Kevin Maguire, associate editor of the Daily Mirror has said: We've got to take sides on tax. Rich individuals, corporations, well-funded special interest groups and much of Fleet Street is on one the wrong side and then there is Richard Murphy plus a few others, including yours truly.
National Conference of State Legislatures, Traditional Limits Traditional limits refer to revenue, expenditure or appropriation limits. The features and restrictiveness of these limits vary considerably. Such variations make it difficult to categorize state TELs, but generally, they fall into one of the categories described below: Revenue limits tie allowable yearly increases in revenue to personal income or some other type of index such as inflation or population.
The limit provides for the refund of excess revenues to taxpayers.
This is the most common type of state TEL. Expenditure limits, like revenue limits, are typically tied to personal income or a growth index.
The impact of expenditure limits depends upon the limit parameters. In many states, the limit is tied to a growth index related to the expansion of the economy. Somewhat more restrictive are expenditure limits with refund provisions if revenues exceed the authorized spending level.
Appropriations limited to a percentage of revenue estimates. This variation of a spending limit simply ties appropriations to the revenue forecast, typically ranging from 95 percent to 99 percent of expected revenues.
It does not establish an absolute limit or tie growth to a measurable index. Delaware, Iowa, Mississippi, Oklahoma and Rhode Island have this type of appropriation limit in place. States also have combined components of various limits.
For Corporate tax research 2 64, Oregon has a state spending limit tied to personal income growth, and a provision requiring refunds if revenues are more than 2 percent above the revenue forecast.
This law limits spending and, in a sense, limits revenues by tying them to the forecasted amount. Colorado is another hybrid state.
Other Tax and Expenditure Limitations A number of states operate under voter approval or supermajority requirements that are not tax or expenditure limitations in the traditional sense; however, they can limit state revenue and expenditure options.
Therefore, they are discussed here as a type of limitation. Often these measures are more restrictive than traditional limits.
This is the most restrictive type of limit since all tax increases or tax increases over a specified amount must receive voter approval. Only three states have adopted voter approval requirements. Currently Colorado requires voter approval for all tax increases, and Missouri and Washington require voter approval for tax increases over a certain amount.
Fifteen states now require supermajority votes to pass tax increases. Supermajority requirements dictate either a three-fifths, two-thirds or three-fourths majority vote in both chambers to pass tax increases or impose new taxes. The effectiveness of supermajority requirements depends upon the political makeup of the legislature.
In states with one predominant party, the majority party may have enough votes to increase taxes or block tax proposals. Formulas for Fiscal Restraint Generally, two camps have developed regarding the formulas used in fiscal limits: Why are certain economic indicators contained in these formulas viewed as having such impacts?
Population growth is generally a steady, if not slow or stagnant, demographic indicator in a state. Generally it is not volatile, and it takes significant population inflows through interstate migration and international immigration to register a big increase year over year.
Such events typically only occur in certain pockets of the country and from time to time. The consumer price index CPI inflation measure also has grown slowly in recent years. While the CPI trend is related to the low inflation environment experienced in the United States, it is by no means a guarantee of future levels.
Also, it is widely accepted in economic circles that as the official government estimate of inflation, the CPI has the capacity to understate actual inflation.
This occurs because of important adjustments that are made to the data over time. In general, the personal income growth measure tends to track economic ups and downs, with incomes decreasing during recessions and increasing during expansionary periods.
As a result, use of this indicator is intended to keep budget growth restrained to the level of general economic growth in a state. Interest Groups Are Generally in Two Camps Supporters of TELs argue for their expansion into more states as a means of downsizing state government and containing spending and taxes.
CATO supports TELs that limit government spending to the inflation rate plus population growth index and mandate immediate rebates of government surpluses.About our Topics. A fast-changing world requires you to be current on crucial issues that affect your business. Taxspeaker delivers the latest in CPE courses while maintaining the .
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