Monday, January 14th 2013 - 06:29 UTC

Growing number of US states pushing to concentrate fiscal revenue on sales tax

Attempts to overhaul the US federal tax system are fading in a divided congress in Washington, but in some state capitals, tax reform experiments - some far-reaching - are fast taking shape. Across the South and Midwest, Republicans have consolidated control of state legislatures and governorships, giving them the power to test long-debated tax ideas.

Small-government conservative activist Small-government conservative activist Grover Norquist lobbies for cuts to income and corporate taxes  lobbies for cuts to income and corporate taxes

Louisiana Republican Governor Bobby Jindal, for instance, called last week for ending the state's income tax and corporate taxes, with sales taxes compensating for lost revenue. A similar plan is being pushed by Republicans in North Carolina. Kansas which cut its income tax significantly last year, may trim further. Oklahoma, which tried to cut income taxes last year, is expected to try again.

“When it comes to getting pro-growth tax reform done this year, the only real opportunities are at the state level,” said Patrick Gleason, director of state affairs for Americans for Tax Reform, the Washington-based anti-tax lobbying group headed by small-government conservative activist Grover Norquist.

His group and other conservative pressure organizations, such as Americans for Prosperity, have targeted state capitals for tax reform campaigns.

Cutting income taxes and shifting the overall tax burden to consumption through higher sales taxes is a long-standing goal of some tax theorists. Critics argue that approach is regressive and unfairly burdens the middle class and the poor, who spend more of their earnings on items subject to sales tax.

Nicholas Johnson, a state tax expert with the left-leaning Centre on Budget and Policy Priorities, gave the chances of sweeping tax changes taking hold a low probability. Still, he said he worried the efforts in the states could move the tax discussion in a direction harmful to middle- and low-income taxpayers and make balancing state budgets harder.

“Even if this is too radical, if it makes other radical schemes seem more reasonable, that's worrisome,” he said.
 

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