RSS FEEDS
Recent Research
OCTOBER 17, 2011 | Testimony by NATHAN BENEFIELD
Inheritance Tax Reform
Testimony of Nathan A. Benefield, Director of Policy Analysis, Commonwealth Foundation for Public Policy Alternatives, Pennsylvania House Finance Committee
JUNE 7, 2011 | Commentary by KATRINA CURRIE
The Real Victims of a Severance Tax
Jim VanBlarcom, a busy Bradford County dairy farmer, set a work day aside to come to Harrisburg and tell his story to Gov. Tom Corbett's Marcellus Shale panel. Royalty money from leasing farmland helped him double his dairy herd size, and he's glad the industry's here.
MAY 11, 2011 | Infographic by COMMONWEALTH FOUNDATION
Natural Gas Tax for Smarties
Not sure if Pennsylvania should enact a unique and extra tax on Natural gas? here are some important things you need to know!
Recent Blog Posts
DECEMBER 30, 2011
PA Online Sales Tax Guidelines Claim First Casualty
When the Pennsylvania Department of Revenue issued a new bulletin instructing online vendors about collecting state sales tax, tax reform advocates expressed a lot of concern. The new guidelines were intended to clarify existing law, but still leave a lot of things unclear, and room for the department's judgment of "nexus."
Following the new directive, at least one online retailer has cut off all Pennsylvania ties. The online store ThinkGeek.com told the Commonwealth Foundation that "we did recently terminate our PA Affiliate Relationships based on the recent PA tax legislation" [though there was no legislation].
This means less revenue for Pennsylvania residents who sell or advertise with the site.
Federal courts have ruled that states can only require businesses with a "nexus" in the state to collect sales tax from shoppers, based on the Interstate Commerce clause. Residents are still responsible for the "use tax" on goods they buy out of state. While state law has always had broad definition of "nexus," going beyond simply having a physical presence, the new memo implies that almost any connection -- including advertising on Pennsylvania-based web sites -- could subject a company to state law.
Recently states have tried to go after Internet-only retailers to collect more revenue. Often this comes in the form of "Amazon taxes," targeted at Amazon.com, the largest online retailer, though the company on average represents a small portion of online sales. In fact, Amazon has come up with a new strategy to profit off of state efforts -- offering to serve as "tax collector" for other retailers for a fee.
But other retailers, particular smaller ones, will face significant compliance costs to figure out which of the more than 8,000 sales tax rates across the country to charge each user. And Amazon taxes have backfired in other states, resulting in online retailers dropping all local ties and pulling out of the state, and frequently fail to generate significant revenue.
Background Info:
- In recent Congressional Testimony, Joe Henchman of the Tax Foundation discusses the issue of online retailers and sales tax compliance.
- Tax Foundation Special Report on Amazon Taxes.
- Wall Street Journal debate on taxing online retailers.
- Mercatus Backgrounder on The Internet, Sales Taxes, and Tax Competition.
- ATR Policy Brief on Internet and e-Commerce Taxation.
posted by NATHAN BENEFIELD | 00:33 PM | 0 comment
DECEMBER 29, 2011
Tax-Exempt Government Property Adds to Harrisburg's Woes
The city of Harrisburg is facing a fiscal crisis primarily brought on by over-spending, accruing too much debt, and getting into areas government has no business—from the incinerator to owning a baseball team to collecting wild west artifacts.
But the Capitol City's woes are aided by the abundance of tax exempt properties. Nearly half of all property value in the city of Harrisburg is owned by government or hospitals and other charities exempt from property taxes. Yet these properties still receive city services, including fire and police protection, and benefit from other core city responsibilities, like road repair and clearing the streets of snow (more or less, as anyone who has driven in Harrisburg after a snowstorm can attest).
According to information from the Mayor's Office and the Dauphin County Assessor detailing Harrisburg tax-exempt government properties, assessing the municipal property tax rate on land (not on improvements, or imposing the school property taxes) would generate around $6 million per year, not an insignificant sum.
The city receives payment in lieu of taxes (PILOTs) to offset some of these costs. According to the Act 47 report, the city gets about $410,000 in PILOTs from 13 organizations. The state budget also includes $500,000 (down significantly from years past) for Capital Fire Protection. But these payments are a far cry from what these entities would pay if their property—even just the land portion—was taxable.
The tax exemption creates a perverse incentive for government and tax exempt organizations to acquire more property than they need. More importantly, these exemptions—combined with over-spending—require higher property taxes on businesses and homeowners.
According to a comparison in the Act 47 plan, property owners in the city of Harrisburg would pay two to three times as much as those in the surrounding suburbs, on average. This high tax burden helps explain why so many are moving out of the city: Harrisburg has lost 45% of its population since it peaked in 1950.
posted by NATHAN BENEFIELD | 11:08 AM | 0 comment
DECEMBER 28, 2011
Map: PA Among Highest Unemployment Tax Rates
The Tax Foundation has a new map showing unemployment insurance tax rates. As you can see, Pennsylvania has one of the highest tax rates in the nation.
The unemployment insurance tax is a payroll tax imposed on employers/employees—a higher rate makes it more expensive to hire workers.
Moreover, the effective rate is expected to go up, as Pennsylvania's Unemployment Trust Fund is more than $3 billion in debt. Last week the state House passed legislation to issue $3.5 billion in bonds, to pay off the loans owed to the federal government, and effectively get a lower interest rate, while legislation passed this summer would provide modest savings.
But neither solves the inherent problems of an unemployment system that is quickly drained during recessions, making it increasingly costly to hire workers in a bad economy.
posted by NATHAN BENEFIELD | 02:03 PM | 0 comment
