1	Tax Issues to Consider Tax Reform Task Force Meeting – Feb. 28, 2002 Tony Hutchison, Director, Economic Research and Policy Analysis Senate Staff
2	Guiding Principles of Good Tax Policy Equity and Fairness Certainty Convenience of Payment Economy of Collection Simplicity
3	Guiding Principles of Good Tax Policy – Cont’d Neutrality Economic Growth and Efficiency Transparency and Visibility Minimum Tax Gap (compliance) Appropriate Government Revenues
4	Income Taxes as a Percent of Total State and Local Taxes 1972-1999
5	Sales Taxes as a Percent of Total State and Local Taxes 1972 - 1999
6	Property Taxes as a Percent of Total State and Local Taxes 1972-1999
7	Other Taxes as a Percent of Total State and Local Taxes 1972-1999
8	1972, 1983, and 1999 Tax Revenue Distribution by Source
9	Percentage of tax collections by level of government
10	Number of Services Taxed – Oklahoma and Border States
11	State Job Growth and Relative Business Costs (1986-1996)
12	Regional Financial Associates (RFA) Cost of Doing Business Study - Analysis 33% of the variation in state job growth is related to relative business costs (Zandi -RFA) Of that 33%, labor costs make up 75%, energy costs 15% and the final 10% is represented by the state tax burden.
13	Considerations when looking at tax rankings There are 27 states within I percentage point of one another in the ranking of tax burden as a percent of personal income. 38 states are only separated by only 2 percentage points in the same measure. Must look at state and local tax revenue combined in order to get an accurate comparison of how states compare.
14	Who bears the burden of State and Local Taxes? Texas ranks 48^th in the nation in the share of state and local taxes paid by households, while Oklahoma ranks 10^th . Those rankings virtually reverse for the share borne by businesses (Oklahoma-44^th; Texas 3^rd)
15	States with No Income Tax – Current Budget Situation Florida – Because of its reliance on the sales tax and its dependence on tourism dollars, Florida is reeling in the wake of the 9/11 terrorist attacks. Florida has already had two special sessions to close a $1.2 billion FY02 budget gap. There is a proposal there to roll back the sales tax rate and impose the tax on services. Nevada – Las Vegas tourism has also been hit hard by the events of 9/11. Gaming and sales taxes were down 4.2% through November. Unless revenues turn around there will be a budget gap to close in FY03. South Dakota – FY02 revenues were down over $17 million, primarily from a decrease in sales tax revenues. A shortfall is expected in FY03 but the amount is unknown at this time. Washington – Washington is experiencing a $1.25 billion budget gap and has used cuts and tapped Rainy Day Funds to balance its 2002 Budget. That gap is expected to be $500 million to $1 billion in FY03. Wyoming – There is no budget gap in Wyoming. Tennessee* - Governor Don Sundquist (R) has proposed a comprehensive tax plan that would extend the sales tax to all currently exempt products and services, including advertising. This plan would also target high income Tennesseans by expanding the 6% corporate income tax to sole proprietorships and partnerships. Last year his proposal to implement a state income tax was killed in the legislature. The state needs $705 million in new revenue in FY03 to maintain current funding levels. New Hampshire* - While there is currently no budget gap, the governor has cut 1% across the board to be on the safe side. Alaska – There is a $1 billion shortfall expected in FY02 and a shortfall of $1.25 billion in FY03. A bipartisan group of House members is proposing an income tax, cruise ship tax, and raising alcohol taxes. Texas – Texas is not currently in session, but in the last session a bill (HB3293) was introduced to implement a state income tax. Texas is not experiencing a budget shortfall but there is a potential for problems in areas such as Medicaid and CHIP.