April 2012 CyberSelection: ITEP

Every American's thoughts turn to taxes in April, but ITEP thinks about taxation year-round. Founded in 1980, ITEP (www.itepnet.org/) is the Institute on Taxation and Economic Policy, a nonprofit, non-partisan organization devoted to research on federal, state, and local tax policy issues. ITEP works with lawmakers, non-governmental organizations, the media, and the public, providing accurate, timely, and straightforward information to promote understanding of the effects of current and proposed tax policies. If you want to see how the presidential hopefuls' tax proposals would affect you, other Americans, and the economy in general, check here.

In 1996, ITEP built a "microsimulation tax model" that analyzes the tax systems of all fifty states, the District of Columbia, and the federal government; it estimates the impact of tax systems and tax proposals on actual taxpayers at different income levels. A similar tax model is used by the U.S. Treasury Department, the Congressional Joint Committee on Taxation, the Congressional Budget Office, and by many state revenue departments, but those  models only produce analyses at the federal level, or for a single state.

Who Pays and What's Fair?

Who Pays? A Distributional Analysis of the Tax Systems in All 50 States is the signature publication of ITEP. Now in its third edition, the complete 2009 publication is available for free (www.itepnet.org/whopays3.pdf) under the Featured Reports section of the ITEP homepage. It contains detailed reports on each state's tax policies, but you can learn much about taxation by reading just the clearly written, 14-page introduction.

The study assessed the "fairness" of each state’s tax system, measuring state and local taxes paid in 2007 by different income groups, to show which states have done well or poorly in maintaining overall fairness in their total tax system. The main finding is that "nearly every state and local tax system takes a much greater share of income from middle- and low-income families than from the wealthy….when all state and local income, sales, excise and property taxes are added up, most state tax systems are regressive." The report goes on to say:

"Fairness is, of course, in the eye of the beholder. Yet almost anyone would agree that the

best-off families should pay at a tax rate at least equal to what low- and middle-income

families pay. Virtually every state fails this basic test of tax fairness: …only two states require their best-off citizens to pay as much of their incomes in taxes as their very poorest taxpayers."

State Tax Policy

Current state tax policy and news is front and center on the ITEP homepage. When you mouse over a U.S. map and click on a state, you are presented with links to three options: ITEP's Tax Policy Hub for that state, with reports, data, resources, and news; Who Pays [this state's] Taxes?, a copy of that state's pages in the latest Who Pays? document mentioned earlier; and The Latest [state] Tax News from CTJ's Tax Justice Digest. CTJ is Citizens for Tax Justice (www.ctj.org/about/background.php), a 501 (c)(4) public interest advocacy organization with which ITEP cooperates.

But before looking at any of these options, you may want to study The ITEP Guide to Fair State and Local Taxes (www.itepnet.org/state_reports/guide2011.php), which explains the difference between regressive, proportional, and progressive taxes and why ITEP favors progressive tax systems. Though all states rely for their income on taxes with some combination of these characteristics, the overall progressivity or regressivity of a state system depends on the degree of progressivity or regressivity of each tax within the system and the extent to which a state relies on each tax. ITEP measures these factors for each state, provides details, and charts the overall progressivity, or fairness.

Then you will want to check out the Tax Policy Hub for your own state. I went to my former home, New Hampshire, notorious as the only state in the U.S. with neither a statewide sales tax nor a broad-based personal income tax. The right-hand column, New Hampshire By the Numbers, gave a snapshot of NH taxes. For FY08, NH had $5 billion in tax revenue; 61.6 percent of it came from property taxes. Compare this with the property tax percent for other states: 36 percent for Connecticut, 34.3 percent for Massachusetts, and 30.2 percent for Indiana.

But back to the state hubs. "By the Numbers" gives other interesting data about the details of a state's personal and corporate income, sales, property, and any other tax components: the range of tax rates for personal income and personal exemptions; sales tax rates and how sales tax is applied to groceries; gasoline and diesel tax rates; cigarette tax rates; estate or inheritance taxes; and much more. Also on the hub pages are links to various reports, publications, and testimony specifically on that state's tax situation; resources on tax, revenue, and expenditures; state statutes, legislation, forms, and organizations; CTJ and ITEP news related to the state; and a very useful link to an automatic Google News search that provides targeted results. My only complaint about the state hubs is that there is no easy way to compare the data across several states.

Policy Briefs and More

A tab labeled Policy Briefs & Multi-State Reports is evident at the top of all pages of the site. ITEP Policy Briefs (www.itepnet.org/policy_briefs/policy_briefs.php) are divided into five sections: Tax Basics, Personal Income Taxes, Corporate Income Taxes, Sales Taxes, Property Taxes, and Other Taxes and Revenue Sources. Written to be accessible to average taxpayers, and really brief (2 PDF pages), Policy Briefs provide "a quick introduction to basic tax policy ideas that are important to understanding current debates at the state and federal level." Representative titles I found include:

How State Tax Changes Affect Your Federal Taxes: A Primer on the Federal Offset

Why States That Offer the Deduction for Federal Income Taxes Paid Get it Wrong

Income Tax Simplification: How to Achieve It

How State Corporate Income Taxes Work

Options for Progressive Sales Tax Relief

How Can States Collect Taxes Owed on Internet Sales?

Capping Property Taxes: A Primer

Uncertain Benefits, Hidden Costs: the Perils of State-Sponsored Gambling

Cigarette Taxes: Issues and Options      

Taxes and Economic Development 101

Multi-State Reports (http://itepnet.org/policy_briefs/multistate_reports.php) are issue-oriented reports that cover more than one state, but not necessarily all 50. Many of these longer reports contain an understandable, one-page, executive summary. The most recent titles:

"High Rate" Income Tax States Are Outperforming No-Tax States; Building a Better Gas Tax;

and Corporate Tax Dodging In the Fifty States. Also illuminating: Sales Tax Holidays: A Boondoggle; States Should Not Allow Amazon.com to Bully Them into Forgoing Sales Tax Reform; and Why Large Corporations Can Do Business in Your State Tax-Free. Another section under this tab leads to reports by other bodies that use ITEP data. Even though following these links usually leads you off the ITEP site, most of those reports are written clearly in language that is easy to understand.

Searching Further

Links to several categories of resources are found under the Other Resources tab: state government agencies and organizations, federal government agencies and organizations, and data sources. A linked list of multi-state organizations includes expected ones like the Council of State Governments, but also some that are perhaps new, like the Multistate Tax Commission, Progressive States Network, and Streamlined Sales Tax Project.

A search box, also available on all pages of the site, uses Google Custom Search and returns results from the ctj.org domain. Most of the CTJ cites, however, contain a link to the "Original Post," the sources for which include a wide variety of news and political sites, so this is a good way to find quality news posts on tax issues. I used it to search Mitt Romney, Newt Gingrich, Rick Santorum, Barack Obama, richest one percent, and Amazon. I learned a lot, and what I had read previously in ITEP's briefs and website helped me understand it and put it into perspective.

ITEP is recommended especially for its comprehensive and freely available content on state tax matters, its clear and accessible language, its non-partisan viewpoint, and its commitment to help states avoid budget shortfalls by showing who pays the most, and who pays the least, to support what government does.

Susanne Bjørner provides editorial services to publishers, librarians, authors, and researchers from a base in Spain. Contact her at bjorner@earthlink.net or www.bjorner.info.