Welcome to the IMA Tax Policy Blog. The blog format reflects our efforts to provide IMA members with timely, relevant and thought provoking information in a form that is accessible for easy reference. IMA’s Tax Policy Blog will be updated on a regular basis. Weekly news update emails will be sent out to notify subscribers of new information posted on the blog. IMA members are welcome to submit material for the blog, or request specific information. Simply email Editor Stefany Henson at shenson@ima-net.org with your information or request. Editorial submissions are subject to review. 

Thursday
May052016

State and Local Individual Income Tax Collections Per Capita

By Jared Walczak, The Tax Foundation

Individual income taxes are the single largest source of state tax revenue in the United States, accounting for 36.5 percent of all state revenue in fiscal year 2013 despite the fact that nine states forego a tax on wage and salary income. Among states (and the District of Columbia) imposing an individual income tax on wage income, the tax accounts for an average of 43.4 percent of all state collections.

Income taxes tend to be less important to local governments overall, accounting for 4.8 percent of local tax collections. Over 91 percent of all state and local income tax revenue flows to state governments. Low collections at the local level is at least partly due, however, to their lesser ubiquity. They represent 13.8 percent of collections in the thirteen states (and the District of Columbia) permitting local income taxes, ranging from de minimus collections in Oregon to 31.7 percent of local revenue in Maryland. Local governments in six states—Indiana, Kentucky, Maryland, New York, Ohio, and Pennsylvania—generate more than 10 percent of their revenue from individual income taxation, as does the District of Columbia.

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Thursday
May052016

Illinois Income Tax Proposal Would Result in 3rd Highest Rate on Small Businesses in the U.S.

By Richard Borean, The Tax Foundation

State would fall from 23rd to 48th on State Business Tax Climate Index

A recent proposal to transform Illinois’s income tax system could lead to small businesses facing state income tax rates as high as 11.25 percent, the third highest rate on pass-through businesses anywhere in the nation, according to a new report from the nonpartisan Tax Foundation.

The proposal (HB 689) would transform the state’s flat individual income tax rate of 3.75 percent into a graduated, four-rate system topping out at 9.75 percent. Because many small businesses file under the individual tax code, rather than the corporate code, and because they must also pay a 1.5 percent “personal property replacement tax”—which is, in fact, a second income tax—their new top marginal income tax rate would be 11.25 percent. Since this is a considerably higher rate than what traditional c-corporations would face, the proposal would result in a disparity in the way Illinois treats small businesses compared to larger businesses in the state.

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Wednesday
Apr272016

What Could Your Tax Burden Be Under the Next President?

By Kyle Pomerleau, The Tax Foundation

This election season, nearly every presidential candidate has released a detailed plan on how they would change the tax code. Some of these plans are small and would have a limited impact on taxpayers and economy. Other plans are big and would drastically impact federal revenues, the economy, and taxpayers. Using our Taxes and Growth (TAG) macroeconomic model, we analyzed how these plans would impact the economy, federal revenue, and the distribution of taxes paid.

While analyses like those are very important, these plan are complex and have a lot of moving parts. For many people, it is hard to understand how these plans will impact them. That is why we partnered with USA Today to build a simple tax calculator. This calculator allows you to enter your and your spouse’s income and the number of children you have. The calculator then tells you roughly what your tax bill is under current law and what it would be if Hillary Clinton, Ted Cruz, Bernie Sanders, and Donald Trump were able to enact their tax plan.

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Wednesday
Apr272016

IRS issued proposed regulations on truck, tractor and trailer excise taxes

RSM TAX ALERT — New proposed excise tax regulations include definition of highway vehicle

On Mar. 31, 2016, Treasury and the IRS issued proposed regulations (REG-103380-05) relating to excises taxes imposed on sales of highway trucks, tractors, trailers, and tires; the use of heavy vehicles on highways; and the definitions of highway vehicle and mobile machinery as they relate to the above taxes. The proposed regulations affect manufacturers, producers, importers, dealers, retailers, and users of certain highway trucks, tractors, trailers and tires beginning on and after the date the rules are published in the Federal Register as final regulations.

The proposed regulations are meant to encompass legislative changes and judicial rulings that have occurred since prior temporary regulations were issued (from 1982 forward). These proposed regulations also restate certain portions of the previously issued temporary regulations, providing the public with the opportunity to comment on those older provisions.

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Wednesday
Apr202016

Illinois Lawmakers Consider Progressive Income Tax

If enacted, would increase taxes on 61 percent of Ill. employers — By Richard Borean, the Tax Foundation …

Illinois lawmakers are considering several tax reform options that would increase taxes on the majority (61 percent) of the state’s employers, according to a new analysis from the nonpartisan Tax Foundation.

Proposals to move the state’s income tax system from a flat rate on all income to a graduated rate system, with top rates ranging from 8 to 11 percent, would negatively impact businesses that file taxes via the individual income tax and not through the corporate income tax.

The study details the proposals, and explains how different industries and Illinois’ business tax landscape would be affected. The key findings include:

Sixty-one percent of employers in Illinois are pass-through entities, meaning they pay business taxes through the individual income tax. Implementing the graduated rate structure would increase taxes on many of these businesses.

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