Washington, DC, March 28, 2013—In a new Background Paper released this week by the Tax Foundation, How Is the Money Used? Federal and State Cases Distinguishing Taxes and Fees examines state-by-state what a tax is, what a fee is, and how public understanding of the difference between the two can strengthen taxpayer protection provisions, minimize distortions caused by hidden or mislabeled taxes, and help increase transparency of the cost of government programs.
“A tax has the primary purpose of raising revenue,” said Joseph Henchman, Tax Foundation Vice President of Legal Projects, and author of the exhaustive study. “By contrast, a fee recoups the cost of providing a service from a beneficiary.”
“This is not just a matter of semantics,” Henchman added. “In order to protect taxpayers, many state constitutions contain additional procedural steps and limitations that apply only to tax increases. These protective measures can be undermined if the legislature can circumvent them by merely relabeling what would otherwise be a tax, so a workable definition of ‘tax’ is necessary to give them meaning.”
The report finds that all but two states (North Carolina and Oregon) have adopted these definitions, with Ohio as the most recent addition. The report also reviews which states rule in favor of taxpayers when tax laws are ambiguously worded, and which states have rejected the discredited notion that taxes are “mandatory” charges while fees are “voluntary” charges.
“With April 15th arriving soon, taxes will be on the collective minds of our nation,” said Tax Foundation President Scott A. Hodge. “As taxpayers sign over checks to the government, an understanding of what the word ‘tax’ means is of upmost importance.”
Tax Foundation Background Paper No. 63, “How Is the Money Used? Federal and State Cases Distinguishing Taxes and Fees” by Joseph Henchman is available here.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or firstname.lastname@example.org.
The Taxpayer’s Bill of Rights was supposed to keep money in people’s pockets, but 80 percent of Coloradans actually pay more in taxes to supplement their local schools, according to a study released Tuesday by the Colorado Futures Center at Colorado State University.
“Since the early 1990s, Colorado has enacted layers of reform in pursuit of two conflicting goals – lower property taxes and well-funded public schools,” said Phyllis Resnick, lead economist at the center and lead author of a paper the research for the nonpartisan Lincoln Institute of Land Policy, “Measuring the Impact of Tax and Expenditure Limits on Public School Finance in Colorado.”The Lincoln Institute is a private think tank that studies land taxes and use.
“The result is greater inequality and inconsistency, and surprisingly, a greater tax burden for most Coloradans.”
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Colorado lawmakers begin a mad dash to the finish next week with more than a dozen significant bills in limbo and the session’s clock set to expire.
The final flurry before the May 6 adjournment is typical each session, but this year it is complicated by a divided legislature seeking elusive common ground on a wide range of issues and a series of late bills with huge implications.
The new bills include a repeal of the sales tax on soft drinks, a new$3.5 billion transportation bonds package, two resolutions to cut the length of the legislative session, an opt-out for mail ballots, the renewal of a state consumer watchdog and a ballot measure on how to spend $58 million of marijuana taxes.
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Yes, you can get involved in your city or state. TABOR gives citizens the right to vote yes or no on the government increasing your taxes. To learn more, send an email to info@theTABORcommittee.com
The first tax and expenditure limitation (TEL) was proposed by California Gov. Ronald Reagan in 1972. In the years since then, numerous states have adopted TELs. By studying these laws, we have discovered principles and design concepts for effective tax limitation.
In spring 1978, under the leadership of State Rep. David Copeland, the people of Tennessee adopted the first constitutional tax limitation measure in the nation, the work product of a state constitutional convention.
Then came Proposition 13 in California in June 1978. While not itself a TEL (it was primarily a limitation on the growth of property taxes), Prop. 13 was the catalyst that ignited a national tax revolt. Things began to happen quickly across the country:
- Arizona, under the leadership of then-Senate Majority Leader Sandra Day O’Connor, adopted a TEL referendum in 1978.
- In November 1978, Michigan adopted the Headlee Amendment, which restricted state spending as a share of personal income.
- In 1979, California adopted a Prop. 1-type TEL (the Gann Limit) that for the first time limited the growth of state spending by measuring it against inflation and population or per-capita personal income growth, instead of a percentage of state personal income growth, which really tightened the year-over-year control over taxes and government spending.
- Also in 1979, Washington State adopted a TEL (Initiative 62).
- In 1980, Missouri adopted the Hancock Amendment, again using a percentage of state personal income growth as the measure.
- In 1980, Massachusetts’s Prop. 2 ½ drew heavily on the language of California’s Prop. 1 in order to control the growth of local governments.
Many other states have since adopted constitutional or statutory controls. But many were not tough enough or sufficiently well enforced or honored to be effective. Circumvention began in earnest in Missouri as the legislature and courts played games with the revenue base and school financing. In California in 1989, wily Assembly Speaker Willie Brown corrupted the Gann Limit formula in a statewide initiative devoted to improving California’s roads and highways. Continue reading
Colorado’s Education Association President, Kerrie Dallman, welcomed many thousands of delegates at the National Education Association to Denver this summer for its national convention. http://www.youtube.com/watch?v=Wb_62weV7EE&sns=em
If you wondered how your friends and family in the education profession might be willing to respect the citizens’ Taxpayer’s Bill of Rights, please watch just one minute of the attached video, starting at into 1.30 it. Realize how that message was then taken back across the nation. Then consider the TABOR Committee’s mission to inform people in other states of the TABOR benefits.
(In the last two minutes of the video, Dallman talks about the Community Organizers imported and hired into JeffCO since this spring to work against new school board policies. And to think that the media reported the walk-outs as if they were spontaneous.)