Tax and Budget Reform

Progressives can demand a fairer, more accountable tax and budget system through policies that reduce economic inequality, eliminate economic giveaways to companies receiving tax breaks and government contracts, and create more transparent tax and budget decisions:

* Making Taxes More Progressive:  For a general guide to best practices on local tax policy, see ITEP’s Guide to Fair State and Local Taxes. On key policy for states has been the State Earned Income Tax Credit to ease the tax burden on lower-income working families as well. 

* Reforming the Corporate Income Tax: Many states have enacted Statutes for Combined Reporting to prevent businesses from using complex combinations of subsidiaries to manipulate where they have to report profits. To avoid federal tax giveaways reducing state revenue, many states have “decoupled” their tax codes from federal definitions of corporate income. 

* Tax and Budget Transparency: Connecticut in 2006 passed a particularly comprehensive review law, which establishes a commission to review each tax credit and policy in the state, measure what jobs they actually helped create or retain, whether there are better alternatives to achieve the same policy objectives.  Floridians Against Inequities in Rates a few years ago promoted ballot initiatives language (see text of initiatives) to sunset tax expenditures every ten years and eliminate other tax loopholes. The Montana Senate approved SB 242 to require publicly-traded corporations to disclose basic tax information, such as how much income they made in the state and taxes paid to help avoid corporate tax avoidance. 

* Fixing Failed Tax Subsidies: A few states, with Minnesota, Maine and Illinois in the lead, have enacted disclosure laws to track individual economic development deals and make the information accessible to the public. Good Jobs First’s Model Accountability Legislation includes disclosure rules, job quality standards and other economic development subsidy reforms– and gives private citizens the legal right to enforce these rules if state officials fail to do so. 

* Reforming Government Contracts:  The scramble for government contracts often corrupts government and its agencies, so some states use responsible contractor laws screen out shady employers who cut corners on public services. New Jersey and Arizona have flatly prohibited companies that offshore jobs from bidding on their state contracts. New Jersey has also passed the most far-reaching “pay to play” law prohibiting campaign contributions from government contractors after a series of contracting scandals.