Showing posts with label State Budget 2009. Show all posts
Showing posts with label State Budget 2009. Show all posts
Monday, July 27, 2009
States Raised Taxes in 2009
It's not news that state legislatures raised taxes in 2009 in order to close significant budget gaps. What is noteworthy is that trends emerged, and NCSL has filed a useful report on the subject. The report lists which states did what, but here are some examples:
*States reported $142 billion in budget gaps.
*36 states reported raising taxes to help close the gaps, increasing revenue by an estimated $24 billion. (I assume that means that budget cuts were the main tool used to close budget gaps, as they were in Hawaii.)
*19 states made no signifcant tax policy changes.
*Trend - states relied heavily on raising personal income tax, a source that has not been tapped in recent years.
*Trend - states specifically turned to higher-income wage earners.
*Trend - more than a dozen states applied new tobacco and alcohol taxes.
*Trend - business tax breaks scaled back.
*Trend - new assessments on health care industry.
*Trend - incentives for renewable energy and transportation initiatives slowed.
*Noteworthy - some state actually cut taxes. North Dakota cut individual and business taxes by $50 million.
*Noteworthy - Massachusetts and California raised their sales tax.
*Noteworthy - Florida raised tobacco tax and generated more than $1 billion in fee increases.
*Noteworthy - Delaware added sports betting to its gaming activities to generate $53 million.
*Noteworthy - Delaware also approved a tax on crude oil transfers.
Tuesday, May 26, 2009
How the budget was balanced
Rep. Blake Oshiro's op-ed on the 2009 legislative session focused on balancing the state budget, without question, the highest priority of the session. This appeared in The Honolulu Advertiser, Sunday, May 17, 2009. Here is a pie chart that reflects the percentages below.
Modest increases a small part of balancing budget
By Rep. Blake Oshiro
If there is one message that I would like Hawai'i residents to remember about the 2009 legislative session, it is this: The Legislature balanced the budget, as required by law, mostly through budget cuts, not tax increases. The tax increases that were passed were modest, and will not affect most people in the state.
While the Legislature faced many critical issues this year, balancing the state budget was our first priority.
The budget bill covers state expenditures and revenues over the next biennium, fiscal years 2010 and 2011. Given the Council on Revenues' latest projections, the House and Senate faced a potential shortfall of $2.1 billion by the end of 2011. Our task, therefore, was to find a way to cover that loss through a combination of cutting expenses and raising revenues.
Knowing that tax increases are the last thing politicians want to do, we looked at every option available to us. We considered public employee benefit reductions, eliminating tax credits and tax exemptions, transfers from special funds to the general fund. We turned over every rock, no matter how small, to add to a list of budget solutions.
In the end, here is how we balanced the budget:
Budget cuts and lapses to the general fund accounted for about 50 percent of the solution. The cuts were taken from all departments, but because of the sheer size of some departments, the major cuts came from the agencies with the largest budgets — Education, Human Services and Health.
Applying a carryover balance from fiscal year 2008, and finding various revenues through credit adjustments, non-general funds, penalties and enforcement added another 35 percent to the solution.
Most of the publicity centered on a package of tax increases, which will ultimately account for about 10 percent of the solution to cover the budget shortfall. A tax increase of any kind is difficult to propose. We are well aware that any tax increase, no matter how modest, is going to negatively impact a segment of the population. However, we tried to target the increases on a very small percentage of Hawai'i taxpayers, including high-income earners who make up about 2.4 percent of the population; the hotel room tax; those who are selling property over $2 million and second homes and investment properties of any price; and cigarette and tobacco users.
The federal stimulus money, about $115 million, accounted for about 5 percent of the solution. This was a critical component to our ability to balance the budget, but we also needed to keep in mind that the stimulus is a one-shot injection. Hawai'i cannot expect to receive more federal stimulus money going forward.
In most years, the Legislature passes a budget bill, but also appropriates money through other bills outside the budget. It's significant that this year the Legislature passed only three appropriations from the general fund, the largest of which was $12.3 million for Hawai'i hospitals to treat low-income patients and enable them to receive $12.5 million in matching federal funds for Medicaid reimbursements.
I think it's worth looking at what this budget does not include, for that is an important part of the 2009 legislative story.
We tried hard to ensure that there was minimal impact to the poor and the middle class. The budget does not include a major reduction in services so that our public safety net is dismantled. It does not include mass layoffs, which would only result in skyrocketing unemployment and a serious reduction in consumer spending.
Most importantly, it does not include a rise in the general excise tax, the most regressive tax in terms of impacting those who can least afford it.
Finally, the governor has continuously linked our work in balancing the budget to her ability to negotiate contracts with the public employee unions. She gives the false and irresponsible impression that if the Legislature balances the budget through other means, then it gives the unions little incentive to negotiate a fair contract. The truth is that the Legislature has never used collective bargaining figures to balance the state budget, in good years or bad. It is not our role to get involved or to influence labor union negotiations.
The state budget and the selected tax increase bills have nothing to do with the governor being able to negotiate a fair contract with the unions in the best interests of the state. She should be able to do so without blaming the Legislature and by basing negotiations on the state of the economy and the projections of the Council on Revenues.
In closing, I want to thank the people of Hawai'i for helping us through this very difficult session. Most seem to understand that we had to make tough decisions, but we tried our best to protect the most vulnerable.
Modest increases a small part of balancing budget
By Rep. Blake Oshiro
If there is one message that I would like Hawai'i residents to remember about the 2009 legislative session, it is this: The Legislature balanced the budget, as required by law, mostly through budget cuts, not tax increases. The tax increases that were passed were modest, and will not affect most people in the state.
While the Legislature faced many critical issues this year, balancing the state budget was our first priority.
The budget bill covers state expenditures and revenues over the next biennium, fiscal years 2010 and 2011. Given the Council on Revenues' latest projections, the House and Senate faced a potential shortfall of $2.1 billion by the end of 2011. Our task, therefore, was to find a way to cover that loss through a combination of cutting expenses and raising revenues.
Knowing that tax increases are the last thing politicians want to do, we looked at every option available to us. We considered public employee benefit reductions, eliminating tax credits and tax exemptions, transfers from special funds to the general fund. We turned over every rock, no matter how small, to add to a list of budget solutions.
In the end, here is how we balanced the budget:
Budget cuts and lapses to the general fund accounted for about 50 percent of the solution. The cuts were taken from all departments, but because of the sheer size of some departments, the major cuts came from the agencies with the largest budgets — Education, Human Services and Health.
Applying a carryover balance from fiscal year 2008, and finding various revenues through credit adjustments, non-general funds, penalties and enforcement added another 35 percent to the solution.
Most of the publicity centered on a package of tax increases, which will ultimately account for about 10 percent of the solution to cover the budget shortfall. A tax increase of any kind is difficult to propose. We are well aware that any tax increase, no matter how modest, is going to negatively impact a segment of the population. However, we tried to target the increases on a very small percentage of Hawai'i taxpayers, including high-income earners who make up about 2.4 percent of the population; the hotel room tax; those who are selling property over $2 million and second homes and investment properties of any price; and cigarette and tobacco users.
The federal stimulus money, about $115 million, accounted for about 5 percent of the solution. This was a critical component to our ability to balance the budget, but we also needed to keep in mind that the stimulus is a one-shot injection. Hawai'i cannot expect to receive more federal stimulus money going forward.
In most years, the Legislature passes a budget bill, but also appropriates money through other bills outside the budget. It's significant that this year the Legislature passed only three appropriations from the general fund, the largest of which was $12.3 million for Hawai'i hospitals to treat low-income patients and enable them to receive $12.5 million in matching federal funds for Medicaid reimbursements.
I think it's worth looking at what this budget does not include, for that is an important part of the 2009 legislative story.
We tried hard to ensure that there was minimal impact to the poor and the middle class. The budget does not include a major reduction in services so that our public safety net is dismantled. It does not include mass layoffs, which would only result in skyrocketing unemployment and a serious reduction in consumer spending.
Most importantly, it does not include a rise in the general excise tax, the most regressive tax in terms of impacting those who can least afford it.
Finally, the governor has continuously linked our work in balancing the budget to her ability to negotiate contracts with the public employee unions. She gives the false and irresponsible impression that if the Legislature balances the budget through other means, then it gives the unions little incentive to negotiate a fair contract. The truth is that the Legislature has never used collective bargaining figures to balance the state budget, in good years or bad. It is not our role to get involved or to influence labor union negotiations.
The state budget and the selected tax increase bills have nothing to do with the governor being able to negotiate a fair contract with the unions in the best interests of the state. She should be able to do so without blaming the Legislature and by basing negotiations on the state of the economy and the projections of the Council on Revenues.
In closing, I want to thank the people of Hawai'i for helping us through this very difficult session. Most seem to understand that we had to make tough decisions, but we tried our best to protect the most vulnerable.
Tuesday, May 5, 2009
Legislature in the News: From Barrel tax to Budget to Karen's Law
HB1552 - Kahana Valley Bill
Bill to allow Kahana leases could win Legislature's OK - Honolulu Advertiser
HB1713 - Hazard Mitigation Bill
Negligent property owners targeted - Honolulu Advertiser
HB200 - State Budget
Lawmakers hope to balance the budget as the end of session nears – KHON2
Lawmakers will work overtime for budget – Star Bulletin
No deal for state, OHA on lands - Honolulu Advertiser
Hawaii lawmakers agree on budget – Honolulu Advertiser
Legislature's Budget Includes $800 Million In Cuts – KITV4
Budget showdown ramps up over tax hikes – KHON2
Battle over Balancing the State Budget – KGMB9
State lawmakers turn in costly bills – KITV4
State Lawmakers Reject Gas Tax, Fee Hike – KITV4
HB1271 - Barrel Tax
Barrel Tax Bill Could Net State $31 Million – KGMB9
New Hawaii petroleum tax hike likely to raise gas prices: Increase could generate $31M annually for clean energy, food programs - Honolulu Advertiser
HB1744 - County Hotel Room Tax
Counties will continue to get TAT funds – Maui News
SB1673 - Hawaii Health Systems Corporation
CEO Lo: It’s new day for hospital – Maui News
HB819 - Karen's Law
Karen's Law fails for 2nd straight year – Honolulu Advertiser
'Karen's Law' Doesn't Pass; Pine Blames Oshiro – KGMB9
Karen's Law Killed – KFVE
Legislature
Lawmakers Extend Legislative Session – KITV4
Bill to allow Kahana leases could win Legislature's OK - Honolulu Advertiser
HB1713 - Hazard Mitigation Bill
Negligent property owners targeted - Honolulu Advertiser
HB200 - State Budget
Lawmakers hope to balance the budget as the end of session nears – KHON2
Lawmakers will work overtime for budget – Star Bulletin
No deal for state, OHA on lands - Honolulu Advertiser
Hawaii lawmakers agree on budget – Honolulu Advertiser
Legislature's Budget Includes $800 Million In Cuts – KITV4
Budget showdown ramps up over tax hikes – KHON2
Battle over Balancing the State Budget – KGMB9
State lawmakers turn in costly bills – KITV4
State Lawmakers Reject Gas Tax, Fee Hike – KITV4
HB1271 - Barrel Tax
Barrel Tax Bill Could Net State $31 Million – KGMB9
New Hawaii petroleum tax hike likely to raise gas prices: Increase could generate $31M annually for clean energy, food programs - Honolulu Advertiser
HB1744 - County Hotel Room Tax
Counties will continue to get TAT funds – Maui News
SB1673 - Hawaii Health Systems Corporation
CEO Lo: It’s new day for hospital – Maui News
HB819 - Karen's Law
Karen's Law fails for 2nd straight year – Honolulu Advertiser
'Karen's Law' Doesn't Pass; Pine Blames Oshiro – KGMB9
Karen's Law Killed – KFVE
Legislature
Lawmakers Extend Legislative Session – KITV4
Monday, April 13, 2009
Raising Income Tax on High-Income Earners
The following opinion piece ran in this morning's Honolulu Advertiser.
Wealthier families can afford tax hike
By Rep. Marcus Oshiro
Lawmakers are required by law to pass a balanced budget for the upcoming biennium. Faced with a $262 million deficit, which is expected to worsen when the Council on Revenues announces new projections in May, we have proposed a combination of strategies. Included in the mix is a proposal to raise income taxes on higher-income wage earners. While no one wants to raise taxes, we explored the impact of this type of tax increase and discovered it has clear advantages. Here's why: Personal income tax increases are a better option than spending cuts because they have a lesser impact on consumer activity in our local economy. The 2001 Nobel Prize-winning economist Joseph Stiglitz believes "economic theory and evidence gives a clear and unambiguous answer: It is economically preferable to raise taxes on those with high income than to cut state expenditures."
According to economist Peter Orszag, President Obama's choice for budget director, when it comes to addressing state fiscal deficits in the short run, tax increases on higher-income families are the least damaging mechanism of all. Orszag's argument was supported by 120 economists who signed a letter to Gov. David Paterson of New York, a state also dealing with a significant deficit.
"The reasoning is straightforward: In a recession, you want to raise (or not decrease) the level of total spending — by households, business and government — in the economy," the letter states. "Budget cuts reduce the level of total spending. Raising taxes on high-income households also will reduce spending, but by much less than the amount of the tax increase since those with plenty of income typically spend only a fraction of their income."
Personal income-tax increases are also a better option than spending cuts because they support, not undermine, federal attempts to stimulate the economy. History and basic economic principles show that whenever you attempt to close a budget deficit, the economy contracts. If we close the budget gap by preserving as much spending as possible, this will have a more positive impact on the effectiveness of the federal stimulus package.
Some may recall the increase in federal taxes on upper-income Americans in 1993 as part of the effort to address a federal deficit. There is no evidence that these tax increases harmed the national economy; in fact, the U.S. enjoyed a boom economy in the decade following.
In addition, fears that high-income families will leave the state are considered overblown. Frank Mauro, executive director of the Fiscal Policy Institute, points to evidence that high-income families are able to absorb increases, and cites a recent Princeton study that concluded that no out-migration resulted from the state of New Jersey raising income taxes on households with incomes over $500,000.
Hawai'i faces more than a short-term budget deficit. I am optimistic that we will pull out of it successfully, but we must look beyond our immediate situation. It is obviously the opportune time to modernize our tax structure to ensure that we have the adequate revenue we need. Many states face the same problem — tax codes that may be obsolete, relying on industries that no longer generate the revenue and economic stability that we desire.
The Center on Budget and Policy Priorities estimates that at least 45 states are facing deficits of such magnitude that it is clear they can't "cut" themselves out of the hole. Ten states are seriously considering raising taxes: Arizona, Connecticut, Delaware, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Washington and Wisconsin. Both California and New York raised income taxes this year.
Raising taxes must also be part of the solution, and raising the personal income tax on the wealthiest of our society seems to be the best option overall.
As we consider all the options available to use, it's important for Hawai'i residents to keep an open mind. Taxes are not inherently evil. A tax system allows government to plan for and provide the infrastructure and the services needed for our society to function. That tax system, however, should not only be fair and efficient, but structured in a way that promotes healthy economic growth.
Rep. Marcus Oshiro, D-39th (Wahiawa) is chairman of the House Committee on Finance. He wrote this commentary for The Advertiser.
Wealthier families can afford tax hike
By Rep. Marcus Oshiro
Lawmakers are required by law to pass a balanced budget for the upcoming biennium. Faced with a $262 million deficit, which is expected to worsen when the Council on Revenues announces new projections in May, we have proposed a combination of strategies. Included in the mix is a proposal to raise income taxes on higher-income wage earners. While no one wants to raise taxes, we explored the impact of this type of tax increase and discovered it has clear advantages. Here's why: Personal income tax increases are a better option than spending cuts because they have a lesser impact on consumer activity in our local economy. The 2001 Nobel Prize-winning economist Joseph Stiglitz believes "economic theory and evidence gives a clear and unambiguous answer: It is economically preferable to raise taxes on those with high income than to cut state expenditures."
According to economist Peter Orszag, President Obama's choice for budget director, when it comes to addressing state fiscal deficits in the short run, tax increases on higher-income families are the least damaging mechanism of all. Orszag's argument was supported by 120 economists who signed a letter to Gov. David Paterson of New York, a state also dealing with a significant deficit.
"The reasoning is straightforward: In a recession, you want to raise (or not decrease) the level of total spending — by households, business and government — in the economy," the letter states. "Budget cuts reduce the level of total spending. Raising taxes on high-income households also will reduce spending, but by much less than the amount of the tax increase since those with plenty of income typically spend only a fraction of their income."
Personal income-tax increases are also a better option than spending cuts because they support, not undermine, federal attempts to stimulate the economy. History and basic economic principles show that whenever you attempt to close a budget deficit, the economy contracts. If we close the budget gap by preserving as much spending as possible, this will have a more positive impact on the effectiveness of the federal stimulus package.
Some may recall the increase in federal taxes on upper-income Americans in 1993 as part of the effort to address a federal deficit. There is no evidence that these tax increases harmed the national economy; in fact, the U.S. enjoyed a boom economy in the decade following.
In addition, fears that high-income families will leave the state are considered overblown. Frank Mauro, executive director of the Fiscal Policy Institute, points to evidence that high-income families are able to absorb increases, and cites a recent Princeton study that concluded that no out-migration resulted from the state of New Jersey raising income taxes on households with incomes over $500,000.
Hawai'i faces more than a short-term budget deficit. I am optimistic that we will pull out of it successfully, but we must look beyond our immediate situation. It is obviously the opportune time to modernize our tax structure to ensure that we have the adequate revenue we need. Many states face the same problem — tax codes that may be obsolete, relying on industries that no longer generate the revenue and economic stability that we desire.
The Center on Budget and Policy Priorities estimates that at least 45 states are facing deficits of such magnitude that it is clear they can't "cut" themselves out of the hole. Ten states are seriously considering raising taxes: Arizona, Connecticut, Delaware, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Washington and Wisconsin. Both California and New York raised income taxes this year.
Raising taxes must also be part of the solution, and raising the personal income tax on the wealthiest of our society seems to be the best option overall.
As we consider all the options available to use, it's important for Hawai'i residents to keep an open mind. Taxes are not inherently evil. A tax system allows government to plan for and provide the infrastructure and the services needed for our society to function. That tax system, however, should not only be fair and efficient, but structured in a way that promotes healthy economic growth.
Rep. Marcus Oshiro, D-39th (Wahiawa) is chairman of the House Committee on Finance. He wrote this commentary for The Advertiser.
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