LAO Perspectives on the State’s Tax Structure www.lao.ca.gov Presented to: Senate Select Committee on Recovery, Reform, and Realignment Hon. Sam Blakeslee,

Slides:



Advertisements
Similar presentations
Public Goods and Tax Policy
Advertisements

LAO California’s Economic and Budget Situation Legislative Analyst’s Office.
Karl Smith Tax Reform in North Carolina. 1.The Current Tax System 2.The Growing Problem 3.Alternatives and Concerns 2.
LAO California’s Fiscal Outlook Legislative Analyst’s Office California Association of School Business Officials CBO Symposium November 15,
16 Public Finance: Expenditures and Taxes McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Taxation: Criteria for Evaluating Revenue Options
The School Finance Outlook for and Beyond Legislative Revenue Office April 2010.
Historical Perspective on Arizona’s Tax Structure: Past, Present, and Future Jeff McLynch State Policy Director Presentation.
Chapter 11 Taxes on Sales and Consumption Chapter outline 1.Why Tax Sales? 2.Sales Taxes, Value-added Taxes, Excise Taxes 3.Efficiency Issues in Sales.
Florida The Economy, Taxes and Results - A Balanced Approach is Needed Presentation to the National Association of Social Workers - Florida John Hall Florida.
Governor Taft’s Five Year Tax Reform Plan Lt. Governor Bruce Johnson Japan America Society and PricewaterhouseCoopers April 27,
TAXES CHANGE BEHAVIOR. 1.PAY FOR THE COST OF GOVERNING WHAT ARE THE FUNCTIONS OF TAXATION?
California Budget Sandra M. Emerson. California Budget Prospects General Fund in the red for next five years.
Week 6: Revenue Politics and Revenue Issues Guest Speaker: Brad Williams, Senior Economist, LAO –Overview of revenues for California State Budget –Issues.
Governor Taft’s Five Year Tax Reform Plan Lt. Governor Bruce Johnson Japan America Society and PricewaterhouseCoopers April 27,
Local Taxes in New York: Easing the Burden Citizens Budget Commission Conference December 6, 2007 Held at the Rockefeller Institute, Albany, NY.
Chapter 16 Public Finance: Expenditures and Taxes 1 Graphs and Tables Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 7 The Government Sector. Introduction: The Growing Economic Role of Government Most of the growth over the past seven decades was due to the Depression.
Major Tax Structures: Income Taxes Troy University PA6650- Governmental Budgeting Chapter 8.
Taxes & Taxation. Incidence of Taxation To learn who really is most burdened by a tax, you must look at the incidence of taxation. You can’t just look.
TAXES: The main source of government revenue The Economics of Taxation  In addition to creating revenue for the government, taxes also impact the economy.
2011 Minnesota State and Local Tax Incidence Presentation  Analysis for 2008  Projections to 2013 A full copy of the study can be found on our website.
GPEC Meeting April 9,  Tight Credit Conditions  Consumers scaling back purchases, consolidating finances  Huge overhang of housing supply exists.
Chapter 13Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved ECON Designed by Amy McGuire, B-books, Ltd. McEachern 2010-
Economic Decision Makers ECO 2013 Chapter 3. Households Play a starring role in a market economy Determines what gets produced Supplies labor, capital,
LAO CBO Hot Topics 101: State Budget Outlook Legislative Analyst’s Office CASBO 2012 Annual Conference April 11,
School Finance 101 Presented by Thomas E. White Michigan School Business Officials October 2004.
Dominican Republic Victor A. Canto. Quality of the Data Available data is fairly limited and so is the quality According to the data, during the late.
TAXES CHANGE BEHAVIOR. 1.PAY FOR THE COST OF GOVERNING WHAT ARE THE FUNCTIONS OF TAXATION?
LAO Budget, Pensions, and ERAF Legislative Analyst’s Office September 24,
Week 7: California State and Local Government Finance Guest Speaker: Michael Cohen, Legislative Analyst’s Office, Local Government Section –Proposition.
State Economic Outlook Legislative Analyst’s Office Presented to: California Association of Chief Business Officers April 3,
(c) 2008 The McGraw ‑ Hill Companies 1 The Public Finance Context.
Chapter 12 The Design of the Tax System. Objectives 2.) Understand the efficiency cost of taxation. 3.) Learn the criteria for evaluating the equity of.
Governor's January Budget Proposal. Budget Assumptions Balanced Budget, no structural shortfall in and beyond Modest, steady growth.
ECON chapter 9 1. __________ affect the factors of production & therefore, resource allocation.
Week 6: State-level Finance Issues Guest Speaker: Brad Williams, Senior Economist, LAO –Overview of revenues for California State Budget –Issues in revenue.
Financing the Future: Fiscal Modernization in North Carolina Roby B. Sawyers, CPA, Ph.D. College of Management.
LAO Perspectives on the State’s Revenue Structure Legislative Analyst’s Office Presented to: Commission on the 21 st Century Economy January.
LAO Update on State Budget Jennifer Kuhn Legislative Analyst’s Office February 20,
The Design of the Tax System Chapter 12. “ In this world nothing is certain but death and taxes. ”... Benjamin Franklin Taxes paid.
Tax Policy Center Urban Institute and Brookings Institution California’s Fiscal System Kim Rueben The Tax Policy Center and The Public Policy Institute.
LAO California’s Fiscal Outlook Legislative Analyst’s Office Jennifer Kuhn November 17,
TAXATION.
LAO Propositions 30 and 38 Legislative Analyst’s Office Presented to: Alameda County Office of Education September 12, 2012.
LAO State Budget Update Jennifer Kuhn Legislative Analyst’s Office October 4,
Legislative Analyst’s Office Presented to: November 20, 2014 California Association of School Business Officials, CBO Symposium 0.
Jefferson City Revenue Forecast Staff Analysis. Accuracy in Estimates Important to Make Best Use of Tax Payer Money.
An Optimal Economic Growth Strategy for Alabama Dr. Sam Addy Associate Dean for Economic Development Outreach & Senior Research Economist Montgomery, AlabamaJanuary.
LAO California’s Fiscal Outlook Jennifer Kuhn Director, K-12 Education Legislative Analyst’s Office April 15,
LAO State Budget Update Jennifer Kuhn Legislative Analyst’s Office November 21,
Legislative Analyst’s Office Presented to: December 15, 2014 California School Boards Association, Annual Education Conference 0.
The Economy, the Budget, issues, talking points, solutions? Professor Dennis Hoffman W. P. Carey School of Business.
Chapter 17 Taxation, Budgetary Policy, and the National Debt © 2001 South-Western College Publishing.
CHAPTER 9 Taxation. Impact  Resource Allocation - change LS, higher tax = shift to the left  Behavior Adjustment - sin tax  Productivity & Growth -
Public Policy in Texas Chapter 12. LEARNING OBJECTIVES LO 12.1 Analyze and evaluate Texas tax policies. LO 12.2 Describe the politics of state spending.
Texas Revenues IV April 26, The term tax incidence focuses our attention on the individuals and groups that actually bear the burden of a tax. Tax.
State of the States Brian Sigritz Director of State Fiscal Studies NASBO NASACT Middle Management April 12, 2016.
The California State Budget Senator Carol Liu, Chair Senate Budget & Fiscal Review Subcommittee on Education.
“The Big Tax Swap, 2008 to 2016” Who has benefited? Who has paid? And what we can do about it. Statewide Assembly May 2 nd, 2016.
Chapter 18 Public Finance: Expenditures and Taxes Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without.
Economic Background: Short Term and Long Term Issues January 29, 2009 Russell Fehr City Treasurer.
Ewww….Taxes Chapter 9.
Tax Reform Session 5-6.
The School Finance Outlook for and Beyond
C h a p t e r 16 TAXES ON CONSUMPTION AND SALES
2018 Utah Tax Reform Working Proposal
California’s Fiscal Outlook
Public Finance: Expenditures and Taxes
May Revision CSAC.
Presentation transcript:

LAO Perspectives on the State’s Tax Structure Presented to: Senate Select Committee on Recovery, Reform, and Realignment Hon. Sam Blakeslee, Chair February 2, 2011

LAO Background: Taxes in California  State and Local Governments Rely Predominantly On the Following Four Taxes: Personal income tax (PIT) Sales and use tax (SUT) Corporate tax (CT) Property tax  For the State, Revenues From the First Three Taxes Comprise 95 Percent of Proposed General Fund Revenues 1

LAO Background: Tax Burden—Aggregate 2

LAO Background: Progressivity and Regressivity 3

LAO Background: Tax Incidence  Important Difference Between Who Pays a Tax And Who Bears the Burden of the Tax (Incidence) Corporations legally owe taxes, but the burden is borne by workers, consumers, and owners of capital Retailers legally owe sales taxes, but the burden is borne in large part by consumers  Economic Perspect ives General agreement on who bears PIT and SUT Differing views on CT and, to some degree, on the property tax 4

LAO What Criteria Do You Use to Judge a Tax System?  Reliability (Growth and Stability)  Broad-Based Levies  Impact on Economic Activity  Equity Considerations  Administrative Feasibility 5

LAO How Our Tax System Stacks Up— The Positive  “Robust” System Grows roughly in line with the economy  Broad-Based Taxes, Levied on: Income Consumption Wealth (property tax) 6

LAO How Our Tax System Stacks Up— The Negative  Major Volatility  High Marginal Rates  Challenges to Tax Bases SUT (services and remote sales) Tax expenditures Tax gap 7

LAO Volatility— Capital Gains Are the Main Story (In Billions) 8

LAO Volatility— Impact on State Revenues 9

LAO Volatility— Impact on the State Budget  Boom/Bust in PIT Revenues Complicated Our Budgeting Process Enormously  Problems in Late 1990s and Mid-2000s Surge of revenues one-time or ongoing? Over-committed ongoing spending programs Failure to set aside revenues  Result: Huge Operating Shortfalls 10

LAO Addressing Volatility: Budget Management Options  Most Effective Tool: Set Aside Above-Average Revenue Growth in Reserves  State Has Taken Action in This Regard Proposition 58 ACA 4 on 2012 ballot 11

LAO Addressing Volatility: Revising the Revenue System  Reduce PIT Rates on Capital Gains  Reduce Progressivity of Rate Structure  Rebalance Mix of Taxes Away From PIT  Income Averaging on Capital Gains/ Stock Options 12

LAO Base Broadening— Declining Sales Tax Base 13

LAO Base Broadening— Inroads on Income Tax Base 14

LAO Base Broadening— High Marginal Rates  PIT—One of the Highest Rate in the Country  SUT—Highest Uniform Rate In the Country  CT—One of the Highest in the Country 15

LAO Addressing Base Broadening— Expand Sales Tax to Include Services  Turn Tax on All Tangible Goods Into More of a Tax on Consumption Lower rate Exclude “intermediate” business purchases More equitable treatment of economic activity  Issues How inclusive? Will it apply to: Housing? Schooling? Medical? 16

LAO Addressing Base Broadening— Expand Income Tax Base  Reduce/Eliminate Tax Expenditure Programs (TEPs) and Lower Rates  Many TEPs Result in: Distortions Inequitable treatment among taxpayers 17

LAO Addressing Base Broadening— Tackling Tax Expenditures (In Millions) 18

LAO Conclusion  The State Has a Sound Tax System  Improvements Should Be Focused on: Reducing volatility Keeping bases as broad as possible and rates as low as possible 19