MuniLand

States on average derive about 49 percent of their revenue from sales taxes, so holiday shopping results are important for state treasuries. Unfortunately, the early read on holiday retail sales looks pretty bleak. Reuters reports (emphasis mine):

As the U.S. holiday season winds down, retailers are left to hope that post-Christmas sales can help salvage their worst performance since 2008, preliminary data showed.

Holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year, according to data from MasterCard Advisors SpendingPulse.

Meanwhile, online retail sales, in which 46 states do not require the retailer to collect sales tax, surged 16 percent in the comparable period according to ComScore. There is no Christmas cheer for state treasurers in that data.

Nineteen states derive 50 percent or more their revenues from sales taxes, and eight derive over 60 percent, according to the U.S. Census:

The Tax Foundation named names in a new report that details the states that have the heaviest tax structures. The report compiled personal and corporate income tax, sales tax, unemployment insurance and property tax rates, and it used this data to rank states by their tax burdens. The Tax Foundation describes the purpose of the effort:

State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.

Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax.

Voters and legislators in two very red states, Oklahoma and North Dakota, have recently defeated conservative initiatives to eliminate important taxes. Among some Republicans, there seems to be a realization of the need to pay taxes to fund essential services like schools and police and firemen, and of the need to find other sources of revenue once a given tax is repealed.

North Dakota has become the first state in the nation to propose and subsequently defeat a constitutional amendment banning property taxes. The proposal, Measure 2, would have given all local revenue decisions to the state legislature without detailing how the process would work. It was overwhelmingly rejected – by 77 percent of voters. This comment in the Bismark Tribune seems to capture the reasoning of voters on the issue:

I voted “no” on M2 because it was too vague and when I inquired supporters on how funding gets reacquired they kept stating that politicians will be forced to rethink the budget when, in reality, politicians always get funding by raising taxes. There is no such thing as a vacuum in government budgets and this argument relies on common sense in government actually taking effect. If Mandan elects a grocery personality with dubious managerial skills (I worked for the guy, he severely lacks leadership), then I have serious doubts that politicians will “rethink” anything.

Conservatives are working in legislatures across the country to eliminate or reduce state and local tax rates with the stated purpose of promoting job creation. These legislative efforts have received support from the American Legislative Exchange Council (ALEC), an ultra-conservative lobbying group. Oklahoma Governor Mary Fallin is the latest beau ideal for ALEC’s fiscal austerity drive as she leads the charge to eliminate her state’s income tax. She writes in the introduction to ALEC’s latest edition of “Rich States, Poor States”:

I have been committed to these fundamental principles for years, and we are seeing incredible results because our legislators have had the courage to stand with me in support of conservative governance. Oklahoma’s economy is outperforming the national economy, and our success stands in stark contrast to the record of dysfunction, failed policies, and outrageous spending that occurs in Washington, D.C. Oklahoma could teach Washington a lesson or two about fiscal policy and the proper size and role of government – and so could the tax and fiscal policy reforms espoused by ALEC.

I’m all for state and local governments shrinking their workforces and learning more efficient ways to deliver government services. There is nothing sacred about the current level of the government’s labor force, especially at a time when the non-public sectors of the society are continuously seeking to deliver goods and services with fewer economic inputs. It is only fair that we ask similar efforts of the public sector.