Aug. 2, 2010
TAXING OTHER CITIES: Tax Foundation Analyst Warns of Compliance Costs, Driving Away Jobs with City Occupation Tax
By Tony Rutherford
Huntingtonnews.net Reporter
(The article is based on an analysis published by the Tax Foundation , a non-profit , non-partisan tax research organization based in Washington, D.C. Joseph Henchman, who wrote the full article (see below for link) is an attorney whose analysis of state fiscal trends and constitutional issues have been featured in the New York Times, CNN, ABC News, C-Span and others.)
Huntington, WV (HNN) – A prominent tax attorney and analyst for the non-profit, non-partisan Tax Foundation has concluded that wage, earnings, and occupation taxes in counties and cities are a mixed bag.
“Local income or wage taxes can be part of a sound tax system, particularly, if revenue is used to reduce other taxes that may do more economic harm,” wrote Joseph Henchman in “County and City Income Taxes Clustered in States with Poor Tax Climates.” He continues, “ Using local income tax revenue to reduce corporate income taxes or property taxes can produce a friendly tax climate.”
Indiana, Kentucky, Maryland, Michigan, Ohio and Pennsylvania have extensive local-level wage and income taxes. Unfortunately, “with the exception of Indiana, each of these states were in the bottom half of the country’s 2008 State Business Tax Climate Index.”
Based on a United Van Line’s 2005 Migration Study, three of the states --- Indiana, Michigan and Pennsylvania --- are among the ten states with the “most outbound moves.”
(Editor’s Note: Six of the nation’s 20 largest cities by population impose a “city or county level tax measured by compensation, be it on wages, earned income or occupational privilege. They are: NYC, Detroit, Indianapolis, Columbus, Ohio, and Baltimore. Henchman cautions that only in some areas such as New York City do “municipal services and opportunities” potentially keep resident in the city even with a high income tax rate. In others, the high local tax rates may simply accelerate an ongoing decline.”)
Although Huntington’s proposed occupational tax represents one of the lowest tax plans, the attorney/analyst has three cautions --- compliance costs, driving away jobs, and treatment of nonresidents.
Henchman stresses that “simplicity and transparency” serve residents better. Yet, in, Albion, Michigan, the city tax form is 16 pages with instructions. In Iowa, 666 jurisdictions impose a local-level income tax. The tax policy should ensure the tax burden/policy “does not drive out jobs and capital investment.” Finally, the Institute reminds that nonresident workers should not be viewed as “a captive revenue source.
“They can be highly mobile,” Henchman wrote.
NOTE: HNN has asked the Tax Foundation in an email for a specific non-partisan analysis of the full tax reform package. If they respond, we will publish their conclusions.
To read the full article, click: http://www.taxfoundation.org/publications/show/23363.html
For analysis of the data, visit: http://www.taxfoundation.org/taxdata/show/487.html
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TAXING OTHER CITIES: Tax Foundation Analyst Warns of Compliance Costs, Driving Away Jobs with City Occupation Tax
By Tony Rutherford
Huntingtonnews.net Reporter
(The article is based on an analysis published by the Tax Foundation , a non-profit , non-partisan tax research organization based in Washington, D.C. Joseph Henchman, who wrote the full article (see below for link) is an attorney whose analysis of state fiscal trends and constitutional issues have been featured in the New York Times, CNN, ABC News, C-Span and others.)
Huntington, WV (HNN) – A prominent tax attorney and analyst for the non-profit, non-partisan Tax Foundation has concluded that wage, earnings, and occupation taxes in counties and cities are a mixed bag.
“Local income or wage taxes can be part of a sound tax system, particularly, if revenue is used to reduce other taxes that may do more economic harm,” wrote Joseph Henchman in “County and City Income Taxes Clustered in States with Poor Tax Climates.” He continues, “ Using local income tax revenue to reduce corporate income taxes or property taxes can produce a friendly tax climate.”
Indiana, Kentucky, Maryland, Michigan, Ohio and Pennsylvania have extensive local-level wage and income taxes. Unfortunately, “with the exception of Indiana, each of these states were in the bottom half of the country’s 2008 State Business Tax Climate Index.”
Based on a United Van Line’s 2005 Migration Study, three of the states --- Indiana, Michigan and Pennsylvania --- are among the ten states with the “most outbound moves.”
(Editor’s Note: Six of the nation’s 20 largest cities by population impose a “city or county level tax measured by compensation, be it on wages, earned income or occupational privilege. They are: NYC, Detroit, Indianapolis, Columbus, Ohio, and Baltimore. Henchman cautions that only in some areas such as New York City do “municipal services and opportunities” potentially keep resident in the city even with a high income tax rate. In others, the high local tax rates may simply accelerate an ongoing decline.”)
Although Huntington’s proposed occupational tax represents one of the lowest tax plans, the attorney/analyst has three cautions --- compliance costs, driving away jobs, and treatment of nonresidents.
Henchman stresses that “simplicity and transparency” serve residents better. Yet, in, Albion, Michigan, the city tax form is 16 pages with instructions. In Iowa, 666 jurisdictions impose a local-level income tax. The tax policy should ensure the tax burden/policy “does not drive out jobs and capital investment.” Finally, the Institute reminds that nonresident workers should not be viewed as “a captive revenue source.
“They can be highly mobile,” Henchman wrote.
NOTE: HNN has asked the Tax Foundation in an email for a specific non-partisan analysis of the full tax reform package. If they respond, we will publish their conclusions.
To read the full article, click: http://www.taxfoundation.org/publications/show/23363.html
For analysis of the data, visit: http://www.taxfoundation.org/taxdata/show/487.html
Share This Story:
Make HNN Your Homepage (IE Users Only)
