State Taxes Are Dinosaurs Says Study
It’s not just the recession. States cant pay their bills because their tax systems are dinosaurs–built for an economy that has long since ceased to exist virtually anywhere in America.
That’s the conclusion of a year-long study–“The Way We Tax”–conducted by Governing magazine, with funding from The Pew Center on the States.
The study found that as states grapple with their worst revenue shortfalls in 50 years, 11 states, representing nearly a third of the people in the U.S.–including California, Florida and Texas–have tax codes so outmoded and inefficient that they need to be redesigned from the bottom up. The rest–with the exception of only four (Delaware, New Mexico, North Dakota and Wyoming) require substantive overhaul.
The study also found that at a time when their treasuries are starved for cash, many states have cut back funding for their tax departments–among the few governmental agencies with the potential to bring in more dollars than they spend.
The study assesses all 50 state tax systems in three critical areas: adequacy of revenue; fairness to taxpayers; and management of the tax collection process.
These findings could not be more timely, with governors and state legislators across the nation enmeshed in vexing tax debates. And many in the federal government continue to advance the devolution of power to states–states that, according to this new research, often do not have the tax systems to support additional responsibilities.
Individual issues addressed in the report include:
How California, grappling with a revenue shortfall bigger than the economy of many small nations, is being undone by its tax system;
How New York’s huge budget hole is due in large part to tax cuts enacted in headier days;
How Colorado’s voter initiatives have handcuffed that states ability to raise necessary revenues;
How South Dakota, New Mexico and Hawaii have been able to go against the national trend and create a modern sales tax base;
and How the state of Washington, a national model for customer service and technological innovation in tax collection, is hobbled structurally by its revenue code.
