|"to be rather than to seem"|
- Broaden the sales tax to "many services and previously exempted tangible items" (other than medical services and prescription drugs) with a relief mechanism for low-income individuals. At the same time, the rate should be lowered.
- Use federal AGI as the base for the state income tax "with minimal deductions and exemptions" while also lowering the rates to be competitive with nearby states.
- Be sure there is adequate funding for local services.
The themes from North Carolina's talk of tax modernization are similar to modernization needs in most states. Focal points for modernization should be:
- Broaden/modernize the sales tax base to cover today's types of personal consumption while lowering the rate and phasing out application of the sales tax to business purchases.
- Simplify personal income tax by eliminating special deductions, exemptions, rates and credits and lowering the rate. States should also encourage Congress do to the same with the federal income tax and then they can start the state income tax calculation with federal taxable income.
- Review all incentives to see if they are meeting their intended purpose (also be sure they even have a stated purpose). Consider if any deemed worthy should be in the tax law or run by a state agency. For more, see my February 2012 testimony delivered to CA Committee on Revenue & Taxation and Committee on Accountability and Administrative Review.
- Ensuring that the goals of state and local governments are aligned as evidenced from their tax and budgeting systems. For example, local governments may need to share in income tax revenues to be help support state economic growth goals.