The Center's work on 'Taxes' Issues


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. . . .

The Causes and Costs of High Incarceration Rates

October 29, 2014 at 1:12 pm

Most states’ prison populations are at historic highs, I explained yesterday, imposing high costs on states even as many states have cut education funding.  Here’s a closer look at the causes and impacts of high incarceration rates:

Incarceration rates have risen mainly because states are sending a much larger share of offenders to prison and keeping them there longer — two factors under policymakers’ direct control.  Reforms to reduce prison populations will need to target these two areas.

More specifically, research on the causes of rising incarceration rates has found:

  • Crime rates have risen and fallen independently of incarceration rates.  Crime rates began rising in the early 1960s, roughly a decade before incarceration rates did.  In the 1980s, violent and property crime rates fluctuated, while incarceration rates continued rising.  By the end of the 1990s, crime rates had fallen to 1970s levels, and they have continued to fall throughout the 2000s; yet incarceration rates continued to grow well into the 2000s, peaking in 2007 (see graph).

  • Arrests per crime have been relatively stable.  Incarceration rates may rise even when crime rates remain stable if police become more effective at apprehending offenders.  Yet, “by the measure of the ratio of arrests to crimes, no increase in policing effectiveness occurred from 1980 to 2010 that might explain higher rates of incarceration,” a recent National Research Council report concluded.
  • The share of offenders sent to prison has climbed dramatically.  For all major crime types, the likelihood that a person convicted of a crime will go to prison has risen sharply over the past 30 years.  That’s especially true for drug offenses; the likelihood of being sent to prison for a drug-related crime rose by 350 percent between 1980 and 2010.  The increase in the share of offenders sent to prison accounts for 44 to 49 percent of the long-term growth in state incarceration rates, the National Research Council study estimated.
  • Length of stay in prison has grown for all types of crimes.  Between 1990 and 2009, the average time served rose by nearly 25 percent for property crimes and by roughly 37 percent for violent and drug crimes, the Pew Center on the States estimates.  The increase in average sentences has contributed as much to the growth in incarceration rates as the rise in the share of offenders sent to prison, and possibly slightly more.

High incarceration rates impose significant human (as well as budgetary) costs.  People with criminal convictions face serious challenges in finding stable, decent-paying jobs.  Time behind bars is generally time lost developing the skills and education increasingly necessary in today’s labor market, a particular problem given that formerly incarcerated people typically have less education.

Even those who do find jobs typically earn less than otherwise-similar people who haven’t been incarcerated.  A Pew study found that men with a criminal conviction worked roughly nine fewer weeks, and earned 40 percent less, each year than otherwise similar non-offenders.

Incarceration also increases poverty, for former inmates as well as other household members, including children.  Many inmates are also parents and/or partners, and their incarceration leaves households with one less potential wage earner.

Tomorrow I’ll outline some ways that states can reduce high incarceration rates, generating savings that they can use more productively.

Why Money Doesn’t Walk

October 20, 2014 at 11:24 am

We’ve shown that interstate differences in tax levels have little effect on whether and where people move, contrary to claims by some tax-cut proponents.  The related claim — that people who leave a state take their incomes with them, harming that state’s economy — isn’t true either, our new paper explains.

The vast majority of people can’t take their income with them to a new state because they work for someone else.  When people leave a state, they usually also leave their job.  The income they made in that job then typically goes to the person who gets that job next; it doesn’t leave the state.

For example, consider a California sales representative who is transferred to Nevada.  What you might call “income migration” (or “money walks”) analyses would suggest that California’s economy is weakened because the sales representative moved away and took her income with her.  In reality, her income stayed with her employer and was then transferred to her replacement.  California’s economy was not harmed.

Income migration analyses also ignore the income gains for other in-state small businesses when business owners move away.  For example, if a New York doctor in private practice retires and moves to Florida, his or her patients ― and their payments ― will go to some other New York provider, increasing that provider’s income.  Also, the owner of a successful business who leaves will often sell it to someone who will continue to operate it.

Moreover, income migration analyses effectively assume that people’s incomes stay the same after they leave a state, even if they don’t find a job in the new location or moved there to retire.  That assumption further skews their results.  For example, when someone from New Jersey retires to Florida, income migration analyses claim that New Jersey’s economy lost income equal to the person’s pre-retirement salary, even though that person’s income probably would have declined even if he or she had stayed in New Jersey.

To be sure, some income does automatically follow a person when he or she leaves a state — pensions, Social Security, and investment earnings, for example.  But that represents a relatively small share of total taxable income — under one-fifth in most states.  And, as with other forms of income, much of such income that is “lost” to a state when people move out is replaced by income “gained” when others move in.

Policymakers should focus their attention on the policy choices most likely to grow the incomes of their current and future residents, and not be distracted by misleading claims about income migration.  The chief policy prescription that the income migration concept is used to justify — deep cuts in (or outright repeal of) state income taxes — would likely prove self-defeating, leading to deteriorating schools, roads, public safety, and other services that make states places where businesses want to invest and where the engineers, managers, and other personnel they need to hire want to live.

New Jersey Going from Bad to Worse on Budget Practices

October 7, 2014 at 4:34 pm

New Jersey, which already comes up short in budget planning and budget transparency, is falling even further behind.

The state Treasury Department recently stopped publishing monthly comparisons of actual tax collections to projected collections — information that the state’s revenue status reports had included for years.  The timing is especially unfortunate given New Jersey’s recent large revenue shortfalls.  Delaying acknowledgement of sluggish revenue collections will give policymakers less time to address the problem if these shortfalls continue.

The state has also stopped publishing town-by-town data on state property tax rebates in its annual reports on property tax collections and has removed prior-year reports from its website.  This makes it very difficult to see how state and local policies affect property tax bills across the state.  The state Assembly recently passed, with near unanimous support, a bill requiring publication of the data.  But the bill needs state Senate approval plus the governor’s signature to become law, and Governor Chris Christie hasn’t said if he will sign it.

New Jersey had plenty of room for improvement even before these changes.  It received the second-lowest score in our survey of how well states use ten proven budget planning tools to chart their fiscal course accurately and make mid-course corrections when needed.   It also fared poorly (30th out of 50) in the U.S. Public Interest Research Group’s latest ranking of state budget transparency.

New Jersey should stop digging this hole deeper and resume publication of data that can help the state plan.  And the state should go even further — by including long-term revenue and spending forecasts in its annual budget, building more consensus into its revenue estimating process, and providing more information on the cost of individual “tax expenditures” (tax credits, deductions, and exemptions), for example.

Better budget planning and more transparency would help New Jersey policymakers make more-informed decisions.