A big story coming out of Texas: considering eliminating the "business tax."
As the federal tax bite grows, there is a nascent movement at the Texas Legislature to phase out the tax, commonly called the margins tax, without replacing it.
Business leaders and some conservative lawmakers say the tax, which taxes gross receipts as opposed to profits, is complicated and not applied evenly. Other critics of the tax say dropping it would make the state’s business climate even more attractive.
At first blush, eliminating the tax without a replacement might seem improbable. The tax raised $4.5 billion in 2012 and accounted for 10.3 percent of the state’s total taxes, according to the comptroller’s office.
Seeing these stories coming out at the same time suggest some states are taking steps to separate themselves from states with serious budgetary problems, like California and Illinois.
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With regard to Illinois, in today's edition of the WSJ:
Illinois legislators, caught between public-employee unions and Wall Street credit-rating agencies, weighed a divisive plan on Monday to dig the state out of the nation's deepest pension hole by cutting retirement benefits.
Illinois is wrestling with a $95 billion pension gap that has left it neck-and-neck with California for the worst state credit rating in the country. The Democrat-controlled legislature has been stalled over how to reverse its failure over decades to adequately fund pensions for state workers.
Two competing plans are working their way through the legislature. The House is debating a six-year freeze in the cost-of-living increase for retirees and an increase in employee contributions, among other changes. The Senate last year passed a bill requiring those in the pension system to choose between a diminished cost-of- living increase and retiree health benefits.Back on November 22, 2012, the WSJ called Illinois "the Unfixable."
Illinois's pension system is heading for a meltdown and may now be beyond help. That's the forecast from a Chicago business group, which told its members last week that the state's pension crisis "has grown so severe" that it is now "unfixable."
The Commercial Club of Chicago wrote that because the November elections did not bring in lawmakers willing to push real reform, the state's roughly $200 billion debt now threatens education, health care and basic public services. The problem is worsening so fast that the usual menu of reforms won't be enough to keep public pensions from sucking taxpayers and whole cities into its yawning maw.Yawning maw. The tea leaves suggest there is no support at the federal level to bail out Illinois, or California, though we will be seeing more stories along that line over the next couple of years.
Bruce, No question a proposed federal bailout of states like illinois and california is coming. The only question is if the good people of the states like Alaska, Texas and North Dakota who have been fiscally responsible will put up with having their pockets picked to support the govt unions and welfare rolls in the fabulously irresponsible democrat havens. My suspicion is not and this will lead to a serious Constitutional crisis.
ReplyDeleteThe good news is this: I don't think the country as a whole has the stomach for bailing out any state. Governors will be very clever in looking for specific aid from the govt to help pay bills. Although the money will be targeted for disasters, like hurricanes, once money gets to the states, it can be used for anything (feds can require money to be used specifically for one purpose, but states can pull state money from those line items, and use it elsewhere).
DeleteCertainly extension of unemployment benefits helps some states more than others. Same with wind credits. Etc. Etc.