About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

33 Tax Features 1 (1989)

handle is hein.tera/taxfeaturs0033 and id is 1 raw text is: TAX FOUNDATION'S VOL. 33, NO. 1 JANUARY/FEBRUARY 1989 Election Year Politics and Fallout From TRA'86 Dominate 1988 Federal Tax Scene Fiscal Condition of Most State And Local Governments Improves Many states improved financially in 1988, pri- marily due to a strong national economy and various tax increases enacted in 1987. However, a few large states suffered severe deficits. Califor- nia, Connecticut, Massachusetts, and New York contended with revenue shortfalls ranging from $250 million to over $1 billion during 1988. State and local governments collected $421.8 billion in taxes during the 12 months ending March 1988, an increase of 8 percent, or $31.2 bil- lion, over the previous year. State tax collections totaled $259.7 billion, up 8.3 percent, and local government taxes netted $162.1 billion, showing a 7.5 percent rise. Thirty-four states raised taxes, mostly on sales taxes covering motor fuel, to- bacco, alcoholic beverages, and general sales. High Court Decisions State and local governments suffered a setback in their borrowing efforts under South Carolina v. Treasury Secretary. The court ruled that the provi- sion in the Tax Equity and Fiscal Responsibility Act of 1982 which denies Federal income tax exemption for interest earned on long-term pub- licly offered state and local bonds not issued in registered form violates neither the Tenth Amendment and principles of Federalism nor the doctrine of intergovernmental tax immunity. The bond registration requirement was intended to prevent Federal tax evasion and money launder- ing schemes. It has proved successful since no state or local government has since issued any bonds in other than registered form. In a controversial case with potentially wide- ranging consequences, D.H. Holmes Co. v. Louisi- ana Secretary of Revenue and Taxation, the court unanimously ruled that Louisiana's use tax on merchandise catalogs ordered from out-of-state by a Louisiana retailer and shipped to prospec- tive customers within the state does not violate the Commerce Clause of the Constitution. Despite $909.0 billion in revenues in FY'88, a 6.4 percent increase over 1987 collections, the Federal government left itself with a budget deficit of $155.1 billion, exceeding the 1987 defi- cit by $5.4 billion. Due to the stubborn budget deficit that represents over 3.3 percent of total Gross National Product (GNP), pressure contin- ues to mount to raise taxes or cut government spending in order to reduce the red ink in Fed- eral government accounts. It may seem surpris- ing that 1988 saw no major legislation to combat the problem, but there are several reasons why this issue has been side-stepped. First, since 1988 was an election year, major tax-raising legislation was politically untimely. The budget summit between the Administra- tion and Congress, convened in the wake of the 500-point drop in the stock market on October 19, 1987, conveniently worked out a two-year deficit reduction plan to avoid election-year tax manipulation. The budget summit culminated THIS ISSUE: PAGE 1: Tax Action '88: Federal, State & Local PAGE 3: Budget Watch PAGE 5: Front Burner International Tax Action '88 INSERT: Avoiding Budget Limitations in the Revenue Act of 1987 which called for $8 billion and $14 billion in new tax revenues for FY'88 and FY'89, respectively. Secondly, the public is still absorbing the impact of the Tax Reform Act of 1986 (TRA'86) which radically changed the Tax Code for indi- viduals and corporations. Since many of TRA'86's provisions are staggered over five years, its full effects will not be felt until 1990 or later. Another major tax act in 1988, attempting to address the budget deficit, could not have gained enough political momentum, especially if it involved increasing the income tax rates established in 1986. Faltering NEC Thirdly, no major deficit reduction legislation was witnessed in 1988 because of the appointment of the National Economic Commis- sion (NEC) late in 1987 to address the deficit problem. The 14-mem- ber, bipartisan panel, comprised of business, labor, and Congressional leaders appointed by the President and Congress, is scheduled to report its deficit reduction recommendations in March of 1989. But many budget observers predict its report will be kept on ice pending the course of direct deficit reduction discussion between the Bush White House and the Congress. Substantive tax increase options are unlikely in the wake of President George Bush's read-my-lips pledge not to raise taxes and subsequent declaration that he would (Continued on page 2) I TAX FOUNDATION'S VOL. 33, NO. I JANUARY/FEBRUARY 1989

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most