Tax Analysts®Tax Analysts®

My Subscriptions:

Featured News

May 10, 2010
Listen to the CBPP on Tax Credits for the Poor

Full Text Published by Tax Analysts®

by David Brunori

David BrunoriNot everyone agrees with the Center on Budget and Policy Priorities. The center has called for higher taxes on the wealthy and business entities. Although I generally agree with the CBPP's Nick Johnson and Michael Mazerov, they have staked out some controversial positions. Many people strongly disagree with the idea of raising taxes during a recession. But there's one policy area in which everyone should heed the CBPP, and that's the taxation of low-income residents. The center, in its latest report, has criticized attempts to raise taxes on the poorest segments of society. And it is right.

It's unfair to ask the dispossessed to bear a greater burden of paying for government when they are already bearing the brunt of the economic downturn. We as a society should not fulfill the prophecy that the poor get poorer. The unfairness of reducing earned income tax credits and other tax benefits is exacerbated by proposals in many states to reduce tax burdens on the wealthy. There is nothing just in cutting marginal capital gains rates for the wealthy but increasing the burdens on those who cut their grass, clean their toilets, and watch their children.

As the CBPP says, proposals to increase the tax on the poor are aimed at reducing deficits. Balancing the budget on the back of the poor? That's not only unfair, it's also unwise. First, the poor don't have money -- that's why we call them poor. If you really want to raise taxes to cure deficits, you might want to look at the rich, because they by definition have money. Moreover, as the center points out, the poor spend their after-tax dollars. Increasing their taxes will reduce consumption and further hurt the economy. When really rich guys pay more taxes, they still buy Mercedes S-Classes and very good champagne.

You should read the center's report "Some States Scaling Back Tax Credits for Low-Income Families." Whether you agree with the CBPP on other issues, I challenge you to take issue with the argument that raising tax burdens on the poor and dispossessed during a recession is wrong.

Candidate Tax Returns

Nothing bores me more than the debate over whether candidates for office should release their income tax returns. Actually, American Idol and James Joyce novels probably bore me more. But who cares whether Ohio Gov. Ted Strickland (D) releases his tax returns? He did, by the way. He and his wife earned $166,321 in 2009. The Democrats in Ohio have been hammering Republican gubernatorial candidate John Kasich about his failure to release his returns. Geez, what are they hoping to find out, that Kasich is rich? The former member of Congress worked for Lehman Brothers the past eight years, until management drove it off a cliff. We know that in 2008 Kasich made $1.4 million, which is considerably more than tax journalists make.

Bad Press for the Schools in New York

The Wall Street Journal ran an interesting article on April 29 explaining how hundreds of school districts in New York violated the law by illegally hoarding cash that could have been used to reduce property taxes. Under state law, school districts can keep a limited amount of money in reserve. But the schools found a way around that and accumulated billions of dollars. I'm all for spending money on schools. Society could make no better investment. But the WSJ article makes it look like the New York schools were thumbing their noses at the taxpayers. That can't be a good thing.

Not Another Business Tax Climate Index

A group called the Small Business & Entrepreneurship Council has published a "Business Tax Index 2010." (For the index, see Doc 2010-9501 or 2010 STT 83-3.) The Tax Foundation does a business tax climate index. Society needs another business tax index like it needs more law schools and television shows about desperate housewives.

But the council felt compelled to analyze business taxes in the 50 states and rank them according to 16 measures, including tax burdens, nominal rates, and the attractiveness of the state's revenue agents. Actually, that last measure is made up. The top 10 are South Dakota, Texas, Nevada, Wyoming, Washington, Florida, Alabama, Alaska, Ohio, and Colorado. The highways are jammed with business execs heading to South Dakota and Wyoming. Seriously, I wonder if Lloyd Blankfein has ever thought of moving Goldman Sachs to Sioux Falls.

If you're going to have a list of winners, you have to have losers. The losers, according to the council, were the District of Columbia (which isn't even a state), New Jersey, Minnesota, California, New York, Maine, Iowa, Vermont, Oregon, Massachusetts, and Rhode Island. No sane person would run a business in those states, the council apparently thinks.

Arizona Business Tax Cuts Fail

Arizona Republican House Speaker Kirk Adams's plan to slash business taxes by nearly $1 billion has failed. Adams's bill (HB 2250) would have cut the corporate income tax rate from 7 percent to 5 percent, in addition to cutting property taxes and offering tax incentives for job creation. Adams believed that the tax cuts would create jobs and spur economic development.

What I find curious is that this bill almost passed while the state readies for a May 18 ballot measure that would increase the sales tax by 1 percentage point and raise $1 billion in revenue.

Weird Holding of the Week

In 2005 the U.S. Supreme Court held that the Oneida Indian Nation had to pay taxes on property it owned in New York's Madison and Oneida counties. But on April 27 the Second Circuit Court of Appeals held that although the tribe might owe taxes, the counties could not sue it to collect those taxes. The court held that the nation enjoyed sovereign immunity and couldn't be sued in court. I'm sure there's a technical, legal mumbo-jumbo explanation for why the tribe enjoys no immunity from owing taxes but complete immunity from being forced to pay them. But it seems absurd to me.

You Can't Make This Stuff Up

The New York Tax Appeals Tribunal ruled in a case of immense importance to the state's fiscal system that an adult entertainment club's private dance fees were subject to sales tax because they didn't consist of dramatic or musical arts performances. The club (cleverly called Nite Moves) challenged the assertion that it had to collect sales tax when young ladies were paid to dance for patrons. New York law exempts artistic performances from sales tax. We have seen this before, when the court of appeals ruled that a "peep show" featuring naked girls dancing was not a place of art, but rather a place of entertainment. Entertainment indeed.

Now -- I swear -- I don't know anything about this business. But apparently the tax tribunal does. The tribunal ruled that the routines performed by naked dancers at Nite Moves were not original and were learned from other dancers or on YouTube. Therefore, this kind of dancing was not the kind of carefully arranged and practiced patterns of movement normally equated with the art of dance. Who knew the judges on the New York Tax Tribunal were such connoisseurs of naked-lady dancing.

What's weird about all of this? The lawyer for the club, Andrew McCullough, met its owners while patronizing it. Weirder still, he lives in Utah. Now, I know there aren't a lot of naked-lady-dancing establishments in Utah. But couldn't he find one closer than New York? Weirder still, McCullough is the chair of the Utah Libertarian Party and plans on running for governor. Check out his campaign website:

No Justice for Blago

First, a federal judge won't let former Illinois Gov. Rod Blagojevich travel to Costa Rica to star in I'm a Celebrity, Get Me Out of Here. Then Blagojevich bombs in the musical Rod Blagojevich Superstar. Then he gets fired by Donald Trump on Celebrity Apprentice. Then he was criticized for saying in Esquire that he was blacker than Barack Obama. Now the Illinois General Assembly refuses to appropriate funds to pay to have his official portrait painted and hung in the capitol. The guy can't get a break.

* * * * *

The Politics of State Taxation is by contributing editor David Brunori, who welcomes comments at

About Tax Analysts

Tax Analysts is an influential provider of tax news and analysis for the global community. Over 150,000 tax professionals in law and accounting firms, corporations, and government agencies rely on Tax Analysts' federal, state, and international content daily. Key products include Tax Notes, Tax Notes Today, State Tax Notes, State Tax Today, Tax Notes International, and Worldwide Tax Daily. Founded in 1970 as a nonprofit organization, Tax Analysts has the industry's largest tax-dedicated correspondent staff, with more than 250 domestic and international correspondents. For more information, visit our home page.

For reprint permission or other information, contact