27 research outputs found
Davis v. Department of Revenue of Kentucky: A Preliminary Impact Assessment
States with income taxes frequently exempt municipal bond interest from state taxation. Such exemptions, referred to as double exempts, are tax expenditures that reduce state revenues, but are viewed as a subsidy to the cost of capital for the state and its localities. All but a few states provide the income tax exemption for state based issues while taxing interest from municipal bonds issued by muni issuers in other states. A recent court case, Davis vs. Department of Revenue of Kentucky, declared state statutes limiting the state income tax exemptions to ”in-state” issues unconstitutional. This paper provides some legal background and context for the current case and addresses two key fiscal implications of this case. First, the paper presents a basic model that suggests that bonds issued by states with higher marginal tax rates would see the yields increase on their obligations while states with lower than average marginal tax rates would see their yields decline. The yields would converge at new market equilibrium due to the elimination of tax preferences across the states. Second, the preliminary estimates suggest a good deal of variance in how much tax revenue each state will lose if the case is upheld by the Supreme Court.
The Motor Fuel Tax Evasion Issue in Kentucky
Tax evasion is an elusive and burgeoning problem. Methods of tax evasion are continually changing and adapting to new methods of tax enforcement. However, there are strategies that can reduce the potential loss due to fuel tax evasion. This study of fuel tax evasion in Kentucky and the southeastern states provides additional information regarding the causes and nature of the road fund tax evasion problem, and identifies state and federal/state efforts to mitigate the tax evasion challenge. The concepts, issues, and recommendations in this report can aid in reducing evasion of the Kentucky motor fuels tax., thereby, enhancing the efficiency and equity in the administration of the motor fuels tax and increase the resources collected in the Kentucky Road Fund
Kentucky\u27s Road Fund Tax Structure
In recent years, there has been a great deal of discussion of whether the incoming Road Fund revenue is sufficient to meet the needs of Kentucky\u27s Highways System. Many have suggested a policy of raising the current tax rates on motor fuels as a way of enhancing the financial health of the Road Fund. This current study examines the sources of the Road Fund and evaluates the sources of revenue in terms of stability, equity, competitiveness, and adequacy. Finally, the study examines the impact various changes in motor fuel taxes would have on revenue
Legislation Review and Recommendations to Reduce Evasion of Kentucky Road Fund Revenues
Kentucky, like other states, is facing fiscal challenges in providing expanding public services demanded by citizens. One danger of constrained fiscal resources and shortsighted political horizons is the tendency to neglect the investment and maintenance of long-term infrastructures like highways. The Kentucky road fund protects against these dangers by providing earmarked resources for the state\u27s roadways, insuring that basic infrastructure needs are met. However, evasion of road fund revenues decreases the funds available to meet the needs of Kentucky\u27s transportation infrastructure. For these reasons, the Kentucky Transportation Cabinet is interested in developing policy recommendations intended to mitigate evasion of road fund revenues.
This report compliments the final report The Motor Fuel Tax Evasion Issue in Kentucky, 1996 (KYSPR 93-153) which identifies potential concerns in the nature and causes of road fund tax evasion. This current study constitutes an informal report that is complimentary to research report KTC-96-16. Moreover, it provides additional detail regarding the legislative action that addresses fuel tax evasion in the southern region. This report also develops estimates of the revenues lost through evasion in vehicle registration and licensing in the Commonwealth.
The Federal Highway Trust and the Kentucky road fund were established to provide earmarked resources for maintaining and building federal and state roadways. Two major sources of the revenues for the Kentucky road fund are the motor fuels tax and vehicle licensing and registration fees/taxes.
Evasion of these revenues diminishes the resources available to maintaining and building state roadways. There are three studies that have estimated the fuel tax revenue lost through evasion. The U.S. Department of Transportation estimated that evasion of the gasoline tax is between three and seven percent of the gallons consumed nationally, while diesel fuel tax evasion is 15 to 25 percent of gallons consumed nationally. Evidence of fuel tax evasion is provided in the Council of State Governments (CSG) study that estimated nearly 1.2 billion dollars of aggregate state fuel tax revenue was evaded in fiscal year 1993. Estimates of the fuel tax evasion occurring in Kentucky are provided in the KTC final report The Motor Fuel Tax Evasion Issue in Kentucky (1996). This study estimates that up to 20 million dollars of Kentucky fuel tax revenue was potentially evaded in fiscal year 1993.
Estimates of revenue lost through evasion of vehicle registration and licensing are less common. The CSG report estimated that between 421 to 654 million dollars of aggregate state revenue from licensing and registration were evaded in fiscal year 1993. Similar analysis is applied to obtain the evasion losses of Kentucky vehicle registration and the associated ad valorem taxes as reported in Appendix B. The estimation predicts that over 239 thousand vehicles were unregistered in Kentucky in 1994, resulting in a road fund revenue loss that approach 50 million dollars
For the People: Popular Financial Reporting Practices of Local Governments
Popular financial reports are reports distributed to citizens and other interested parties who lack a background in formal government financial reporting but who desire an overview of the government’s financial status and activities. This paper examines the current state of local government popular financial reporting in the U.S. The results of a survey of large cities and counties indicate that 75 percent of these local governments have issued popular financial reports and that the types of reports and methods of distribution vary. Many of the reasons for providing popular reports relate to providing information and improving transparency and accountability by providing more user friendly financial reports. This paper concludes with a discussion on popular financial reporting in the context of government transparency and accountability, and offers a research agenda for continued study of the topic