Senate Expected to Level Playing Field for Main Street Businesses
Legislation that would allow states to compel internet retailers to collect sales taxes is expected to pass the U.S. Senate in the next couple days. Passage of the Marketplace Fairness Act would be a first step towards leveling the playing field between internet retailers and bricks-and-mortar businesses.
Under current law, internet retailers are not required to charge customers sales tax unless the retailer has a physical presence in the state where the customer lives. Customers are still required to pay sales tax on on-line purchases, by declaring purchases on their income tax forms. Few customers do this, though. By not charging customers sales tax, online retailers can undercut bricks-and-mortar retailers on price.
Some states have undertaken their own efforts to compel internet retailers to collect the sales tax, with varying success. It seems clear that a federal approach to this challenge would ensure a more consistent approach among the states, but until now Congress has been slow to take action on this issue. Read more
Two federal tax credits are responsible for lifting tens of thousands of Wisconsin children out of poverty. Together, the Earned Income Tax Credit and the Child Tax Credit lift 136,000 Wisconsinites out of poverty, including 71,000 children, according to a new report from the Center on Budget and Policy Priorities.
The new CBPP report underscores how important the two credits are to low- and moderate-income families with children. The federal EITC benefits about 390,000 households a year in Wisconsin, and the CTC benefits 296,000 households.
The benefits of these credits go beyond just helping families make ends meet. We’ve long known that in addition to lifting families out of poverty, refundable credits like the EITC encourage work, improve the health of children, and help children do better in school. New, groundbreaking research shows that many of these benefits last into a child’s adulthood. In later life, children whose families receive the credits are likelier to attend college, work more hours, and earn more money. Read more
Preliminary Thoughts on the “Chained CPI,” from a Policy Perspective and Strategic Perspective
Until recently, most Americans probably hadn’t ever heard of the “chained CPI,” and the rest of us generally tuned out any discussion of the idea. That is likely to change significantly in the coming weeks and months, now that President Obama has endorsed it as a deficit reduction strategy. There are many different parts of the President’s budget package that I’m tempted to write about, but this one is likely to be the most hotly contested, and it’s worth starting to explore the pros and cons.
In a nutshell, the “chained CPI” is a way of adjusting the traditional measure of cost of living increases by taking into consideration that as certain goods and services become more expensive, people shift their consumption to other goods and services that are more affordable. For a good summary of the issue, see the NPR story Tuesday. Read more
Sequester’s Head Start Cut Exposes Kids to the Lottery at an Early Age
As I read the following story, I was sincerely hoping it would prove to be an April Fool’s item – but alas, that is not the case. It’s actually a story from mid-March, which I just learned about today, via Jared Bernstein’s blog (On the Economy, which is well worth following if you have an interest in federal fiscal issues and/or economic policy).
“At least two Indiana Head Start programs have resorted to a random drawing to determine which three-dozen preschool students will be removed from the education program for low-income families, a move officials said was necessary to limit the impact of mandatory across-the-board federal spending cuts.”
This sort of story is likely to become much more common over the next month or two, and perhaps far more so in coming years. Thus far, most of the effects of the sequester haven’t kicked in. Even among Head Start programs, most are waiting for more details about the magnitude of the cuts before taking action; however, the longer it takes to apply the cuts, the deeper those cuts have to be over the second half of the current federal fiscal year.
Jared offers a couple of suggestions for other ways to generate revenue and reduce the federal deficit without resorting to random drawings to determine which young children get a head start. Unless federal policymakers are willing to consider revenue options, such as scaling back tax exemptions and loopholes, the budget bills for fiscal year 2014 and beyond will subject far more children to random and not-so-random cuts in cost-effective services that have been preparing them to be productive members of America’s future workforce.
Jon Peacock Read more
The budget passed by the U.S. House of Representatives includes deep cuts in federal support for important services that state and local governments in Wisconsin provide. Under the proposed budget — sometimes referred to as the “Ryan budget,” after its author Rep. Paul Ryan — state and local governments in Wisconsin would have difficulty maintaining the services that contribute to a high standard of living in our communities.
The Ryan budget significantly reduces grants from the federal government to state and local governments – grants that support state and local initiatives in transportation, education, housing and community development, health and the environment, workforce development, and other important services. The chart below is taken from a Center on Budget and Policy Priorities report on the Ryan budget, and shows how grants are distributed among service areas.
In 2014, Wisconsin is slated to receive $1.9 billion in federal support from discretionary grants for services provided by state and local governments. Read more
Vote on Non-binding Resolution Shows Bipartisan Support to Require Internet Retailers to Collect Sales Taxes
Increasingly in recent years, there seem to be few tax issues on which liberals and conservatives can agree. So it was refreshing last Friday when there was strong bipartisan support for requiring large Internet merchants to collect state and local sales taxes – just as Main Street retailers do.
Perhaps the bipartisan support shouldn’t come as a surprise because the proposal isn’t primarily about taxes; it’s about fairness. People with a broad spectrum of views about taxes and spending agree that it’s unfair for our local businesses and bad for the Wisconsin economy to allow large Internet retailers like Amazon and Overstock to put their local competitors at a huge competitive disadvantage by not collecting sales taxes.
The 75-24 vote last Friday was on an amendment to add the Marketplace Fairness Act to the Senate’s 2014 budget resolution. That resolution isn’t going to be approved in the House, and in any case it is only intended to be a budget outline, not a piece of binding legislation. However, the lopsided vote for the Marketplace Fairness Act strongly suggests that when the act comes to the Senate floor it is very likely to have enough votes to overcome a filibuster.
A blog post yesterday by Michael Mazerov of the Center on Budget and Policy Priorities explains the legal history of the current exemption for interstate commerce, and the need for the proposed legislation. He notes that an estimated $11 billion per year in taxes on Internet Sales is uncollected each year. Read more
The two houses of Congress are considering very different budget resolutions this week. Much of the debate has been about the very different paths they take to reducing the deficit – and whether the deficit should be brought down by spending cuts alone or by a combination of spending cuts and new revenue.
Although the route to deficit reduction is a very important part of the deliberations, it’s unfortunate that there hasn’t been very much public discourse about another very fundamental aspect of the debate – the timetable and goal for reducing the deficit. A short paper released today by the Center on Budget and Policy Priorities (CBPP) examines that question. It explains why the goal should be to get debt under control, not to set out to eliminate it completely during a time when the economy economic recovery is still anemic.
The paper critiques the frequently cited argument or analogy that families and state governments must balance their budgets so the federal government should do so as well. It explains some of the flws in that analogy:
“First, families do not balance their budgets every year. Read more
Side-by-Side Comparison of Three Alternative Budget Bills
The National Priorities Projects has created a very useful side-by-side comparison of the three federal budget plans offered this week by Congressman Ryan, Senator Murray and the House Congressional Progressive Caucus (CPC). It provides a handy matrix comparing those three major plans, and contrasting those proposals with relevant polling data.
For another take on the competing budget proposals, see Paul Krugman’s New York Times column, “After the Flimflam,” which provides a brief critique of the three plans. It’s well worth reading – if for no other reason than the fact that one rarely gets to see a budget called “flimflammier.”
Jon Peacock Read more
The budget plan introduced today by House Budget Chairman Paul Ryan looks a whole lot like the plan that Ryan and Romney campaigned on last fall. However, it’s not that it hasn’t changed at all, because he proposes even deeper cuts in income tax rates this time — to undo the tax measures enacted in early January as part of the compromise that avoided the fiscal cliff.
The following are some of the noteworthy aspects of the Ryan budget, drawn from a 4-page critique issued late today by Robert Greenstein of the Center on Budget and Policy Priorities:
- Unspecified tax offsets – The current budget plan, like the one Romney proposed, would make a deep cut in the top income tax rate, and purports to offset the cost of that by closing tax loopholes. In the months since the election, Ryan still hasn’t come up with a single offset that he is willing to offer publicly as a way to make the rate cuts revenue neutral.
- Cutting Medicaid and repealing coverage expansions in the health reform law – Greenstein states that, “under Ryan’s budget, 40 to 50 million more poor or moderate-income Americans would be uninsured, even as the wealthiest Americans enjoyed new tax cuts.” His critique explains how that estimate is derived.
he automatic budget cuts included in sequestration would harm Wisconsin’s families. But it would be even worse to replace sequestration with deeper cuts in domestic programs, as some members of Congress are advocating.