Transcripts For CSPAN2 Urban Institute Discussion On State Budget Priorities And Tax Revenue 20240714

Their economic circumstances. States for what about the effects of the tax cuts and job ask what is passed at the end of 2017, they particularly were worried their state Income Tax Revenues would be more volatile and do it hard to predict what the results were going to be due to shifting payments over time and changes in federal deductibility. We encourage all the audience, both those in person and those who might be watching unlighted joint in the in the conversation via social media using the liveaturban as we have on the screen here we have a great panel today ready and willing to discuss all the issues at this time and in the near future. The Panel Discussion will be followed by a questionandanswer session, so you all should write down your questions or remember your questions and youll have an opportunity to ask them of the panelists at the end of the moderated discussion. I would like to introduce the moderator for todays panel, howard gleckman, a senior fellow at the urbanbrookings Tax Policy Center. Use editor and frequent contributor to Tax Policy Center blog on all things cisco. Hes an authority on longterm care issues, which may be helpful today because we will be discussing some states chronic longterm fiscal problems. So let me welcome howard and the panels to the stage and that howard will be introducing our panelists. [applause] thank you, mark here thank you all for coming. This is as mark suggested a very interesting time for states. On the one hand, many iceman in tax revenue extra Strong Economy and benefits of tax cuts and job act, along with many states said they hated. On the other hand, there are states who feel some real risks to their huge revenues. We will talk about revenues, talk about what states are doing with the money and how some at least are thinking about reforming their tax structures. Our panelists today your longer files but very briefly, john hicks is executrix of National Association of state Budget Officers. Kim rueben is fellow at the urban brookings Tax Policy Center of the direct of state and local finance initiative at urban. Next is joseph bishophenchman, executive i present the Tax Foundation finally nick johnson is Senior Vice President at the state fiscal policy at the center on budget and policy priorities. We will have an informal conversation among ourselves for a while and then we will turn over to you for some questions. Let me start with john. I would if you could give us an overview of state revenues for this budget year . Thanks, howard. The word i would use his very improved. We have states Revenue Growth of the you were in and last year as a back to back on the best weve seen since just prior to the Great Recession. And so, but theres a story behind that that makes it more and usual and pass good times and that has to do with the interactivity of the tax cut and jobs act and the timing of personal income tax payments. For states general fund the personal income tax has a group of 50 is the 45 5 of our money. So personal income tax is a very important stream of revenue. Last year we finished fiscal year 18 with personal income tax growth on a beating basis of about 8 which is a really high number. But the story was in december, estimated taxpayers walked down to the tax office and wrote the check in december. It was a check they wouldve written baby in april of the later you. We got whole bunch of money december of 2017. Thank you, kim. Last year fiscal 18 we were waiting in april to may be given bunch of that money back in tax refunds when filers files. We didnt. States talks about the significant amount of nonwage income being the driver of a lot of the increase while withholding has been good, the real boost in income was the result of Capital Gains and dividends and bonuses and other nonwage income. States had revenue surpluses at the end of fiscal 18. Revenue surpluses they didnt count on rf time to act on. The good news is a whole bunch of that went into our rainy day funds as a function of the law of the state of what to do with the yearend surplus. We walk into this year, doing pretty well, going into november. Suddenly in december of 2015, estimated tax payments dropped like a rock, almost like 40 over the the prior period pic in january also a big decline. Revenue collected one whats going on. You do something to with the fact that so long an incentive for wealthier taxpayer to pay their taxes in december because of the 10,000 federal, state and local Tax Deduction limitation. Clearly time is now new to state revenue collections. And so states were speculating that, april we may be all right that we are not sure. April came and we did get back that money, almost 30 increase in s. B. To payments or final payments across the board, still waiting to get some states in. We were rising high in november, and we dropped, and what we done this, right back to where we are from november. And thats about a x. 5 increase in revenues on the income tax side and about 6 increase in revenues total general fund. More than estimated, so were looking at surpluses again, howard, this interview. I will call this late money. We got late by nilesh and were getting late money this year, more than estimated. Only nine states have new revenue estimate for the fiscal 20 that incorporates the april tax receipts. Most of the states have completed the revenue estimates, as a lot of money is going to roll into rainy day funds and ending balances again at the end of this year may come out as a norm of wood. Its been a topsyturvy couple of years. A good period for states. Rainy day funds have been beneficial a lot of this extra money or money greater than budgeted. Before the Great Recession we dropped down to about 2 of our spending intrinsic and out we have in a savings account. We have been slowly building a backup. Beyond that which we were required before the Great Recession, beyond what we were in the early 2000 recession, we had record levels of rainy day funds across the country. Will end up at about 7. 5 or more at the end of this fiscal year and 7. 4 what was estimated in governance budgets. We were probably exceed that. The good news about late money is sometimes its nonrecurring. Theres caution but how much of that nonwage income would repeat itself next year. They acreages of one that moneyo store it away, to prepare for the next recession, which has been one of the highlights of governors and legislators Budget Proposal as they are pleading their work now is improving. Gill, governor signed his budget the other day and touted the billion dollars that will be in the rainy day fund. The Arizona Governor and legislature came to agreement on some big things and that was another highlight they made is another billion dollars in rainy day fund. So something as a look past the last 30 years, states would pay more attention to that now, Lessons Learned from the last recessions and as i call this late money has really been a nice way to increase that. And yet save, allow the legislature for the subsequent year to be delivered about how much of that is recurring and what we should do with it. Kim, he talked about the income tax. Give us more of a sense of where else this route is coming from. Of income taxes, thats one of the uncertainty was. But because there were other things going on, states get my from other places if there was the wafer for decision, Sports Betting. Theres new marijuana taxes. States are expanding the Revenue Sources into other things that are new and then i think like to just highlight what john was talking about, i think governors and legislators doing a good job, and much better job than what youre doing right after the Great Recession that we went into the recovery originally were think a lot of states saw money improving with a lot of her drastic tax cuts. Like in my mind i feel like what weve seen over the last couple of years and starting with what was a really hard budget year, which was the one not in the 2019, so if about to get into the 2020 budget year this year, fiscal year, last year was 2019 fiscal year, the 20102010 fiscal year was a really hard year for states were a lot of state actually were late getting to budgets done but it did is they made a lot of improvements where they took seriously the fact that unexpected shortfalls and actually changed a couple of things. We have places like kansas that we visited the income tax cuts, oklahoma did some of the same thing. In some ways the 2019 fiscal year was a bonus, and this year was a bonus because they were already doing things that look like it was smarter budgeting. The fact this year a lot of states starting with last you got more money and also have these Court Decisions that basically authorize Sports Betting and authorized their way for decision was basically means they can tax wayfair tax internet sales. It means they have other needs of revenue coming in and if you sort of terror that pair that with the fact the economy is doing pretty well, their budgets, their money seems pretty good. There is a sense of uncertainty and malaise that if you talk to people, like part of the reason theyre putting money into the rainy day funds is their time to figure out how long it will last and whats going to happen at the federal government to go forward. Joe, give us more of a sensf how this revenue is changing funding priorities. Joe and kim john and kim have talked about how a lot of this goes into rainy day funds but not all of it. Give us a sense of what else theyre doing with this money. And let me add my congratulations to you and this wonderful space. Very fitting at the urban institute and its important mission, so its very nice. As john and kim both suggested, whatever the opposite of a a crisis is, thats kind of the situation right now at the state level. I took over state policy of the Tax Foundation in in 2009, andy outgoing predecessor who is on his way to go beat Mitch Daniels as budget director, so pretty nice job, and he said very busy during the first third of the human state legislators are in session and then the summer its very, not a lot going on and you can get caught up on longterm stuff, event it starts wrapping up after the election. None of the years ive been at the Tax Foundation have been like that. We have been in kind of crisis mode since 2009 and probably a little before that. Ive never really experienced this is all brandnew for me, this year. There really are not states giving with major crises, and even the states that have like systemic, unsolvable budget problems like illinois or louisiana were able to make it through the year okay without actually addressing them. And then so you have i think states looking at this as an opportunity to look at longterm structural things. Its not so much how it would balance the budget this year, how do we get to the year, but we have the time and in many cases the money to be able to do some pretty dramatic things. It varies by state what that dramatic thing is. Texas and nebraska, their big thing that theyve tried is offer a long time is property taxes. Utah is looking more at sales tax structure and broader structure taxes as a whole, which park as i was able to tackle this year, overall. Eleanor ilsley of income tax. Some of these were able to result in legislation. Most of them didnt because these are kind of longterm structural big things, kind of white whales of various constituencies in those varies state that they were able to talk about those because there wasnt any of the kind of larger crisis over biting those, which is been the case for a long time. The only thing i would add to that we will leave this program on Budget Priorities for whats expected to be a brief pro forma session of the u. S. Senate. No votes schedule today. The chamber has been convening every three Business Days during this summer, postit work. Mick to legislative business will resume monday, september 9, and of the u. S. Senate here on cspan2. The presiding officer the senate will come to order. The clerk will read a communication to the senate. The clerk washington, d. C. , september 3, 2019. To the senate under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable ted cruz, a senator from the state of texas, to perform the duties of the chair. Signed chuck grassley, president pro tempore. The presiding officer under the previous order, the Senate Stands adjourned until 8 30 a. M. On friday, september 6, 2019. Without putting a particular partisan spin, thats not been what states to do when they set up their revenue structures whether its good or bad. Its not something that is expected and its not something that has happened so you started in the introduction talking about looking for other Revenue Sources. That is something that the states do to, they need to find more revenues, the first are not looking to do is raise their sales tax or their income taxes unless theres really a punctuation that happens such as a Supreme Court decision declaring your k12 System Unconstitutional which has and across the country in several places. It was the last time i stayed in Kentucky Rate income and sales taxes because the Supreme Court said that so it is just not the rule, whether there an opportunity there or not is true but its not the way the state chose to set themselves up. I guess i would be more in mixed camp that we do see this bifurcation. Weve done some work there, ive done some work where we actually found that states responded differently to unexpected deficits after the Great Recession than they did before and it was largely related to whether republicans were in control or not and basically didnt raise taxes to find sort of maintain services, they cut things and they did that more and we did have to shift to more republican control. And we have seen in the aftermath of thisrecession , the Great Recession, in my mind weve seen this bifurcation. Weve seen some states which have basically set on arguing that they need to expand the sales tax and income tax and you get all this growth, the whole texas miracle that doesnt reallypan out for other states. But then weve seen other states like california and new york and new jersey and dc and maryland actually increase many millionaires taxes rates that we might see more movement especially as income inequality becomes a thing to try and figure out whether there is a way to rebalance things and whether there is a way to collect more money for certain groups. Now, i dont know if you rub some salt in. I do think there is this difference, i also want to go back to be relatively optimistic about over the three budget cycles but then thats different, part of that is whether were at a global peak or a local peak and i feel like in some way im really impressed with what states are doing right now in part because i was so unimpressed. Like, that were some of the things they did the first time they got money coming in after the Great Recession but increased, there were certain states that basically taxes, that is what they did rather than source some spending. I find it just an interesting change in the rhetoric and im also sort of interested in how were going to see legislatures and the executive work going forward. We have seen more, weve seen a decline in the number of states that have all republican controls and weve seen an increase in the number that are democrats. Weve also seen this interesting mix where the ones that are split, we basically see as opposed to the houses being different, we see governors of one party and houses largely both of the other party except for minnesota so there is sort of this interesting discussion and description of whats going on where is it that you have anexecutive who is negotiating with people who are very different than them. Even states like illinois where were talking, youve got also the problems but im interested in their tax reform proposal. I want to go to a graduated income tax and the legislature is aboutto pass it and it will go to referendum. Is there any future in graduated income taxes ormore graduated income tax . Its the present. Most states have graduated rate income tax, they may be more or less equally graduated but illinois is one of the few stathose constitution is borrowing them from head to having a graduated rate so all theyre doing is proposing to the voters they change the state constitution to allow them to do what every other state income taxes allowed to do. And i also think that states that you already have the ability to have more graduated income taxes probably will consider more and more having a new top bracket for the wealthiest taxpayers. Or consider increasing the rate at the top of the income spectrum the cause theres so much money now at the top of the income spectrum that to leave that aside sort of doesnt make sense. Its one of the reasons why i think Income Tax Revenues generally at the state level have not kept pace with this economic expansion because a lot of the economic expansion has occurred at the top of the income spectrum and estate tax codes collect an awful lot of revenue at the middle of the income spectrum so theres a disconnect. I also think that you could and we already are seeing a reaction against the tax cuts and the jobs act. The tax cuts and job act puts an enormous tax windfall to the quite well off households and to corporations and so i think in a lot of cases you are seeing essentially well, maybe we can roll back a little bit of that revenue. The federal government exploding budget deficits are going to mean the federal government may not be as present for state in the future, maybe states need to take that into their own hands and raise a little bit more of that revenue. So certainly illinois. Certainly illinois has messed up a property tax system, messed up a sales tax system. Income tax, because they are constitutionally required to just have one rate and tax everybody, tax it the same way. Their hands are tied from messing up the income tax. Now, is it not a given that a state income tax will have a messed up tax system, even messed up income state tax system, a lot of states do it. I dont see that in the future for illinois. I think if they repeal this constitution they will have less tax forces and the one thing that kind of keeps things going in illinois, that is this low income tax, people willing to put up with the rest of it because theres countervailing positives including that, then that will be gone. One of the things i mentioned was wanting to tackle the quality. Ive yet to see evidence that tax policy can meaningfully address that. These states with the highest inequality are also the state with the most progressive tax systems. There the states with the millionaires taxes and the income tax. What i do agree with is this is an opportunity that has not really been used forstate to tackle structural changes. One we focus on quite a lot at the Tax Foundation is real tax reform. Most date tax systems , i would say there dying badly but that concedesthey were designed at all. Thats the process of historical evolution and accident that i can go into a store in illinois and by four items and pay for different sales tax rates, not counting the localsales tax at the top of that of which there are 10,000 across the united states. Luckily, the way their decision is motivating some states to look at the system including some of the most recalcitrant like colorado and louisiana and alabama, but theres a lot more that needs to be done so going back to illinois, illinois, only taxes 20 percent of taxable transactions under its sales tax so the previous governor, when he came in he said i will concede that we should expand the sales tax to that if you, the democrats in the legislature will concede to Structural Reforms to pension systems, to work rules, to a bunch of other stuff and thats where the debate ended because they werent willing to concede on that and i think thats going to continue to be the debate in illinois so kind of pouring more money into the system without structural changes is like pumping blood into somebodywho has a transfusion when thats not solving the underlying problem. It seems like states always talk about broadening the Sales Tax Base. Its a great conversation until it becomes legislation and the lobbyists get to it so we cant do my industry because were special. Let me be optimistic on something and his praises everybody on this platform. Like your anniversary of the washington dc tax reform which included expansion of the Sales Tax Base so the Sales Tax Base is one of the things experts agree on that nobody else does but we were able to get it done in dc as part of a comprehensive tax overhaul. I think you are on the Staff Associated with drawing up therecommendation for it. You are on the commission. And then you know, the Tax Foundation said nice things about it, Grover Norquist said nice things about it. We found a way to advance competitiveness, progressivity andsimplicity. And if dc can do it, no state really as an excuse not to even try. I think thats right, i will point out i did get more state mail about the fact that we test bogus studios and anything else ive ever done from people i know. But that was something where all those gyms aredoing fine. That was sort of a unique situation in some ways where the commission was sort of the business side and these special interest groups, it was put together as a package so there was some income tax reform that went with the sales tax for him. That moved forward and the fact that dc is going gangbusters, these things are always easier to do if there is money in the system. But i do agree that i think we should, it would be great if more places thought about what their tax system looked like and thought about how reforming it could actually better serve the needs that they have. This might be taking us in a different direction. One of the things i feel like feds need to worry about whats going on with their pensions and where were going to go when the economy turns down, but one of the things that im worried about and i feel like states are worried about is one thing that were really well or pretty well in the last recession was the fact that the federal government intervene in a way that was pretty good in terms of loving states in those early years of the great depression. Im worried in the next recession whether we have room in the federal budget for any political will to take that role. If we basically have a whole bunch of midwestern states that are having tornadoes and underwater and we cant get a bill through fordisaster relief , are we at a point where the federal government will step in and will play that role and what does that mean for states if they actually haveto do more on their own . One of the things that might mean is some numbers, just in the last five years, 30 states have raised their gas tax. I guess thats art of that phenomenon is i dont know about giving up but essentially realize youre not going to get much more from the federal government. John, what do you see in terms of states taking on these responsibilities themselves rather than waiting for the fed . We never waited for the fed that transportation funding because we do the prominent amount of fundraising for roads and bridges in the united states. Federal governments an important partner there, but its the state to raise the money for transportation. 34 states now who have raised their gas taxes in the last six years and we get a metric last year where above, among those 30 it had been a quartercentury is the last time they raised their gas tax prior so that the heavy lift for an elected official to make a vote on. Theres still a handful of statesdebating whether or not to do it again but thats a good example of , that has been the most active tax issue in State Governments in the last several years has been transportation funding. After states have electric vehicle fees to be prepared for the replacement law of fuel tax revenue so and then on the expansion ofSales Tax Base , in State Governments we dont move with mighty speed with most of it at the same time, we move incrementally, slowly but there are state expanding their sales taxes base. Iowa and kentucky did itlast year. There have been several states who started to move into digital goods. Theres no debate in several states about expanding the base of the sales tax the moreservices. Connecticut even tried to propose a attorneys and accountants, you know, the third rail of sales taxes. So it moves slowly but there is consideration and thats not a red blue issue in terms of expansion of Sales Tax Base, thats getting to a recognition of the loss of the base. Our sales tax Revenue Growth has not stayed up with the economy. And then the wayfarer decision is going to help that a little bit. On average we are seeing the online sales tax implementation is upping sales tax revenues bytwo percent roughly, thats just a good median of what the estimates have brought in. So there are activities there. And infrastructure is probably the best example of where states have accepted higher revenue requirements as a function of getting done what they need. I dont know where i stand on our federal balance budget but a lot of it at the state level is pushed to solve problems as driven, you just cant goin the red. You cant borrowexcept in limited ways. Your operating budget. You cant just put this off or resolve it, when the cost comes down on recession, sometimes dont stop the clock to give it more time you got to solve these problems at the state level and theyre very proud ofthat. If you talk to leaders at the state level, theyre able to tackle these in ways that washington cant. Theres a little bit of a disconnect , i tension that exists in a couple of things that have been said because john, you pointed out correctly theres a conventional wisdom that we just dont want to raisetaxes , its political. Its politically problematic, its just not going to include states during the economic expansion and at the same time on a more practical level when youre looking at your tax code, youre looking at the revenue needs of the state of the Transportation Trust fund say, the political will does come together around discrete tax increases and sometimes in very surprising places. Oklahoma last year for the first time and i think a quartercentury and acted hundreds of millions of dollars of tax increases overcoming those nations most restrictive supermajority requirement, overcoming a majority to raise new revenue physically for k12 schools. I was very struck this year in newmexico , at how the tenor of the discussion changed in a state where a major source of revenue is oil and gas receipts at a time when oil and gas revenues are actually pretty high, when the expected budget gaps had not come to be because oil and gas revenue was coming in. Nonetheless lawmakers were looking hard at their budget, looking beyond the bump in gas revenues and saying how are we going to be prepared for the inevitable moment and that revenue goes back down and then taking a hard look at the tax code and saying how do we change our Income Tax Revenues to make it less volatile. To put in place, two mechanisms so that it will raise revenue if overtime . How do we look at our corporate taxes to reduce the ability of corporations to move their profits from state to state to avoid taxation mark i feel like, i actually see a bit of a shift towards that more practical mindset that joe is mentioning in the area of taxes pushes against a bit this sort of reflected antitax. But that i think was part of or much of the last decade was sort of part of the dna of the state tax code. One of the interesting stories for a few months ago is Washington State which raise taxes to pay for a public longterm Care Insurance program. This is a case where there seem to have been demand for the program and they were willing to raise a payroll tax to pay for it so i guess youre right, there are at least some cases where if the program is popular enough, the legislators will raise taxes. Were seeing that were basically were seeing something for taxes are being introduced but there being earmarked and tied to what is going to be spent on and theres certain areas that peoplefeel like we need to invest in. I think k12 got a lot of attention last year. I keep hearing conversations about Early Childhood stuff and then we are hearing things about whats going on with training and not necessarily traditional Higher Education but other ways that people get the skills they need. To work, which you know, as a publicly financed economist you want money to be fungible and you want it to be able to be applied to the place that is most needed at that moment. But the fact that it seems like voters want to know what they are getting for their dollars is interesting and it feels like a direction were going in in some places. I would agree, transportation is the most prominent example of most of our state constitutional lockboxes and part of the willingness raise transportation dollars, even though it doesnt happen until every quartercentury is transportation has always been considered a user fee based financing so thats why you have fees on electric and hybrid vehicles theyre not paying for the use of theroad , but your correct in the sense of i do see a continued tendency towards your marketing as being either of the political necessity to be able to raise or increase a new revenue stream. Marijuana tax is the most recent example. When our alcohol taxes in the state are not earmarked to be used for something but our tobacco agreement, 20 years ago became earmarked, our lottery funds became earmarked, our marijuana funds are becoming earmarked. Its a way to get things done. It removes the flexibility of the broader State Government to be able to move things around and finance those things that things change, it locks them in and in some cases it becomes the only way to get the vote. Ironically i feel like people sometimes underestimate how much general money is needed for certain things. So Something Like the fact that people think the lottery pays for education and it pays for such a small percentage of education. Yes, thats how its being justified. In fact its a very regressive tax cause the people who are playing the lottery tend to be lower income. Especially in places where we are earmarking that for scholarships for Higher Education that artneeds base like the whole scholarships and things. It is especially the case that you have what feels like a tax on lower income people thats going to provide money for wealthier people or higher income people. It also seems that the states are very good at gaming the earmarks for things like tobacco when they could really use the money to pay for tobacco programs and Smoking Cessation or do they use it for other things . I worry sometimes that people say theyre going to use the money for particular purposes and instead of the money being fungible usable. I think at its core thats what drives voter skepticism, that lets take a whole bunch of general taxes and it will gofor wonderful things. People are skeptical and the further away the government is from them in terms of levels, the more skeptical they are that will be the case. So to the extent you can call those fears and im from San Diego California where we got a half cents sales tax for transportation and so they laid out this is what we are going to build, its a mix of highway and transit and local streets. There will be a separate oversized committee will review all the expenses. Going to give regular reports to it. Any two thirds vote on the ballot in order to get this past and they regularly get it and they had trouble recently, with what they live and what they promised but theyre sorting through what theyre going to do on that but generally, it results in a better product because its much more refined. I think the problem is a false sense of security. Youre giving voters or trying to establish something based on an assurance, this money is going to be a lot boxed for education but thats giving voters assault false sense of security that down the road makes them even more cynical lottery revenue for instance which doesnt grow, which is eroding as other forms of gaming come online doesnt manage to keep pace with the growing cost of providing k12 education so i think theres a really important difference between earmarking revenues versus explaining to voters that the money is needed because the things that their tax dollars pay for, education, transportation, healthcare and Public Safety are in fact the Building Blocks of Vital Community and they have to be funded and in order to fund them were going to have to fix these long standing problems in our tax codes which to some extent are a fluke of history, i think to a large extent are a function of the era in which they were enacted, in which State Governments were not merely even as democratic, multidemocratic as they are today, were put in place by wealthy and powerful forces. And we have to be able to go to voters and articulate a reform agenda that is tied to sound use of those dollars without artificially earmarking things in way that will just lead to future voter skepticism. I think that the only way to get out of this box of states like illinois which for years and years at spent this amount of revenue and brought in this amount of revenue and piled up over time to these deficits. If social services and education and transportation are important and they are, people should be willing to pay for them. The solution should not be lets dump it on a small percentage of high income earners that i think you mentioned earlier raise volatility problems when we go into the next recession because half of that revenue is going to vanish. New york had a bad december revenue wise because the stock market had a bad december revenue wise so i think theres a fundamental conflict there of running to rely on this group of people while not wanting to rely on them and expecting them to cover all the costs of everything. If theres more fundamental things underlying this trend then lets talk about how to address it but ive yet to see the evidence that tax policy meaningfully addresses it, that new york, one of the most volatile states in the country. We think a state like california is more reliably to income tax because its relying more on its property tax because of prop 13 so there is that volatility there but i think i love what californias done since the Great Recession. I feel like theyve been much more responsible than prior and the fact that theyre putting that money into rainy day funds and recognizing the fact that it is volatile. I do think that if youre going to address rising inequality, it is the case that the state with the most inequality have the most progressive tax system. I feel like the causality is going in the other direction area i feel like in some places the fact that you have a state like california that has a tremendous number of very rich people also a lot of people who are below the poverty line , in part their income tax is set up because its recognizing that and california is a big enough state that it is hard for people to migrate so i feel like some of the places where we seem the most progressive systems, its because theyre recognizing that they do have this variation where if youre a state that has a homogeneous population, then its easier to have things be flat or have it not very as much because people are all sort of at the samelevel. The problem though is if we start thinking about demographics and whats going on in the future, part of what i see is the big question and its a question withillinois but also a question and other midwestern statesand states where the demography is changing and the population is changing , in part , illinois is its own special case in my mind. Theres a level of corruption or things going on in that state that added to it but as you think about other places like michigan and like, other states where there facing the crimes in their local government and their cities and their population, but they have these public pension obligations, but were largely set up to be on a pay go basis. But that was set up at a point where populations were growing. Setting up generous pension benefits in the 1950s , if youre going to have growing populations, it was astounding to me that, i dont know if it was your numbers or somewhere else where it was like, detroit was number two in terms of cities in 1980. That astounded me if we think about where flint is now and i was at a meeting in the middle of winter one year where basically they pointed out flint owes as much in its 10 public pension payments as it gets in its general revenue so part of this is states are going to have to figure out whats going on with their changing populations, which are getting more diverse acrosstheboard, across states and with changing in the aging of the population to sort of figure out how theyre going to raise the money they are going to need to provide what might be more Expensive Services over a smaller number of people who are working. I know this is about tax policy but the phenomenon that weve observed that kind of states are able to tackle some big structural things because its not limited to tax policy. California is talking about, talking seriously about addressing huge problems on housing policy in that state. New york is starting to talk about solving transportation and transportation Construction Costs which are a big problem there. Theres only so much tax policy can do to address what houses cost in california or whether they can build a new transportation line in new york city area it all plays a factor and im hopeful that maybe we can tackle some of these at the state level this year because that only redounds positively on the tax situation. Let me switch heres a little bit and i dont want to run outof time without talking about salt. So the states, some state governors, Governor Cuomo that it was a war on his state. The tax cuts and jobs act, salt deduction. States are trying a number of things to try to respond to this, to try to turn limited deductible tax payments into fully deductible charitable contributions. They tried to work with a payroll tax, nothing seems to have quiteworked. Id like each of you to give me a sense of where you think the story is going, where were going to settle into a time when salt is captain nobodys going to care or whether this will be an ongoing battle. How do you think this will play out mark. In looking as you described, some of those workarounds last year were past and just a handful of state read really smallnumber of states. And so the jury is still out on a couple of them area as to the amount of assistance some of that provided and im thinking of connecticut more than i amnew york. So states, jared talked about opportunities to do structural reform. A lot of states the tax cuts and jobs act as an opportunity to do tax reform so there was almost a dozen states who did some very significant move around in their state tax policy to do several things, some of which was to stay revenue neutral with it and not increase the burden on their own state taxpayers, others it was to leave a little money on the table and others was to do some other things such as broaden the base of even the Corporation Income tax associated with that so i saw states using that big change more as an opportunity to rearrange a few things in their state tax policy, not so much to maybe give relief to those individuals of higher incomes whose liability increase the cause of that salt limit and so its going to be a longterm examination as to whether that change will create a greater limit on the ability of state and local governments to raise taxes. Im not so bare dish in that viewbecause i think that is fairly esoteric. But i dont see a lot of change happening. As a result of this, of states who had the most to lose taking a shot at some options, and some of which were tamped down clearly by federal rules and so i havent seen many more experiments pop up out of this current legislative session. First, i think this is sort of a really interesting lesson in the fact that being able to see something matters more than what the actual effect is. But the fact that a lot of the people who are affected by this salt or think they were affected by the salt art necessarily because the federal government got rid of the alternative minimum tax at the same time so youre very vocal up until the 50 to 300,000 people were losing their salt deduction. There are some politics involved in this and so i think we havent seen people leave the states, no matter what Governor Cuomo says. Yet i think its too soon. I think we are going to see more dancing around where states try things and the federalgovernment responds. There are going to be unintended consequences like there is interesting part about the federal governments response in terms of the regulation about limiting the ability for people to take charitable contributions instead of state and local Tax Deductions, and that tax credits for education and all sorts of other tax credits that states were getting, often state states were given for charitable contributions for tuition for private schools are also affected by that so youre going to see this interesting conversation about how do you define these things . I think in some ways its an interesting conversation highlights the fact that what a lot of nonprofits do and what a lot of state and local governments do in terms of what they provide in services is pretty similar so its worth figuring out whether there should be the difference between how you treat Charity Versus state and local governments taxes will be an interesting question. I think we are more broadly going to see conversations about what does it mean to keep the itemized deduction if you have only 10 percent of your population taking it so we might see some pushback to do something more broad and it is the fact that its the people at the top of the Income Distribution and i dont know whether it is really going to mean that states are not going to be able to have possessive taxes so i think were going to see a little bit more dancing around or proposals, im hoping states go slow, especially when we Start Talking about business taxes and moving income tax stuff to payroll taxes, just the present thing get obligated for low income families in terms of you need income tax, you need income to qualify for the earned income tax credit and so if money is moved from salary to being something thats considered payroll taxes so salaries go down, you could have circumstances where lower income workers and of being made worse off in an attempt to try to help people at the top of the Income Distribution keep their salt deductions. Were thinking about different ways we might see something where they expand limit or sort of change that you do on the income tax, property taxes. I dont think its done but part of that becomes especially interesting is the fact that in four years at this point,it all reverts back to the old tax system. Before that point, we will see either i think a new democratic president is going to do, or what to do a lot of things to the income tax system more broadly. If we think we take seriously interest in wealth tax, it might be moot as we go forward or we might see it, republicans retain the presidency and gain control or gain positions in congress , seeing something where they try to make it permanent so i think its going to be an ongoing conversation but i dont see there being a lot of action back quit revealing the salt would be a big tax cut or some of the wealthiest people. Its easily the most progressive these of the tax cuts and jobs act to create a rhetorical problem for a lot of people and weve been analyzing some of the various salt restoration bills that have been proposed by democratic members of congress and theyre all terrible ondistributional analysis because of just the dynamics of that. It does in law goes away in a couple of years and we will see what happens but we will certainly be debating it again and john mentioned the jury is still out. It is literal in this case is new york does have a lawsuit against the federal government area and i think its careless but we will see what the judges say on that. Salt was almost repealed in the 1986 tax reform act, new york through everything they could add and they put it off for another couple of decades. The consensus then was this provision was one, another one of those accidents of history that dates from the original part of the code in 1913 and it has the effect of subsidizing high tax states. And allowing them to go retire, theres an organization not on this stage that would go to state and say you should raise income taxes. You should rollout millionaires taxes, the federal government will take it up. Thats tremendously bad Public Finance incentives and its now been removed or partially removed, mitigated with this which again is the most aggressive elements of the tc j. In addition to what he said, revealing the is also expensive at a time when we couldnt afford the taxcuts and jobs act, the movement would just increase the cost. Six or 700 billion. Of that amount of revenue so much of this discussion is around is 10,000 the right dollaramount . I think the way it played out in state taxes, its turned out to be a bit of a big nothing berger. Turns out both andrew cuomo and Arthur Lanford were wrong about this, we didnt have hundreds of thousands of people decamping to states with significant income taxes because of the. So but ken is right, this is part of the myth as we head into a big federal tax cuts, i know federal tax reform is not the topic of this panel but we are heading into that period over the last few years inevitably and its hard to imagine this doesnt become part of it. Can i make a prediction . We will stop at some pointfor a universal deduction. Your salt, your charitable, it will all go into a larger tax bracket. What do you think . You taking that that . The other thing to think about is would it be a deduction at all. Let me switch gears again and turn to you for questions but i want to get back to a topic that you all alluded to earlier which are these other sources of revenue and theres a whole long interesting, then on marijuana taxes, taxes on sports medicine, theres been a netflix tax, denver legalized magic mushrooms and supposedly theres a tax on that. Are we going to continue to see states to these sources of revenue and are they really going to generate very much. And mark. The top three questions will get at the Tax Information from state legislators was conformity with the federal tax code and what should wedo with our tax system with all the revenue were getting from it. Retail, which 32 states have done something on way fair and thats a decision that was not quite a year ago so states didnt really want to move and then marijuana. And a lot of it is explaining what you have to do because its a lot of updates to a lot of different things, tax and nontax. You have to make decisions about how you want to structure it, whether youwant to license it, all that stuff and the revenue , its not nothing but its a couple billion dollars nationally. Maybe 10 billion nationally. But not enough to reveal your property taxes for Something Like that. And i think a lot of the motivation of why were getting questions from state legislators is that it will be a revenue patch for some other priorities so weve got to talk people out of that but states are still pursuing it and you know, i dont think were that far off from federal legalization. The other thing i would just say is i think especially with marijuana the fact that you have a couple of states that were early movers and theyre getting a ton of money. Dc colorado and they see washington and the argument, it just needs to be highlighted that as other states come on board like other things that we saw as this includes the amount of money anyplace gets that is going to godown. And their volatile. So Sports Betting, richard just released a paper on this and ive learned all sorts of neat terms so if you want to legally guess on a sports team. Thats also something where legislators they were going to get a ton of money because theres so much betting going on and itdoesnt recognize the fact that much of the money thats getting that gets paid out. There are winners and losers, not just the size of how much is happening and then that something is going to end up being volatile. Rhode island got its bill in on Sports Betting past, unfortunately. Unfortunately right before the super bowl and they lost money on it because everybody sat on the paychecks and they won and youve got to be careful when youve just got to realize some of these things can be very volatile and uncertain and its not going to be the replacement for how youre going to pay for your school. But the states we mentioned earlier that have a big budget problem, we are debating solutions to it. When the way fair decision came down almost adjournedthe session because they assumed that will solve everything for us. Theres an instinct towards that we fight against. Are these the golden geese . Theyre not the golden geese and the key point is the money that would be spent , Legal Marijuana on Sports Betting is money that isnt being spent on something else. So those taxes have a way of cannibalizing each other and they tend to erode over time area the next big thing comes along and we have the exact same conversation about state lotteries which have, we had this conversation about what is the next thing and it never becomes thelongterm solution. They should be thinking about marijuana, the main reason to legalize marijuana is not for the revenue, its because its probably pretty lousy criminal Justice Policy to chase smalltimemarijuana users using resources for that. So the racial disparities, the climate disparities of marijuana, Law Enforcement are terrible. So thats the main reason to be thinking about Marijuana Legalization and prompting some interesting discussions about how do you use the revenue for Marijuana Legalization . In addition to all of the really important technical concerns that joe raised about how you structure marijuana tax, if theres all sorts of social economy questions about what are we trying to, were legalizing marijuana, can we use that revenue to start to unwind the harm of these disparate enforcement practices over decades and decades did to a lot of our communities though a number of the legislators in new york who you would have expected to sign this law are saying hold on, we want to make sure this legislation is all respects including the written use of the revenue is going to benefit the communities, the communities of color, low income communities for so many years were left out these disparate enforcement practices though this part some interesting debate. The prospect of licensing, to some of those other communities is being another economic boost. In a couple of instances, particularly Sports Betting and with legalization of marijuana, theres a strong argument that those monies are already being spent in the black market and once legalization, so there isnt quite the substitution problem that you had with the lottery because short of big cities you didnt have the numbers games in the middle of america when the lottery came so insome cases this is simply expanding the base. The way fair decision was of everything, it was you were precluded from collecting what was you already and so as joe mentioned, a number of states, ive never seen states move so high as not only to set thresholds on the , like south dakota did in the case alluded to but also to pass what these marketplace facilitator collector laws so that the Small Business person and estate is notburned so much by having to figure it out. I counted over 30 i think this morning before i came here so that is moving quickly and are states say that to get the money you already are supposed to pay on your income tax return and you feel fill out the use tax but Sports Betting was never expected to be a big number, i talked to richard about this. When i picked up the phone and called the nevada revenue estimator about a year ago and they said only 17 million in the only state that had Sports Betting, thats all i needed to hear. But i will say some kudos to pennsylvania whose figured out how to get moneyout of it. 10 million per license, i think they sold, they printed eight licenses. 80 million is nota small number, its one time but its not a small number and new jersey and others are following basically what you bet on your phone. Which is the other way youre going to get decent money and theyre going to have to do nevada this year in terms of their Sports Betting so in some cases those are incremental changes rather than new changes, fantasy football, fantasy Sports Betting being another expansion. We started with lotteries and we went to kino. This is nothing but another notch on that same thing. Theres nothing big and knew about this but theyre not big revenue gainers. But as their longtime budget person in the state, theres no more importantmillion dollars in the last million dollars. Can i just, the other thing to think about because the other thing is it whether these things are taxing bad. Thats when we started taxing things like cigarettes and even some of the conversation about taxing soda. Its about trying to discourage behavior if you think about when states are talking about things like carbon taxes or certain things, are they trying to discourage the behavior in which case you have several dividends, where you basically get money and youre also trying to affect what people are doing but you need to recognize the fact that this money ideally will go away if people start doing it. Versus something that you see as sort of Norton Francis said this at the mta meeting when he wasin the discussion about whether its entertainment, whether gambling and Sports Betting entertainment. Or is it entertainment and a sin . You could have different thoughts about the money and why you want to tax certain things and how were moving in these directions. Let me give you a chance to ask a few questions. Id like to ask you to please introduce yourself and please make a question and not a statement. Thank you very much. I identify as a midwesterner and trump is not appropriated or started 16 billion in a bailout for largescale farmers and there was another limit earlier of umpteen billion so why question is if those farmers are turning in, and so theyre getting bailouts, does the state in which those farmers are located lose income or do they get money from the bailout to . I dont know if the farmer payments are taxable at the state level question mark that would be the main question but i mean, art the state losing money . I guess youre talking about news sourcesbut im asking , are they losing money by the carrots . Theyre certainly not gaining it in any economist will tell you that parents are attacks and a very personal tax, especially on exportoriented people like farmers. Other questions. Yes maam. Im patty woodward, id like to know more about the financial transaction tax. I dont know much about it but it sounds to me like that to be a good place to get some income. Its an idea that pops up pretty regularly, people that watched superman to are often referenced with the idea that we will take a fraction out of everything and it will add up to trillions of dollars and somehow it wont affect the economy and no one will notice it. There have been studies done that does dramatically, dramatic damage to Investment Decisions and the ability to have a functioning financial sector. Are there states that are imposing it to mark. New york city. A tiny one. Its the kind of thing so San Francisco at one point, thats when i lived there so 15 years ago at this point. Brought up the idea of having a financial transaction tax or something similar on things that were going on in the pacific state though part of the, part of what it seemed like it would be easier for a country to do it then estate to do it is the fact that especially Financial Transactions can move to other places and so you could imagine new york city if you think about it because the New York Stock Exchange has a certain number of people who are sort of committed to it but when youre talking about some of the secondary markets, it becomes much tougher just because figuring out how your taxing it would be a problem. If we then try to do it where your taxing not by the exchange but by where somebody lives, as opposed to waving some, part of it becomes much more difficult i think for a place to do then say a local or a state to do than for say a country to do the cause were talking about things that by their nature are much harder to pin down than a specific location and could be more fungible. Do we have a different sense of it . Thats largely right, i would just say the impetus behind the financial transaction tax is understandable in an era where youre seeing these vast amounts of money changing hands in the Financial Market so ihave sympathy for the instinct. I havent seen a really good model for how you woulddo it at the state or local level. Carl. Im very happy for the equality around here but that means that when we pass a tax we want to look at distribution in the you did a great job of sorting through that the federal bill. I will give an example of the state level but the question is what the appetite, need or ability of state Budget Office and legislation to do this analysis as we see these gaps going. For example, howard and i both work in wanting care policy and might disagree about this but the Washington State is the first state to pass a payroll finance payroll tax, peer benefit less than 1 and i have serious questions about it does not help the bottom half very much and people have no assets will go on medicaid anyhow and the other will get the 35000 would benefit but they would gotten the same thing on medicaid so they dial out early so that needs to be im not saying i know it but it needs to be analysis about that who pays and who gets or Something Like that . Good question. What is the states [inaudible] it is variable. There are tax policies divisions typically in the tax policy revenue estimating functions of State Government that are very capable of doing this to be shown analysis around income taxes because thats become the bulk of the work whether its business taxes or individual income tax but on sales taxes im less knowledgeable i will say about the state do that but some of the capabilities across its not just large states either. And their ability to know whos paying taxes now to know information about their income they have the data to do that and in some cases the sales tax you got to make assumptions around that but on the income taxes they got the data to do that and the question is the leadership and as they seek the data and information because they are working for decisionmakers in that case. Organizations like some of those on the panel are outsiders and that there are other outside affiliates who great capability of doing that and states that ive seen so i dont know its universal but i know theres a lot of capability. We did a study a few years ago looking at which states have the capacities and there are the three states minnesota, maine have the ability to do copy of the multitask distributional analysis that are published that states can do bits and pieces but if you could do bits and pieces you are missing the forest through the trees. Since use the phrase who pays i will add for the organization [inaudible] publication called who pays the describes incidents of tax across all 50 states. I do think an interesting dimension of this is things that are closer to these. You mentioned payroll tax to support the Washington State we started looking at issues of fees and fines part of the criminal justice asked him that are very challenging and very damaging in low income communities and communities of color and [inaudible] they are often driven by the School Fiscal pressures from above so i think as john pointed out its right that its as much policymakers to listen to what the data says about the distribution of taxes as it is about generating data. Theres a theoretical challenge and a practical one. John touched on the property tax depend on the share you think renters are paying as part of the rent they are paying. The Corporate Income tax is progressive depends on whether you think it appears in lower wages or it appears lower profits to shareholders. You can get very different answers but those are like huge differences when you add state tax systems. We make one set of assumptions honorably i would make a different set of assumptions but you get dramatically different answers on them. Practical challenge is redistributive policy is less effective at the state level with some exceptions that it is at the national level. If youre redistributing within West Virginia or within mississippi you are not going to be able to do a whole lot. I would just ahead you brought up something thats an important part in it easy to do at the state level or at least balance more, in part, its not only the distribution of the taxes but whether its distributional of the benefits and so figuring out how you tie those together and seep benefiting from something is an important part of this discussion but also assumptions you have to make assumptions about who is benefiting from certain things. We try to do that at the federal level. Its hard to who benefits from the permit of defense . Everyone, certain sum and then do we all benefit . To be all benefit equally . That drives your result. But that is changing the topic. Thats talking about [inaudible] if you talk about the tax side of the ledger you can make meaningful assumptions about how taxes get estimated pretty reasonable answers. Minnesota is having a debate about conformity and who is benefiting from those conformity dissections. Looks like about half of the taxpayers in the state of minnesota, particularly middle and lower income taxpayers will benefit so what could they do because they could expand working family tax credit and this is not Rocket Scientist who benefits from defense spending is simply this piece of legislation could be a benefit to everyone in minnesota or only to a subsection of those in minnesota and thats why it could be helpful. I disagree with you. I dont know why ass were talking equity and i dont see white looking at both sides of the equation is a fundamental part of that. If the goal is for people to pay according to their incomes and distribute benefits according to how we want to distribute them how do you not look at the division of benefits . I want to ask one more quick question because theres another whole Panel Discussion and you probably seen in the newspaper over the last couple of days oklahoma is suing some Drug Companies with opioids in two of the companies have excelled for 350 million and i want if you all think this is the next tobacco cycle settlement to raise revenue. Will receive other states going after opioid makers and generating lots of revenue . Yes. I think we will but i think its mark propagated and there is whats going on especially at the federal level is who are you holding responsible for this and oklahoma is an interesting case and that they are saying disproportionately hurt because they have some uninsured people who were unaffected by this but partly did not expand it and they could ensure those people. I think there will be an interest in having some agreements and getting money in it will be interesting to see whether its just the manufacturers or they do have a broader that the people involved in the agreement and unlike cigarettes and needs to be stated that there are positive uses of these drugs but for certain people who are in surgery or going to certain things it can be incredibly helpful to have access to these things so it might not be advertising and pushing it is a problem but it feels a little more propagated than state cigarettes. Its a heartwrenching situation and hope we can come up with a solution that will not image a whole bunch of lawyers. Last word. I think part of the solution is about expanding medicaid to get people the treatment they need. We are out of time. Thank you for coming. [applause] can i i did not say this but if you think the fact that its assassinating and is more volatile you just started a data subscription series and like [inaudible] from the Rockefeller Institute we are collecting more information on a monthly basis and we have sheets of paper if youre interested in finding out more about it to gain access i was supposed to say that at the beginning. [laughter] [inaudible conversations] [inaudible conversations] [inaudible conversations] Supreme Court Justice Ruth Bader ginsburg delivers remarks this evening in little rock, arkansas as part of a lecture series hosted by the Clinton Foundation and the Clinton School of public service. Life coverage started 7 30 p. M. Eastern on cspan. Tonight here on cspan2 on the tv conversations with best selling authors at 8 00 p. M. Eastern. Live coverage at 7 00 a. M. Eastern here on the to online at cspan. Org and with the free cspan radio app. , life coverage is saturday at 9 00 a. M. Eastern on cspan, online cspan. Org or listen with the free cspan radio app. This is the story of how this whole new economy was built and how ive always been interested ever since i was working in washington and how business and government directed with one another. They have an antagonistic relationship but have a collaborative relationship. The real story of American History is one of public, private partnership in many ways and ways that are unseen and so this was i think the story is a great way to get into that. University of washington history professor Margaret Omara discusses her book, the code. Sunday night at 8 00 p. M. Eastern on sundays q a. Pbs science correspondent miles obrien dates joint states climatologist for local, regional and National Climate change at the Science Center of iowa planetarium. Hosted by Drake University this is one hour in