Liability, Math, and Budget Crunches

Can a state tax all of the income of its residents, wherever it is earned? The US Supreme Court heard oral arguments yesterday in Comptroller v. Wynne. A decision will answer whether residents of one state are liable for taxes on income earned in another state, even if that income has already been taxed. If not, they may be eligible for a tax credit against taxes already paid. Maryland's Montgomery County could be liable for as much as $150 million in back claims for refunds and $25 million in future revenue.

Republican Governor-elect Greg Abbott of Texas treads lightly around tax relief. He said “it’s a general priority,” but would not promise a business tax break over a cut in local school property taxes, noting the “need to be able to do the math on it.” Following Rick Perry’s time as governor, Texas is running a budget surplus and has a $6 billion reserve.

Meanwhile, Kansas needs a heavy hand with spending cuts. Revenues are down, way down, and the state will need to cut $279 million in spending if it wants to  pay bills after June. After that, Kansas will need to cut another $436 million in spending from the next fiscal year’s budget. This crunch arrived about a year earlier than the state expected. Others, like TPC’s Norton Francis, saw this coming.

Scranton, in dire financial straits, plans to triple a local tax. Pennsylvania’s “Electric City” levies a flat tax of $1 per week on all who work in Scranton. The city awaits a judge’s approval to raise the tax to $3 per week. The hike that could take effect as soon as April, 2015. Property taxes could rise, too. In 2012, Scranton had to pay police and firefighters the minimum wage for two weeks in order to meet payroll. The city of 76,000 also has a pension system on the verge of collapse. Scranton has been under state oversight for 22 years, and must improve its finances by 2020.

If volunteer hours were tax deductible, would people donate more or less money? In 2013, 63 million people volunteered at charitable organizations, giving an estimated 8 billion hours of free labor worth $163 billion, according to the Urban Institute. People, foundations and businesses donated about $335.2 billion in financial support in 2013. A new TPC brief by Katherine Toran explores how creating a tax deduction for volunteer labor might affect charitable donations, as well as the supply of volunteer labor.

The carbon tax: You can’t keep a good idea down? In the first 100 days since Australia repealed its carbon tax, emissions were 4 million tons higher than during the same period last year, University of Melbourne’s Mike Sandiford explains. Troubling news, but former Australian Prime Minister Julia Gillard, whose administration introduced Australia’s carbon tax, predicts the tax’s return: “Good reforms often take more than one go around and they'll be back.”

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