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Overview

Overview. Revenues & Business Taxes Federal Legislative Activity State Legislative Activity. Projected. State Year-End Balances As a Percentage of General Fund Expenditures (Source: NCSL). Percentage Change in FY 2006 Revenue Growth Estimated vs. Actual (Source: NCSL). 49 states reporting.

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Overview

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  1. Overview • Revenues & Business Taxes • Federal Legislative Activity • State Legislative Activity

  2. Projected State Year-End BalancesAs a Percentage of General Fund Expenditures (Source: NCSL)

  3. Percentage Change in FY 2006 Revenue GrowthEstimated vs. Actual (Source: NCSL) 49 states reporting.

  4. Projected Percentage Changes in Revenue and Appropriations: FY 2007 (Source: NCSL) 49 states reporting.

  5. Net State Tax ChangesBy Year of Enactment, 1997-2006* (Source: NCSL) * 44 states reporting for FY 2006.

  6. Total Tax and Nontax Revenuesin billions of dollars (Source: NCSL) * 44 states reporting for FY 2006.

  7. State Structural Deficits in FY 2007, FY 2008 and Beyond (Source: NCSL)

  8. Longer-Term Fiscal Pressures • K-12 education • Medicaid • Pension obligations & OPEB • Infrastructure

  9. Total State & Local Business Taxes • Nationwide, businesses paid $497 billion in state-local taxes in FY05 • Businesses paid 44 percent of total taxes collected by state and local governments • State & local business taxes up by 25% - over $100 billion – between FY02 and FY05

  10. Federal Legislation on State Taxation • Authorizing State Tax Incentives after Cuno • Nexus for Business Activity Taxes; PL 86-272 • Streamlined Sales Tax Legislation • Withholding for Nonresident Employees • State Taxation of Retirement Income • Internet, Telecom, Pipelines…

  11. State Legislative Trends • Gross Receipts Taxes • Related Party Expense Addback (“anti-PIC”) • Unitary Combined Reporting • Sales Factor Trends • Tax Shelter Disclosure • SSTP, Property Tax Reform, Telecom Reform…

  12. Gross Receipts Taxes: Next Big Thing? • History • Washington • West Virginia (repealed 1987) • Indiana (repealed 2002) • Today • New Jersey (sunsets after 7/1/2006) • Kentucky • Ohio • Texas

  13. Gross Receipts Taxes: Next Big Thing? • Tomorrow ? • Illinois • Michigan • IN, WV, NC… • Concerns • COST Policy Position & Survey Results • Joint COST / Tax Foundation Study

  14. HI Anti-PIC: State of the States WA ME MT ND OR VT MN NH ID WI SD MI MA NY WY CT RI PA IA NV NE NJ OH IN IL UT DE CA WV CO MD DC VA KS MO KY NC TN OK AZ NM AR SC GA AL MS AK TX LA FL Key Not applicable (e.g., unitary or no corporate income tax) Anti-PIC statute (SC-Geoffrey; TN-No addback if disclosed) Anti-PIC legislation considered bin 2004 or 2005 or 2006 but not enacted (as of September)

  15. Trends in Expense Addback Proposals • Scope: Royalties, interest, management fees? • Safe Harbors • Expansion of Sec. 482-type Powers • MTC Model Language

  16. Unitary Combined Reporting • Vermont • Kentucky AMC: Nexus Consolidated • Ohio CAT: Consolidated or Combined • Texas Margins Tax: Unitary Combined • MTC Model Statute & “Tax Havens”

  17. Increased Sales Factor: Recent Activity

  18. Tax Shelter Disclosure • Enactments (in order of adoption) • California (2004) • Illinois (2005) • New York (2005) • Connecticut (2005) • Minnesota (2005) • Massachusetts (2005) • Utah (2006) • West Virginia (2006) • MTC Model Statute & “51-State Spreadsheet”

  19. Other Issues • SSTP • Property Tax Reform • Real Property (ID, SC, TX) • Business Personal Property (CT, KS, ME) • TABOR • Telecom Taxation

  20. Questions? Joseph R. Crosby 202/484-5225 jcrosby@statetax.org

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