Policies for the Jurisdiction of the Budgets and Revenue Committee
Below are the policies of the NCSL Standing Committee on Budgets and Revenue as of the annual business meeting, which was held on Aug. 15, 2013.
Federal Deficit Reduction and the Impact on States (Resolution)
The National Conference of State Legislatures recognizes the need for the federal government to reduce its annual deficits and achieve a sustainable fiscal path. The Budget Control Act (P.L. 112-25) has provided a foundation to temporarily hamper the nation’s rising deficit, but a comprehensive framework is needed to manage long-term debt.
NCSL believes a broad deficit reduction plan must:
- Contain an examination of all possible avenues for deficit reduction, including discretionary spending, entitlement and mandatory program reform and revenue-related options.
- Avoid cost shifts and new unfunded mandates.
- Make a commitment to reduce spending so that state-federal programs do not carry an unreasonable share of any deficit reduction actions.
- To the extent that funding to the states is cut, there should be commensurate relief from obligations imposed by federal laws, regulations, and practices.
- Provide a fiscal analysis of the potential intergovernmental and federalism implications of any recommended actions.
Critical deficit reduction principles include:
- Unfunded federal mandates. Impose no new unfunded federal mandates and address existing unfunded mandates; expand the definition of an unfunded mandate to include new conditions of grant aid; broaden application of UMRA; and conduct UMRA analysis of any recommendations.
- Preemption. State authority should be upheld in areas such as medical malpractice and tort law and public employee participation in Social Security and Medicare.
- Streamlined Sales Tax. Enact the Marketplace Fairness Act to authorize the collection of state and local sales and use taxes from remote sellers.
- Bonds. Retain tax-exempt financing of state and local government bonds.
NCSL looks to collaboratively work with both Congress and the Administration as partners and welcomes the opportunity to address the nation’s fiscal challenges.
Expires August 2014
Public Pensions, Health Insurance, and Post Retirement Benefits
State legislatures authorize and fund public employee pension plans and determine their regulation and oversight. With these plans, state and local governments provide retirement savings vehicles and security to virtually all full-time state and local employees. Any federal regulation of state and local government pension plans should recognize the unique designs and protections inherent in these plans and should only be pursued through consultation with state and local governments. Current federal regulations that impose excessive and unnecessary administrative costs on states and localities should be simplified or eliminated.
Federal Reductions to Social Security Benefits
Under some circumstances, the Social Security Administration reduces benefits to state and local employees who earn government pensions through work not covered by Social Security. Since 1983, the Social Security Administration has reduced worker and spousal benefits through two provisions called the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). There have been numerous proposals before Congress to repeal or to limit the application of the GPO and the WEP. The National Conference of State Legislatures supports efforts by Congress and the Administration to address the inequities and unintended consequences to state and local government retirees caused by federal reductions of Social Security benefits. NCSL urges Congress to enact legislation that will reduce or eliminate the impact of the GPO and WEP on state and local government retirees, particularly those who have earned lower uncovered government pension benefits or partial benefits.
Mandatory Medicare and Social Security Coverage
The National Conference of State Legislatures opposes expansion of mandatory Social Security and Medicare Coverage to public employees of state and local governments who are not already covered. NCSL believes that state and local governments should be allowed to affiliate their plans with Social Security and Medicare on a voluntary basis.
Taxation and Regulation
NCSL believes that the exemption of state pension and benefits plans from federal taxation is a sound component of federal tax policy that should continue.
All states and many local governments sponsor defined contribution plans that allow
s employees to defer an additional portion of their salary in anticipation of retirement needs. Federal legislation enacted in 2001 simplified participation in, and the administration of, these supplemental arrangements. NCSL supports further improvements that enhance flexibility, improve existing arrangements, avoid increased federal regulation, maintain or expand the plans’ unique features and characteristics and avoid mandates that would replace existing plans with methods designed for the private sector. NCSL opposes any federal encroachment on state authority to regulate state pensions that would supplant rather than supplement current savings, and other efforts that could result in additional cost and complexity for state and local governments and their plan participants.
NCSL strongly opposes any effort by Congress to impose annual federal reporting and funding requirements on state and local governments regarding various aspects of their public employee pension plans and penalties for non-compliance, such as loss of federal tax exempt financing benefits for bonds issued by state or local governments during any noncompliance reporting period.
NCSL believes these actions would be unnecessary, intrusive and coercive. This federal effort would impose new, unfunded costs on states by requiring additional reports and compels the presence of the federal government in issues exclusively managed and legislated by states. States report comprehensive information in proposed federal legislation in their consolidated annual financial reports as recommended by the Governmental Accounting Standards Board.
Health Care Costs
The National Conference of State Legislatures (NCSL) supports federal efforts that allow public sector retirees to deduct health care premium costs and/or additional medical expenses from their taxable income, as well as federal efforts to allow retirees to save for health care costs through tax preferred vehicles.
National Conference of State Legislatures Supports and Urges Enactment of the Marketplace Fairness Act
WHEREAS, the 1967 Bellas Hess and the 1992 Quill Supreme Court decisions denied states the authority to require the collection of sales and use taxes by out-of-state sellers that have no physical presence in the taxing state; and
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WHEREAS, the combined weight of the inability to collect sales and use taxes due on remote sales through traditional carriers and the tax erosion from electronic commerce threatens the future viability of the sales tax as a stable revenue source for state and local governments; and
WHEREAS, a report from the Center for Business Research at the University of Tennessee has estimated that in fiscal year 2012, states had over $23 billion in uncollected sales tax revenues from out of state sales; and
WHEREAS, the Marketplace Fairness Act was introduced in both Houses of Congress which authorizes each member state under the Streamlined Sales and Use Tax Agreement to require all sellers not qualifying for a small-seller exception to collect and remit sales and use taxes with respect to remote sales and allows a state that is not a member state under the Agreement to require sellers to collect and remit sales and use taxes with respect to remote sales sourced to such state if the state adopts and implements certain minimum simplification requirements; and
WHEREAS, the United States Senate passed the Marketplace Fairness Act on May 6, 2013 by a vote of 69-27 and the President has indicated that he would sign the legislation.
NOW, THEREFORE BE IT RESOLVED THAT, the National Conference of State Legislatures (NCSL) appreciates the leadership of U. S. Senators Richard Durbin (Ill.), Mike Enzi (Wyo.), Lamar Alexander (Tenn.) and Heidi Heitkamp (N.D.) in achieving a strong bipartisan vote in support of the Marketplace Fairness Act in the Senate; and
BE IT FURTHER RESOLVED, THAT the National Conference of State Legislatures urges the House of Representatives to pass the Marketplace Fairness Act, sponsored in the House by Congressman Steve Womack (Ark.) and Congresswoman Jackie Speier (CA.) or similar legislation authorizing remote sales tax collection to states having complied with the legislation; and
BE IT FURTHER RESOLVED THAT, the National Conference of State Legislatures would oppose efforts by some in Congress to consider the Marketplace Fairness Act part of federal tax reform; and
BE IT FURTHER RESOLVED THAT, a copy of this resolution be sent to the President of the United States and to all the members of Congress.
National Conference of State Legislators Supports Passage of the Federal Digital Goods & Services Tax Fairness Act
WHEREAS, Digital goods and services are online purchases that are downloaded directly by, or services that are provided electronically to, consumers that can transcend numerous state and local boundaries across the United States;
WHEREAS, The exponential growth of digital commerce has continued to facilitate the country’s economic recovery. In 2012, consumers downloaded over 36 billion apps and that number is expected to eclipse the 90 billion mark by the end of 2015. The revenue from digital commerce was approximately $18 billion in 2012 and is expected to grow to $46 billion by 2016;
WHEREAS, State policymakers recognize that the continued deployment of broadband infrastructure and adoption of broadband services is vital to economic growth and participation in the global economy.
WHEREAS, Digital goods and services are a major driver of the rapidly growing 21st Century digital economy and as such, fair and rational tax policies are needed that will not impede the continued growth of this segment of the economy;
WHEREAS, Due to the complex nature of the way digital commerce is transacted, current state and local tax laws governing the taxation of sales transactions are outdated and ill equipped to address many of the issues that surface in taxing today’s “borderless” digital economy;
WHEREAS, As state and local governments continue to seek to modernize their tax base to include various forms of digital commerce, doing so without establishing a national framework could potentially subject consumers to multiple states claiming the right to tax the same transaction or subject such transactions to discriminatory taxation at rates higher than the rates imposed on the in-state sales of similar goods or services;
WHEREAS, Establishing a national framework would clearly identify which state and local jurisdiction can tax a digital transaction, providing much needed certainty to consumers, providers required to collect such taxes and state and local governments seeking to tax such goods and services in a fair, uniform and rational manner;
WHEREAS, Establishing a national framework as set forth in the Digital Goods and Services Tax Fairness Act preserves state sovereignty as the decision to tax digital commerce or not remains solely with the states;
WHEREAS, the Mobile Telecommunications Sourcing Act (P.L. 106-252) established uniformity in sourcing mobile telecommunications services for state and local tax purposes using similar concepts to those contained in the Digital Goods and Services Tax Fairness Act;
WHEREAS, NCSL has worked with other state and local organizations as well as members of the Download Fairness Coalition to develop the principles contained in the legislation and is poised to assist states as needed in complying with the federal legislation;
THEREFORE BE IT RESOLVED, The National Conference of State Legislatures urges Congress to pass the Digital Goods and Services Tax Fairness Act, in conjunction with or after consideration of the Marketplace Fairness Act, to establish a national framework providing certainty and uniformity for state and local governments in the taxation of digital goods and services, while protecting consumers from multiple and discriminatory taxation and supporting the continued growth of the digital economy.
Adopted by the NCSL Executive Committee Task Force on State and Local Taxation May 31, 2013
Expires August 2014
State and Federal Budgeting: Federal Mandate Relief
It is the policy of the National Conference of State Legislatures to advance and defend a balanced, dynamic partnership among governments at the local, state and federal level. The growth of federal mandates and other costs that the federal government imposes on states and localities is one of the most serious fiscal issues confronting state and local government officials. NCSL applauds the success of the Unfunded Mandates Reform Act of 1995 (UMRA; P.L. 104-4) in bringing attention to the fiscal effects of federal legislation on state and local governments, improving federal accountability and enhancing consultation. However, unfunded and underfunded federal mandates continue to pose an undue burden on state and local governments. NCSL calls upon the federal government to reassess the Unfunded Mandate Reform Act and to broaden its scope and increase its effectiveness.
Specifically, we call on Congress and the President to eliminate and avoid:
- direct federal orders without sufficient funding to pay for their implementation;
- burdensome conditions on grant assistance;
- cross sanctions and redirection penalties that imperil grant funding in order to regulate and preempt the states actions in both related and unrelated programmatic areas;
- amendments to the tax code that impose direct compliance costs on states or restrict state revenues;
- overly prescriptive regulatory procedures that move beyond the scope of congressional intent;
- incomplete and vague definitions which cause ambiguity; and
- perceived or actual intrusion on state sovereignty.
Unfunded mandates result in substantial costs to state and local governments and, collectively, have eroded state legislators' control over their own states' budgets.
NCSL continues to demand sufficient federal funding for state-federal partnership programs through the mechanism of mandatory spending. If the federal government is unwilling to provide such funding as an entitlement to the states, states should be absolved of their legal responsibility to provide services to entitled individuals and fulfill other federal mandates. One approach is the “trigger” mechanism that would delay mandated activities in any year in which the federal government does not meet its state funding commitment.
Specifically, NCSL encourages the federal government to enact the following:
With the adoption of this policy the following existing NCSL policies will be sunset: State-Federal Partnership to Spur Economic Recovery, Federal Grants and Programs, Fiscal Federalism, and NCSL Calls Upon the Federal Government to Meet its Responsibilities to the States.
State and Federal Budgeting: Principles For Fundamental Tax Reform
It is the policy of the National Conference of State Legislatures to advance and defend a balanced, dynamic partnership among local, state and federal governments.
Tax reform efforts and tax actions at the federal level affect states because:
- Federal and state tax systems are inextricably linked; and
- Any federal reform will likely have serious fiscal and administrative ramifications on the states.
Therefore, NCSL urges that all federal tax reform and other actions be guided by the following principles:
- Preserve the fiscal viability and sovereignty of state governments;
- Encourage work, savings, equity and simplicity;
- Avoid further intrusion upon the state excise tax base;
- Preserve states’ ability and discretion to tax certain revenue sources; and
- Preserve the ability of state and local government to adopt fair and effective tax systems. This includes authorizing states with sales and use taxes to require interstate sellers to collect and remit those taxes and preserving the state and local income tax, sales tax and property tax deductions for federal income tax purposes.
- Continue tax policies that reward work, specifically the Earned Income Tax Credit (EITC) and Individual Development Accounts (IDAs).
Do No Harm
- Provide states with adequate transition time to implement and respond to new tax systems, preferably up to three or more years.
- Avoid the negative state impact of retroactive application of tax changes.
- Provide technical expertise to states to ease any transition of administrative responsibilities to the states resulting from federal tax reform.
- Provide adequate federal administrative funds for any federal tax reform that involves modified or increased collection responsibilities for the states.
- Ensure that federal tax changes are made in a manner that preserves federal data collection used by the states.
- Provide flexibility and strengthen states’ ability to finance and administer programs for which they are traditionally responsible or have gained through devolution.
- Recognize that federal tax reductions should not compromise funding for existing and future commitments to mandated state-federal partnership programs.
- To the extent that a national sales, consumption or value-added tax is considered as part of ongoing deficit reduction efforts, the historic role of such taxes as a major revenue source for state and local governments must be protected and all deliberations concerning such taxes must include representatives of the federal government’s partners in the nation’s cities and states.
Payment in Lieu of Taxes
- Preserve tax-exempt financing for infrastructure and capital projects, including the use of public-private partnerships.
- Maintain the tax-exempt status of state and local government bonds and lift existing restrictions on state and local government use of tax-exempt bonds.
- Avoid provisions that weaken the fiscal integrity of state and local governments. This includes: the arbitrage rebate provisions, which essentially are a one-hundred percent tax on the interest income of state and local governments; the alternative minimum tax, which now taxes interest from otherwise tax-exempt bonds; volume caps, which have unduly restricted the use of bonds for projects that have increasingly become governmental responsibilities; and restrictions on advance refunding which increases the cost of government.
- Support the Mortgage Revenue Bond (MRB) program and the low-income housing tax credit.
- Increase enforcement efforts of the federal income tax laws so individual and business taxpayers are not bearing the burden of those who fail to pay owed taxes.
- Continue to take into account states’ reliance on federal tax rates and federal collection efforts.
The National Conference of State Legislatures supports federal efforts to:
State Legislators’ Tax Issues
- Continue, but reform the Payment in Lieu of Tax Program (PILT) program; to create a more predictable, fair and flexible system that accurately reflects the fiscal effects of federal lands on state and local governments; and
- Provide full funding for the PILT program, provided that this goal is accomplished in a manner consistent with long-term federal debt management and deficit reduction; and
- Provide a more flexible payment system through authorization for the transfer of land of equivalent value from the federal government to states or counties in lieu of monetary payment, consistent with state statutes and practice.
The National Conference of State Legislatures supports the standard deduction allowed state legislators under section 162 (h) of the Internal Revenue Code. Regulation, interpretation, or other statutes should not undermine the section.
Regulations implementing this code section should reflect the intent of Congress and should include the following recommendations:
- A "session day" should mean a day in session as defined by the laws or rules of the state of residence of the legislator.
- A "committee" of the legislature should mean 1) a committee of one or more legislators conducting the business of [or reporting to] the legislature, or 2) a committee created by state or federal statute, resolution, order or rule on which the legislator serves in his or her capacity as a legislator. This definition of "committee" should include caucuses that conduct the business of the legislature.
- "State legislator" should include newly-elected legislators who attend official organizational meetings prior to administration of their oath of office.
- Prohibit further preemption of state courts by refusing to give federal courts jurisdiction to establish the valuation of property for state and local tax purposes or by refusing to give selected classes of state and local taxpayers procedural and substantive privileges unavailable to most taxpayers.
- NCSL also encourages Congress and the administration to review the Railroad Revitalization and Regulatory Reform Act (4-R Act) to determine if the courts have expanded the 4-R Act beyond the original intent of Congress and reject federal legislation that would extend to other industries 4-R type benefits.
State and Federal Bugeting: Partnering to Make Policy
It is the policy of the National Conference of State Legislatures to advance and defend a balanced, dynamic partnership among local, state and federal level governments.
Too often, the federal government has responded to budget pressures by simply shifting costs and exporting deficits to the states. The federal government should resist accomplishing national goals through unfunded mandates on state and local governments.
NCSL believes that the federal government must:
NCSL believes the devolution of certain federal responsibilities to the states should constitute a serious attempt at restoring balance to the state-federal partnership. To that end, NCSL has developed a set of principles for any new block grant the federal government considers. Because state legislatures are the bodies that are most involved in the decision-making process with regard to program delivery in the states, we urge Congress and the administration to adhere to the following principles when constructing any new block grant plan or revising any existing block grant program:
- Funding levels for block grants must be adequate to finance mandated programs long-term and to respond to economic changes through countercyclical assistance.
- In the event that Congress imposes "maintenance of current level of services" mandates on funds appropriated for any federal grant program, Congress should provide the funds necessary to maintain and support the current levels of services existing at the time of such mandates. State "maintenance of effort" (MOE) clauses are inappropriate for program consolidations. Requiring states to spend a fixed amount while implementing decreases in federal funding for block grants is equivalent to an unfunded mandate.
- The consolidation of categorical programs into a single funding stream should not be accompanied by a limitation in the types of services provided or constitute new mandatory categories of services.
- Language should be included in any block grant legislation that allows federal block grant funds to be distributed or expended "according to state law." Federal law must allow each state to choose the manner of appropriation of federal block grants. States should be authorized to determine the agency within state government that is responsible for carrying out public participation requirements.
- Maximum flexibility in terms of program implementation and administration should be maintained.
- Technical assistance to states by federal agencies during transition to any block grant should be provided.
- State reporting requirements should not be burdensome or require the use of funds that would otherwise be spent on program delivery.
- The Federal government should not create new entities to oversee the implementation of any block grants to the states.
- Federal agencies and their administrators should rely on the single audits prepared by the states. The federal government should pay the full costs for performing these audits.
State Sovereignty in Online Gaming (Resolution) (Joint with Communications, Financial Services and Interstate Commerce Committee)
WHEREAS, the National Conference of State Legislatures (NCSL) believes the federal government must respect the sovereignty of states to allow or to prohibit Internet gambling by its residents; and
WHEREAS, the 2011 ruling by the United States Justice Department on the Federal Wire Act of 1961, 18 U.S.C. §1084, clarifies that intra-state online gambling is lawful. Any effort by Congress or the administration to reverse this ruling is preemptive and diminishes the flexibility of state legislatures to be innovative and responsive to the unique needs of the residents of each state; and
NOW, THEREFORE BE IT RESOLVED, that NCSL requests Congress consider the perspective of the states as it examines this issue and asks that it involve state legislators in any federal efforts that seek to reform the regulation of online gaming. NCSL strongly opposes any effort by the federal government to overturn the Justice Department’s ruling or consideration of legislation overruling state authority by legalizing or regulating gambling at the federal level. NCSL also requests that federal lawmakers be respectful of state legislatures that prohibit online gaming or other forms of gaming within their state.
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