Daily Deduction

from the Tax Policy Center

Highways, Pensions, Deficits and Reform: A Long and Winding Road

By :: June 27th, 2014

“Are we there yet?” It’s just a little (or a lot) further for the federal Highway Trust Fund. Congress just left for a week-long recess, leaving the Highway Trust Fund nearly empty. The Senate Finance Committee didn’t support Chairman Ron Wyden’s $9 billion tax-raising patch, in spite of Wyden’s willingness to drop some tax increases. He hopes to work out a compromise with House Ways & Means Chairman Dave Camp and both would like agreement in early July. About 112,000 construction projects and almost 700,000 jobs are on the line. With stakes like these, it makes one wonder whether government trust funds make any sense.

New Jersey’s Governor Christie has court authority to cut pensions. The state’s Democratic-majority legislature has proposed a temporary $1 billion tax hike on millionaires and corporations to fill New Jersey’s pension shortfall. But Republican Governor Christie has won state court authority to cut state pension payments by $887 million this year.

Pennsylvania’s GOP House would suspend tax credits to help close the state’s deficit. Facing a $1.5 billion budget shortfall, the House passed a budget bill that suspends 13 tax credits worth $48.2 million.

Indiana’s Republican Governor Mike Pence wants to reform the state’s tax code. The state’s Office of Management and Budget convened a “mix of national conservative leaders and state and local tax experts” to explore ideas. The primary goal, summit participants said, is simplification. Coincidentally, the state will simplify the way it taxes gasoline. Starting July 1, the state will replace a prepaid gasoline sales tax collected by gas stations with a new gasoline use tax based on the previous month’s statewide average cost of a gallon of gas. Indiana will collect the tax from gasoline distributors.

The District of Columbia just approved its own version of tax reform. TPC’s Howard Gleckman gives voice to the tacit manner in which race and class shaped the final product.

Want to test drive your taxing and spending skills? The Committee for a Responsible Federal Budget has updated its online fiscal simulator. It’s harder to balance a national budget than it looks. Drive safely.

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19Comments

  1. Michael Bindner  ::  2:19 pm on June 27th, 2014:

    I suspect that a bit of summitry is the best solution – with administration representatives in the room as well. Cigars options. The accompanying graph, however, is more scary then necessary. It could go to the existing curve, depending on gas prices and driving patterns – which impact collections. Still, a bleaker curve may get the GOP to move more.

    The authority to cut pensions is unfair to the extend he can change terms and dangerous to the extent that he can use creative accounting to get there. Of course, the Democratic bill has no chance of being signed by a Republican presidential candidate – especially as it targets his donors (who should pay but won’t).

    Pennsylvania’s cutting of tax credits could be good or bad, depending on whose credits get cut. I suspect it is bad.

    Mike Pence is being all to creative in the changes he seems to favor. Simply hiding the gas tax won’t make the need for it go away. Any good tax reform should move pain from the bottom to the top. I don’t trust him to do that. More money for the poor and middle class is always better than more for the rich. Reform is never value neutral.

    I see the Council of the District of Columbia passed its tax reform on the margins. Cigars for everyone!

    I test drove my cutting skills. I got exactly the goal and was very progressive – probably as progressive as one can be and hit that mark. My options would take it up even a notch more. TPC is free to score my plan and send it over to Maya for inclusion in the model at any time.

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