State Taxes: Issues & Trends - Countdown Style Joseph Bishop-Henchman - New Mexico Tax Research Institute

State Taxes: Issues & Trends
                             Countdown Style

Joseph Bishop-Henchman
Executive Vice President
henchman@taxfoundation.org
www.taxfoundation.org

10

WAYFAIR
   STATE CHECKLIST ON TAXING INTERNET SALES

• Old rule (Quill)
   • Whether seller is physically present in taxing jurisdiction
• New rule (Wayfair)
   • Whether the state tax law places excessive or
     discriminatory burdens on interstate commerce
• Wayfair checklist (safe harbor)
   • Exclude those who transact limited business in state
     (SD had $100,000 or 200 transaction threshold)
   • No retroactive collection
   • Actions to simplify tax collection for remote sellers
• 32 states + DC have passed laws or regulations to collect

9

WAYFAIR (2)
               MARKETPLACE COLLECTION
•   Marketplace: intermediary that facilitates sale between a seller and
    a purchaser of property.

•   Everyone thinks eBay and Etsy. Argument is that it’s easier for them
    to collect for all their small sellers.

•   Some states have drafted broadly, encompassing swap meets,
    farmers’ markets, food delivery apps, catalogs, or advertisers.

•   Opt-out clause? Let current sellers petition to collect instead.

•   Are thresholds stackable for sellers on multiple platforms?

•   12 states: AL, AZ, CT, IA, MN, NE, OK, PA, RI, SC, SD, WA, DC

8

CONFORMITY
                     UPDATING FOR THE TCJA
•       Which provisions to couple to

•       Expensing & interest deduction

•       GILTI & BEAT

•       Use of revenue windfall

•       Example: Minnesota

    •      Senate Republicans: conform to all but 199A and int’l
           provisions, reduce second income tax bracket, scholarship tax
           break (keep $614m)

    •      House DFLers: no expensing and extend to GILTI, change
           bracket thresholds (keep $1b) plus gas tax increase

7

PROPERTY TAX SWAPS
                          AND SALES TAX INCREASES
•       Texas (13th highest property tax, $1,762 per capita)
    •        Raise sales tax 1 point (6.25% to 7.25%, +$5B)
             for ~10% reduction in property tax bills
    •        Cap city and county revenue growth at 3.5% per
             year
    •        Governor strong supporter. House approved
             yesterday, 107-40, including 20 Ds voting yes.
             Swap would go to voters.
•       Nebraska (12th highest property tax, $1,909 per capita)
    •        Raise sales tax ½ point (5.5% to 6%), expand to
             20 services, for ~12% reduction in property tax
             bills
    •        Raise cigarette tax and increase EITC from 10%
             to 13%
    •        Passed Revenue Committee yesterday. Needs 33
             of 49 senators to avoid filibuster. Governor
             strong opponent.

6

TRANSPORTATION TAXES
       NOT THE THIRD RAIL PEOPLE THINK IT IS
•   Between 2013 and 2019,
    30 states have raised
    gas tax. 22 adjust rate
    automatically.

•   2019: AL, AR, OH

•   2018: OK

•   2017: CA, IN, OR, SC, TN, UT, WV

•   Tolls, VMT, congestion pricing, public private partnerships, taxes
    on electric vehicles

•   $2 trillion #InfrastructureWeek deal?

5

OREGON GRT
            NOT A NEW MEXICO GRT BUT A GRT
•   1990-97: Voters approve property tax
    limitations and reject sales tax for 9th time
•   2016: Voters reject Measure 97, 41%-59% (2.5%
    GRT on sales over $25m; $3b)
•   2018: Attempt to ban taxes on groceries fails.
    Dems take supermajority.
•   2018-19: Debate hybrid VAT vs. hybrid GRT. Biz
    community split.
•   2019: HB 3427 corporate activity tax. 0.57% on
    sales exceed $1m, less 35% COGS and payroll.
    Cuts some income tax rates. $2b annually (avoid
    May 8 teacher walkout).
•   Goals: more revenue, stability (heavy reliance on
    income and business taxes)

4

VAPOR TAXES
                      BALANCING GOALS
•   E-cigarette products

•   Incentivize smokers to
    switch vs. disincentivize
    non-smokers to start

•   Tax based on fluid (per mL)
    vs. percentage of price
    linked to cigarette tax rate

•   Tax cartridges or
    device+cartridges

•   Use of revenue

3

SPORTS BETTING
         BUT IS THERE MUCH REVENUE IN IT?
•   1992: Sen. Bill Bradley (D-NJ) passes congressional
    ban on sports betting in all but DE, MT, NV, OR

•   2018: Murphy v. NCAA – Supreme Court rules 1992
    law is unconstitutional

•   Now legal also in NJ, MS, WV, NM, PA, RI, TN

•   Allow only in casinos (resultant high tax rate), or
    more?

•   Professional, or college too?

•   Give MLB and NBA 1% integrity fee to collect data?

2

UTAH TAX REFORM
              BROADENING THE SALES TAX
•   Sales tax growth slowing due to
    relative growth in service sector

•   Pressure on higher education,
    funded out of sales tax

•   Jan: Governor proposes concept
    in State of the State address
•   Feb: Proposal to broaden to services and cut rate 4.85% to 3%

•   Mar: Business inputs concerns. Cease trying to hit Mar. 14 end of
    session date and set up task force to make recommendations

•   May: Task force starts meeting. Special session likely this summer.

1

ARKANSAS TAX REFORM
        A BIG CHANGE FOR THE NATURAL STATE
•   In works since 2016; split into 5 bills

•   Top income tax rate 6.9% to 5.9% by
    2021; six brackets into three

•   Corporate rate 6.5% to 5.9% by 2022

•   Single-sales factor

•   Full Wayfair checklist

•   1.6% wholesale gasoline tax, ask
    voters to extend ½ cent sales tax

•   Tax expenditure review

State Taxes: Issues & Trends
                             Countdown Style

Joseph Bishop-Henchman
Executive Vice President
henchman@taxfoundation.org
www.taxfoundation.org