The Center's work on 'Taxes' Issues


Improving State Budget Policies

December 4, 2014 at 2:26 pm

States’ choices about investing in schools, health care, child care, and other services can either help create opportunity and prosperity for people or hold them back.  This short video explains how the State Priorities Partnership, a national network of 41 independent state policy organizations, works to:

  • strengthen policies that affect low- and moderate-income families, such as health care, economic security, education, and child care;
  • make state tax systems fairer and more effective in raising needed resources; and
  • help other nonprofits and the general public participate in debates about budget priorities.

Launched in 1993 in 12 states, the network — which local and national foundations support — has grown steadily; its 41 states include four-fifths of the U.S. population.  CBPP coordinates the network.

More Bad News for Backers of Kansas Tax Cuts

November 21, 2014 at 10:42 am

The latest projections from Kansas’ nonpartisan Legislative Research Department bring more bad news for those who hoped Kansas’ massive tax cuts would generate an economic surge.

The department predicts that personal incomes will grow more slowly in Kansas than in the nation as a whole this year and will continue to lag behind the national rate in 2015, 2016, and 2017, by wide margins (see graph).

This isn’t what tax cut proponents predicted.  Governor Sam Brownback said they would be “a shot of adrenaline into the heart of the Kansas economy.”  The Heritage Foundation’s Stephen Moore, who helped design them, said the economic benefits would be “near immediate and permanent.”

Faced with the state’s unimpressive economic performance since the tax cuts took effect, proponents now claim they just need a little more time to work.  But the new forecast, combined with last week’s announcement that Kansas’ budget has fallen much further into the red than previously acknowledged (because of the tax cuts), casts further doubt on those claims.

This shouldn’t be a surprise.  History suggests that deep cuts in personal income taxes are a poor strategy for economic growth, and the serious academic literature typically finds little relationship between a state’s tax levels and its economic performance.  So there’s no reason to think that the tax cuts will cause Kansas’ economy to boom in the future.

California Votes to Shrink Prison Population and Reinvest Savings

November 6, 2014 at 4:28 pm

California voters approved Tuesday a measure to not only reduce the state prison population but also reinvest the savings in specific, high-priority programs.  As our recent report on criminal justice reform and education investments explains, Proposition 47 includes several features that make it a model reform.

Specifically, it:

  • Makes targeted sentencing reductions by reclassifying certain offenses from felonies to misdemeanors, for both current and future offenders.
  • Requires the state to calculate the savings from these reforms each year and deposit them in a dedicated fund.
  • Earmarks the savings for specific investments in mental health and substance abuse treatment, supporting at-risk youth in schools, and victim services.

State policies have been the major drivers of rising prison populations in recent decades, so these changes will reduce prison overcrowding and lower incarceration rates.  The California Legislative Analyst’s Office estimates that Proposition 47 would likely cut the state’s prison population by several thousand inmates while generating corrections savings in the low hundreds of millions of dollars annually.  Even better, research indicates that states can significantly reduce their prison populations without harming public safety.

Just as important, Proposition 47 ensures that the savings get reinvested in specific areas of the budget.  While most states have enacted criminal justice reforms, few have directed the savings to investments in human capital (such as education) or low-income neighborhoods.

4 Ways States Can Reduce Incarceration Rates

October 31, 2014 at 11:51 am

I outlined recently the causes and costs of states’ high incarceration rates. While most states, under both Republican and Democratic control, have enacted criminal justice reforms in recent years to reduce prison populations without harming public safety, most states’ reforms to date haven’t been extensive enough to have a big impact on prison populations.

State policymakers need to enact reforms that target the main drivers of high incarceration rates: the number of people admitted (or re-admitted) into correctional facilities and the length of their prison stays. States should consider four basic kinds of reforms:

  • Decriminalize certain activities and reclassify certain low-level felonies. The increased use of prison — and longer prison sentences — to punish crimes such as the possession of certain drugs, like marijuana, has contributed heavily to the growth in mass incarceration. Lawmakers should look to reduce or eliminate criminal penalties for such crimes when doing so would not affect public safety.
  • Expand the use of alternatives to prison for non-violent crimes and divert people with mental health or substance abuse issues away from the criminal justice system altogether. Policymakers should assess the range of sentencing alternatives available in their state, such as drug and mental health courts and related treatment, community correction centers, community service, sex offender treatment, and fines and victim restitution. Whenever possible, people whose crimes stem from addiction or mental illness should be diverted into treatment programs rather than sent to prison. New York State adopted this approach as part of its successful corrections reforms (see below).
  • Reduce the length of prison terms and parole/probation periods. Policymakers should reform unnecessarily harsh sentencing policies, including “truth-in-sentencing” requirements and mandatory minimum sentences, and allow inmates to reduce their sentences through good time or earned time policies. States also should expand programs that enable inmates meeting certain requirements to receive favorable decisions in parole hearings, especially in states where parole grant rates remain low.
  • Restrict the use of prison for technical violations of parole/probation. The share of individuals entering prison due to a parole violation grew rapidly between the late 1970s and the late 2000s. While it has fallen more recently, parole revocations accounted for more than a quarter of admissions to state prisons in 2013. Some of these violations are technical, such as missing a meeting with a probation officer or failing a drug test. States should heavily restrict the use of prison for technical parole violators and implement graduated sanctions for more serious parole violations.

States can also adopt more effective probation policies. For example, Hawaii has sharply reduced probation revocations with a program that punishes infractions more quickly and with more certainty, but with much shorter periods of incarceration.

These reforms are complementary; adopting just one or two won’t shrink a state’s prison population as much as a more comprehensive set of reforms that improves “front-end” sentencing and admission policies as well as “back-end” release and re-entry policies. New Jersey, New York, and California have adopted comprehensive reforms that helped drive down prison populations in each of those states by roughly 25 percent, even as crime rates continued to fall.

Debating Kansas’ Tax Cuts

October 30, 2014 at 1:10 pm

With Kansas’ radical tax cuts drawing national attention this election season, I recently debated the Heritage Foundation’s Stephen Moore, who advised Governor Sam Brownback on the tax cuts, on their impact.  The full debate, published by State Tax Notes and moderated by its commentary editor Doug Sheppard, is here.  Below is a brief excerpt:

Leachman:  In 2012 you and Arthur Laffer wrote, ‘‘The quality of schools also matters as does the state’s highway system, but it takes years for those policies to pay dividends, while cutting taxes can have a near immediate and permanent impact, which is why we have advised Oklahoma, Kansas, and other states to cut their income tax rates if they want the most effective immediate and lasting boost to their states’ economies.’’  Why — 18 months after the income tax rate cuts were implemented — isn’t Kansas’s economy performing better?

Moore:  It’s a little early to tell about Kansas.  A 1.5 percentage point tax cut isn’t going to turn this Midwestern state into Beverly Hills or Boca Raton.  If Kansas can continue to get the rate down to close to zero, we would expect to see some strong growth effects.  Our advice to Brownback is full speed on the tax cuts.

Leachman:  The total income tax cut in Kansas was very large, equaling at least 9 percent of revenues this fiscal year.  It’s hard to expect a state to do more than that.  And again, Moore said cutting income taxes is the most effective way to immediately boost state economies.  Hearing now that they’ve got to do substantially more tax cutting before they’ll see strong growth effects has got to be disappointing to people who believed in the Kansas experiment.

And here’s part of my final statement in the debate:

Kansas followed Moore’s simplistic advice:  Slash your income taxes and your economy will surge.  But that advice is wrong.  And now, Kansas’s finances are in shambles, its economy is ho-hum, and its future looks worse — not better.  Other states that follow this path can expect a similar result.

This debate is not really just about Kansas.  Other states have passed — more recently than Kansas — irresponsibly large income tax cuts under the guise of economic revitalization.  The tax cuts enacted by these other states — Missouri, North Carolina, Indiana, and Ohio, for example — are not much different from Kansas’s.  While none were as big as the Kansas cuts, they generally included many of the same ingredients.  At their core is big cuts in income tax rates for the highest-income households to be paid for with cuts in funding for schools and other public services key to future economic growth, and often tax increases for low-income families. . . .

Economic growth will not save these states from further diminishing their education systems or other important public services — services already damaged by the Great Recession and its aftermath.  And as in Kansas, there’s no reason to think the tax cuts will cause these states to see their economies boom in the years ahead. . . .