes are needed to close the $16-billion gap is an equally important tax issue -- California's aging and often unfair tax system needs to be overhauled.

The goal of tax reform should be twofold. One is to generate a more reliable revenue stream. The other is to make the tax… more

New Taxes And Tax Policy

Ron Tang — Thu, 10 Apr 2008 10:54:00 -0400

In recent years, there have been enactments and proposals for a variety of new taxes at both the U.S. state and local levels. A key impetus for these changes is the need for more revenue to fund state and local governments. While existing taxes could be increased to generate revenue, other sources have been considered for a variety of reasons. This article looks at a few recent examples and how they stack up under the principles of good tax policy.

Examples

Sources of new tax revenue are sometimes tied to activities that lawmakers believe may have some type of adverse social policy… more

Annette Nellen in Orange County Register | California Lawmakers Want to Tax Downloads

Communications — Sun, 16 Mar 2008 11:01:00 -0400

New America in the News:

California Lawmakers Want to Tax Downloads (Orange County Register)

Democrats would revise the definition of what's taxable instead of proposing a new tax that requires GOP support. . .

So what do you think will happen with downloads?

"You're just going to have a bigger use tax problem," admits Annette Nellen, a San Jose State tax professor who nonetheless supports taxing downloads.

Nellen likes the tax, in part, because increasing revenues isn't her biggest concern – rationale tax policy is. A fellow at the New America Foundation, Nellen has been urging the state to broaden its sales tax because she says a "consumption tax" should tax all the things we consume – goods and services, products and downloads.

"Our tax base hasn't kept up with how we do business and how we live," she said, and that means state revenues will naturally dwindle unless something is done.

"The way we consume things have changed, but we still have a 1930s tax base," she said. . .

Obstacles To Taxing Services -- Are They Insurmountable?

Ron Tang — Thu, 28 Feb 2008 14:40:00 -0500

State sales tax bases have traditionally included only tangible personal property. Often services are either ignored completely in describing the tax base, or a small number of services are specifically targeted as legally taxable. One reason for exclusion is historical. Tangible personal property was the main consumption item back in the 1930s when many states started imposing a sales tax. However, in the past two decades, consumption of services has become significant.

Since 1990, the Federation of Tax Administrators (FTA) has tracked the number and types of services taxed in each state. Of the 168 services tracked, Hawaii, New… more

Tax Consumption, Not Work

adminn — Thu, 01 Feb 2007 00:38:00 -0500

Click here for a brief video discussion of this idea.

For more than 70 percent of American families, the payroll tax is the largest tax they pay. Yet the tax is regressive, inefficient, and insufficient to fund the programs it finances. As a 15.3 percent wage tax levied on employers and employees, it deters job creation and depresses wages at the low end of the scale.

By replacing the payroll tax with a national and progressive consumption tax, the United States could stimulate job… more

Read My Lips: Raise Taxes

Articles — Wed, 31 Jan 2007 06:56:00 -0500

The greatest challenge in politics is to understand when a political era is closing and the door to a new one is ready to be opened. Thirty years ago, a small band of conservatives understood that what they called the era of “tax and spend” -- in which government grew inexorably on a tide of invisible tax increases through Republican and Democratic administrations -- was ready to be challenged.

In 1977, Rep. Jack Kemp and Sen. Bill Roth introduced a bill to cut tax rates by a third and index them to inflation. They were radicals even within their party; this… more

Hopes for Tax Reform in 2007

Articles — Wed, 10 Jan 2007 06:54:00 -0500

Will 2007 be the year of fundamental tax reform? It should be, but in all likelihood, it will not be. Still, there are plenty of changes that could be made to move the tax code in the right direction.

First, the reasons there should be tax reform. Everybody hates the tax code. There is no better political rallying cry than "I am going to reform the tax code to make it simpler, fairer, and better for the economy." The same line is used by the most liberal and conservative would-be reformers. Unlike other public policies in need of reform --… more

Rethinking Domestic Policy

Communications — Tue, 08 Feb 2005 03:00:00 -0500

A New America Event
02/07/2005 - 12:02pm

Summary of Remarks

The second panel of the Real State of the Union, "Rethinking Domestic Policy" was moderated by Morton Mondracke, executive editor of Roll Call. The discussion focused on fundamental problems at the core of American domestic policy, including asset management, health care, and improving standards for all Americans.

Ray Boshara, Director of New America's Asset Building Program, led off the discussion by focusing on the "ownership society." Mr. Boshara defined the current economic social status in the United States as one in which only the upper half of society has access to assets, whereas the lower half is shut out of ownership. While Boshara agrees that having an ownership society is beneficial, Americans need to ensure the right progressive tools to ensure equal opportunities. With progressive tools in place, benefits include national savings, productivity gains, and more engaged American citizens who will help shoulder our national debt and social security in the future.

Michael Calabrese, Vice President at New America focused on the problems of the healthcare system in the United States, which hurt productivity gains. He stressed the importance of universal, mandatory health care coverage, regardless of employment status. Mr. Calabrese also said that subsidies for coverage should be individual based, rather than job based. Currently, companies spend around 1/3 of their overall spending on healthcare costs. This healthcare strategy of continuous coverage with an incremental approach would reduce these costs and limit tax exclusion. This healthcare plan has bipartisan support.

Karen Kornbluh, Director of New America's Work and Family Program addressed the rising phenomenon of "juggler families," with 2 working parents or single parents who work. She emphasized that policies haven't changed to reflect new realities of the workplace and that globalization places more pressure on these families. These parents, already disadvantaged, are forced to work impossibly long hours in order to get ahead, negatively impacting our children. Furthermore, these families have difficulties when one parent switches employment or opts to work part-time, because their healthcare plans are not transferable from one job to another. Because of this opportunity gap, Kornbluh proposed solutions including "skill side" investment strategies to benefit children, universal social insurance for families (including health care and pension plans), and enabling flexibility to balance work and family obligations.

Maya MacGuineas, Director or New America's Fiscal Policy Program, focused on tax reform and revenue-neutral ways to improve the tax system. She said the payroll tax was highly regressive and led to a decrease in jobs. MacGuineas proposed eliminating the payroll tax and replacing it with a consumption tax which would enable private and public savings increases. MacGuineas emphasized that taxing corporate entities to increase revenue was the wrong approach for the era of globalization. She suggests adopting the budget to changing health care, education, and other demands. MacGuineas also highlighted the statistic that Americans pay $8 of taxes for each elderly person for every $1 spent on an individual child. She posited that savings from tax reform could be invested in human development.

Synopsis written by Joanna Lederman, Research Associate at the New America Foundation.