If you ask a Mainer about taxes, you’re liable to get an earful: Mainers have one of the highest tax burdens in the nation. Nonetheless, on election day, Maine voters turned down proposals to cut taxes.
In a slow economy, Maine voters were leery of a proposal that would result in cuts in services. The controversial ballot issue, Question 4, asked voters if they wanted to limit future increases in state and local government spending and taxes to the rate of inflation plus population growth. The measure was known as the Taxpayer Bill of Rights campaign, or TABOR. Those opposed to the measure referred to it as “TABOR II” since a similar proposal was turned down in 2006.
Those in support of TABOR claimed that the bill would put more money back in taxpayer’s pockets. Critics wondered what the actual result of would be, as many state and local services were already facing cuts. Public schools are already operating under frozen budgets.
Voters also rejected a proposal to cut excise taxes on some vehicles and exempt hybrid and fuel-efficient vehicles from sales tax. Measures to encourage the purchase of cleaner cars are popular in states like Colorado but critics feared that tax cuts would have to be made up somewhere else. In that way, it wasn’t so much a tax cut as a shift in taxation.
While tax measures on the ballots were overshadowed by publicity over questions about making medical marijuana more available (yes) and gay marriage legal (no), the tax votes may be indicative of the mood of the nation on the eve of a huge election year… Only time will tell.
Despite three campaign appearances by President Obama, Governor John Corzine lost his gubernatorial seat in New Jersey to GOP challenger Chris Christie last night. Exit polls showed that the top two concerns for New Jersey voters were the economy and the state’s high property taxes.
How high are those property taxes? For the year 2008, New Jersey holds the distinction of the state with both the highest property taxes per capita and the worst business tax climate in the nation, according to the Tax Foundation (note: report will download as a pdf). New Jersey residents also ranked highest in the nation last year with respect to state and local taxes as a percentage of income. New Jersey taxpayers paid a whopping 11.8% of income in state and local taxes, more than 2% above the national average.
Of course, this is nothing new for New Jersey. Residents have generally put up with higher taxes because of what they thought it bought them: some of the best schools in the country, for example. But in the midst of a bad economy, that has changed. New Jersey residents increasingly believe that higher taxes buy them very little (ask Robert Flach) except possibly more corruption.
Governor (for now) John Corzine became the first New Jersey governor to lose a re-election bid since 1993, when then Governor Jim Florio lost to an up and coming GOP challenger Christie Todd Whitman. Whitman, who made cutting taxes a priority in her campaign, later bit at an offer by President Bush clearly intended to knock her out of the public eye and into obscurity.
So what does that mean for New Jersey residents? Luckily for them, they can only go down from here.
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It looks like 2010 likely won’t be all that different from 2009 – at least when it comes to taxes.
Each year, by law, the dollar amounts for certain tax provisions are indexed for inflation. But inflation hasn’t budged all that much (that’s good, right?) which means that a lot of nothing is happening. Here’s an update on next year’s numbers released by the IRS earlier this month:
- Personal and dependency exemptions remain at $3,650.
- The standard deduction for married filing jointly remains at $11,400.
- The standard deduction for single taxpayers and married filing separately remains at $5,700.
- The standard deduction for head of household increases by $50 to $8,400.
- The annual gift tax exclusion remains unchanged at $13,000.
The big kicker, of course, is what the heck is going on with the estate tax? As of now, nobody knows for sure.
Soooo… You know that I wasn’t a fan of the first time home buyer credit. It was touted as a “stimulus” for middle class taxpayers to make home buying more affordable. The idea was that folks would rush to buy homes, thus buoying the housing industry, getting banks going again and more or less saving the planet. At least that’s how I remember it being pitched.
Initially, it was all good news related to the credit. After the IRS paid out nearly $10 billion to 1.4 million taxpayers, Moody’s Economy.com chief economist Mark Zandi reported that almost 400,000 new and existing home sales were attributable to the tax break. So good. Only, the report went on to say that some of those home sales were actually attributable to being “stolen from future demand” meaning that taxpayers simply had an incentive to buy now as opposed to later. The suggestion is that the housing market will slow post-credit (indications are that it’s already happening).
Despite the slowing, the credit did some good even if it was financed by the Treasury. So, of course we should extend the credit, since it’s so great and all, right? I mean, that’s what Congress is saying. For example, Senate Finance Committee Chair Max Baucus (D-MT) supports a three-month extension of the credit and similar bills are pending in the House.
Maybe not so fast. The IRS announced earlier this week that it is investigating more than 100,000 “doubtful claims” related to the credit. In fact, to date, the IRS has instigated 107,000 civil claims related to the credit – about 8% of the taxpayers who’ve applied for the credit. A quick turn of the math shows that to be up to $800 million in potentially false credit.
It’s not all individual fraud, either. According to a House Ways and Means oversight committee, the IRS is investigating 167 “criminal schemes” involving the credit.
And that’s just in the early stages of review.
Sheesh. I figured that what would really happen is just that it would nearly drain the Treasury and perhaps artificially push up home prices. I clearly underestimated the efficacy of the criminal mindset.
(Hat tip: Kay Bell)
