Daily Deduction

from the Tax Policy Center

Holes, Holidays, Hurricanes, and Tax Bills

By :: June 2nd, 2014

The Illinois legislature passed a budget with revenue holes and no spending cuts. Democratic Governor Pat Quinn tried to make temporary tax increases—set to partially expire on January 1—permanent, but he couldn’t get the votes. And Illinois House Democrats wouldn’t cut spending and instead kept it flat. The second half of 2015 will see a revenue decline, when the personal income tax rate drops from 5 percent to 3.75 percent, and the corporate rate falls from 7 percent to 5.25 percent. This will add $2 billion to Illinois $4.17 billion deficit.

And Republican Governor Chris Christie won’t raise taxes, either. New Jersey has a two-year revenue hole estimated at $2.7 billion, but Christie rejects the notion of a “millionaire's tax,” proposed by the state’s Democrats: “The top 10 income taxpayers pay more than the bottom two million filers… if those 10 people get up and walk out…  and go hang with [Governor] Rick Scott in Florida, I'm losing the equivalent in revenue to what the bottom two million filers pay.” It’s not clear that the loss would be so abrupt.

On Florida holidays and hurricanes… Hurricane season began yesterday, and millionaires or not, Floridians can purchase hurricane supplies sales-tax free until June 8. Eligible items include ice packs, flashlights, portable radios, portable generators, Tiki torches, and certain batteries (AAs are tax-free, AAAs are not). Sales tax holidays grew more popular as states carried budget surpluses: They were seen as a way to provide tax relief. But do sales tax holidays help the average consumer or boost a state’s economy? The Institute on Taxation and Economic Policy weighs in: The short answer is “no.”

And assuming hurricanes don’t hit Miami… Property values in Florida’s Miami-Dade County are recovering, especially in the urban center and on the waterfront. The property tax base expanded 6.5 percent from last year, the biggest gain in three years after four years of steep declines, according to new estimates from the county’s property appraiser. More than a million properties in the county have taxable value totaling nearly $210 billion. As for county revenue gain, The Miami Herald reports that “a quick stab at the fresh numbers suggests a gain of around $20 million.”

Selling a basketball team could mean getting hit with a huge tax bill. When you sell an NBA team for $2 billion, you could end up paying federal and state income taxes to the tune of $662 million. Then there’s the federal estate tax that will eventually be due: about $531 million. The wealthy certainly pay a significant amount in taxes—though if there’s any felt sympathy, it might wane when the wealthy person is Donald Sterling.

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2Comments

  1. Hurricane season is here, and preparation is tax-free this week | 1040 Tax Plus Services  ::  4:04 pm on June 2nd, 2014:

    […] post Holes, Holidays, Hurricanes, and Tax Bills appeared first […]

  2. Michael Bindner  ::  10:32 pm on June 2nd, 2014:

    Pat Quinn’s fiscal irresponsiblity is no shock, nor is the Democratic insistence to not cut needed spending. There will be deficits and sadly Quinn will likely cut spending unilaterally. Most governors can do across the board cuts to prevent a deficit. Sad. Christie and especially Scott are just as bad and they are all doing this in the hope that they might have the chance to lose to Hillary Clinton. Most still have not figured out that the decline in revenue came because there was a revenue bubble due to ATRA and its treatment of capital gains – leading people to cash out and take the tax payment before reinvestnig.

    The Florida tax holiday has nothing to do with economic stimulus. It has everything to do with self-preservation – because even when it is a slow hurricane season, Florida can still get hit with that one hurricane that makes landfall. Funny how Gov. Scott has never said anything in support of the existence of global warming – yet he is essentially supporting a tax holdiay that exists because of it. As for Miami, I suspect some of the increase in values is simply recovery from 2008 – although there are some who would consider it a sign we need a land value tax. It has nothting to do with hurricanes – the rich are insured. Should they be? Probably not.

    As for the tax bite on selling the Clippers, I recall mentioning this when everyone was talking about the fine the NBA was levying on Sterling. Compared to the tax bite, the fine is small potatoes.