In conjunction with existing tax collection options, local governments have long advocated

Transcription

1 Questions for the Record Subcommittee on Commercial and Administrative Law Hearng on State Taxation: The Impact of Congressional Legislation on State and Local Governent Revenues April 15,2010 The Honorable B. Glen Whitley. President-Elect. National Association of Counties Questions from the Honorable Steve Cohen, Chairman 1. ffm has parnered with the State of New York to find delinquent taxpayers. The two have created the Optimizer, a system that uses predictive modeling softare to identify delinquent taxpayers. The Optimizer apparently has exceeded expectations and is predicted to bring in an additional $100 millon in revenue for New York over the next three years. Are local governents taking similar steps to identify delinquent taxpayers and collecting unpaid taxes? If yes, what steps are they taking and how successful are these steps? How does such success impact local revenues and taxpayers? One of the biggest revenue sources for local governments is real propert taxes. (In fact, only 14 states permit local governments to impose an income tax.) Most jurisdictions have processes in place that identify delinquent taxpayers and permit the option of filing of a tax lien against the real and personal property of the delinquent taxpayer. In conjunction with existing tax collection options, local governments have long advocated the enactment of federal legislation that would amend the Internal Revenue Code of 1986 to permit the collection of local tax debts and court-ordered obligations in criminal and juvenile justice proceedings through the reduction of federal tax refunds. As a result, NACo strongly supports H.R that would permit the collection of past-due, legally enforceable local government tax obligations to local governments through federal tax refund offsets. (A copy of NACo's letter of support is attached.) NACo is also supportive of the Streamlined Sales and Use Tax Agreement, which would permit members states to collect sales and use taxes on remote sellers - taxes that, for the most part, are not currently collected from vendors or paid by consumers. However, as explained more fully below, NACo opposes efforts to include telecommunications taxesabove and beyond sales and use taxes - in the Agreement. 2. In your wrtten statement and also alluded to in your opening statement, you indicated that NACo supports, yet opposes the Streamlined Sales and Use Tax legislation which was introduced during the 11 Oth Congress. Many of us have been under the assumption that state and local governents wholehearedly support the legislation. Please explain in detail. 1

2 While NACo is supportive of the Streamlined Sales and Use Tax project, it opposed legislation that was introduced in the 110th Congress due to the fact that the legislation included provisions that would have required wholesale revisions to state and local telecommunications tax laws. These provisions affected not only sales and use taxes, but also rights-of-fees, 911 fees, franchise fees, and so on - taxes and fees that were clearly beyond the original scope of the streamlined project. However, NACo does support the current draft version of the Main Street Tax Fairness Act of 201 0, which has yet to be introduced in the 111 th Congress. The proposed legislation addresses only telecommunications sales and use taxes. (A copy of NACo's letter of support is attached.) Various news articles have discussed the complexity of including a complete simplification of all telecommunications taxes in the Streamlined Agreement. Indeed, the Streamlined Sales Tax Governing Board has finally recognized the complexity of this issue and has recently put together a task force to examine the issue of telecommunications taxes in greater detail. I would like to note that NACo does, in fact, favor simplifying telecommunications taxes as long as the vehicle used by the federal government to achieve same does not undermine county governments' abilty to retain taxing authority and revenue streams. We believe that including such reform in the Streamlined Tax Agreement would do just this. 3. Mr. Robert Ward, who testified on the second panel at the hearng, raised an interesting question in his written statement for Congress to consider when reviewing legislation affecting state taxation: Should federal policy emphasize the benefits of interstate differences, including tax competition among the jurisdictions, or should national policy focus on the benefits to be obtained from greater uniformity among the states? Please respond. NACo believes that counties, as political subdivisions of state government, but with closer relationships to the people, have a right and a responsibilty to raise the necessary revenues, unhindered by federal impositions or restrictions, in order to finance critical basic public services of a wide variety, many of which are federally mandated. As such, it would be diffcult for NACo to support the proposition that national tax policy should focus on greater tax uniformity among the states rather than appreciating the benefits of interstate differences. A one-size-fits-all, uniform tax policy fails to recognize the legitimate taxing differences among state and local governments. Jurisdictions tailor their tax schemes based on the needs of the residents and the various taxing options available for use. Some states have no income tax; some jurisdictions depend heavily on propert taxes rather than sales taxes; which jurisdictions impose hotel taxes, while others do not. Indeed, the challenges of trying to impose a uniform taxing scheme is evident by the diffculties the Streamlined Sale Tax project has had in attracting the membership of many states, including California and New York. 2

3 In times past, it may have been diffcult to track and manage tax differences between jurisdictions, but in an era of massive data collection, instant communications and compatible databases, the argument that this is too diffcult is spurious. 4. Many industries have requested that Congress grant them special protections from state and local taxes. We have heard from the hotel industr, the car rental industry, the satellte television industr, Internet access providers, and big businesses among several others. Many of them offer compelling stories, with statistics and chars to support their positions. And many of their concerns are arguably federal concerns because of interstate commerce. Please tell us why, when the issue is of federal importance, we should ignore their concerns. NACo's opposition to these various proposals is evident in the question itself - these businesses are looking for "special protections" when, in fact, no such "protections" are necessary or justifed. What these industries are looking for is simply for is preferential tax treatment at the expense of state and local governments, taxpayers, and others businesses. For example, the cell phone industry claims that it is unfairly taxed, which hinders innovation, growth, and profitabilty. But as made clear in prior testimony presented to this Subcommittee, these claims are simply false. In the year 2000, wireless passed the 100 milion device threshold. In December 2009, according to CTIA, there were milion devices. The facts do not support the claim. Online travel companies (OTCs), such as Expedia, are seeking preemption from state and local taxation in large part because of pending litigation in many jurisdictions over their failure to submit hotels taxes they have collected from customers, but have failed to remit to the appropriate taxing authority. The hotel industry is aligned with state and local governments on this issue and opposes the efforts of the OTCs to carve out special tax exemptions. Internet access providers are already exempt from state and local taxes through the Internet Tax Freedom Act, so any current complaints these companies may have as far as state and local taxing policies are perplexing. Local governments are specifcally prohibited, in federal law, from taxing satellte providers. Federal action should be limited to those situations where problems are of national scope. For example, the Internet Tax Freedom Act, which was signed into law in 1998, was designed to encourage the development of the Internet. Regional differences in how rental cars are taxed or 911 fees are imposed or whether a hotel tax should be imposed to help fund tourism are local issues - no national interests are at stake. Each state and local authority must be able to tailor its taxing scheme to the various resources available in each jurisdiction and how best to use those limited resources to serve their residents. 3

4 Association of Public Treasurers Government Finance Officers Association International City/County Management Association National Association of Counties National League of Cities U.S. Conference of Mayors Treasurers' Association of Virginia June 12,2009 The Honorable Jim Moran U.S. House of Representatives 2239 Rayburn House Offce Building Washington, D.C Dear Congressman Moran: On behalf of our tens of thousands of members, we wish to thank you for introducing the Federal Offset Program for Local Governments Act. This legislation would allow certain tyes of delinquent local tax debt to be collected through the reduction of federal tax refunds. Providing local governments with access to these necessary and owed funds is important both in principle and for budgetary purposes. Our organizations strongly support the Federal Offset Program for Local Governments Act and for many years have been calling for the expansion of the Federal Offset Program. The program was created to help states secure child support arrearages and was expanded to allow states to submit other delinquent claims against an individual's federal tax return. By expanding the program to include local government tax debts, thousands of cities, counties and town across the countr would be able to retrieve hundreds of milions of dollars of lost revenues which are paricularly needed during this economic downturn. Furthermore, as you noted, this legislation wil also help protect honest taxpayers from having to pay for those who are evading payment of their outstanding tax obligations. This legislation is an example of how federal, state and local governments can work well together. There are limited costs to the federal government associated with the bil, as states and the federal government would be compensated by the local government for the administrative burden. Furthermore, it assists efforts to close the "tax gap" for local governments. We can not thank you enough for introducing this legislation and for your continued support to the local government community. Sincerely, Jim Bell, President, Association of Public Treasurers - U.S. and Canada, Susan Gaffney, Government Finance Officers Association, Alison Miller Richards, International City/County Management Association, Stephen Traylor, National Association of Counties, Lars Etzkorn, National League of Cities, Larr Jones, U.S. Conference of Mayors, Tara L. Thomas, President, Treasurers' Association of Virginia,

5 l I 1\ (' 0 National Association of Counties I \I tt ~ J ~..~.... ~.... The Voice of America's Counties il...,... fi'qt ~L~~,) ~~ 1:. '. '.' 11.. ~a...: ~lìl.. ~ Gb May 7, 2010 The Honorable Michael B. Enzi United States Senate 379 Russell Senate Offce Building Washington, DC RE: Main Street Tax Fairness Act of 2010 Dear Senator Enzi, The national associations representing local governent offcials would like to than you for your leadership in attempting to modernize sales and use taxes through the introduction of the Main Street Tax Fairness Act of2010. This important legislation wil respond to the changing nature of sales and use taxes, streamline their collection, and wil help local governents to meet the service mandates for our citizens. Your willingness to take on this task after years of discussions, and your acknowledgement of the concerns of local governent is greatly appreciated. It has been a pleasure to work with you and your staff, especially Randi Reid, on this important legislation and we look forward to continuing to work with you towards the passage of this legislation. Sincerely, 4- C(Jiu ~rj Larry E. Naake, Executive Director National Association of Counties r-~ Tom Cochran, CEO and Executive Director United States Conference of Mayors Donald J. Borat, Executive Director National League of Cities ~/~ Jeffrey L. Esser, Executive Director Governent Finance Offcers Association