State Rainy Day Funds

States use rainy day funds (RDFs), or budget stabilization funds, as a cushion against financial shocks. Every state except Vermont has some sort of balanced budget requirement so that, unlike the federal government, they must balance expenditures and revenues in any given budget cycle (typically one year). States can have RDFs that allow money to be carried over from good years to lean years. Five states–Arkansas, Colorado, Illinois, Kansas, and Montana–do not have RDFs.

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N.J. – 13 of 20 Most Taxed Counties in Nation

New Jersey has 13 of the 20 most taxed counties in the Nation according to a new study by the Tax Foundation for owner-occupied homes located in counties that have populations of over 20,000. According to the study, the ranking of the counties with the highest property tax burden is as follows:

Westchester County, New York ($7,908)
Nassau County, New York ($7,726)
Hunterdon County, New Jersey ($7,708)
Bergen County, New Jersey ($7,370)
Somerset County, New Jersey ($7,201)
Essex County, New Jersey ($7, 149)
Rockland County, New York ($7,066)
Morris County, New Jersey ($6,977)
Union County, New Jersey ($6,727)
Passaic County, New Jersey ($6,673)
Putnam County, New York ($6,553)
Suffolk County, New York ($6,502)
Monmouth County, New Jersey ($6,360)
Hudson County, New Jersey ($5,865)
Lake County, Illinois ($5,790)
Fairfield County, Connecticut ($5,694)
Sussex County, New Jersey ($5,677)
Middlesex County, New Jersey ($5,575)
Mercer County, New Jersey ($5,457)
Warren County, New Jersey ($5,228)

Source: The Tax Foundation

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Illinois: Shortest Special Session Ever?

Yesterday the Illinois legislature held what was scheduled to be a one-day special legislative session on education funding. The goal, in theory, was to come up with new money for pay for the state’s chronically-underfunded education system.

But, as it happened, the session lasted all of 20 minutes in the state House, and not much longer in the Senate. And all the legislature agreed on was that they probably shouldn’t get a pay raise at this time.

Why the sham special session? The short answer: Governor Rod Blagojevich called the session with very clear ideas about which solutions are permissible– and which solutions are forbidden. The former camp includes privatizing the state’s lottery; the latter camp includes, well, just about every sensible tax reform one might wish to enact. Blagojevich has maintained in the past, and reiterated in advance of the special session, that increasing the state’s low, flat-rate, loophole-ridden income tax is not an option he will accept. This is especially absurd given that, as some brave observers have noted, lawmakers could make the Illinois income tax fairer and more sustainable without increasing tax rates at all.

It’s no wonder, then, that state lawmakers see no particular point in holding a special session: if the governor plans to veto any income tax hike, why should lawmakers take the political risk of enacting one?

Check out the weekly updates from the Center on Tax and Budget Accountability for ongoing info on the state’s budget crisis.

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This Week’s IRS "Hall of Shame" Inductee: Edward and Elaine Brown

In January of 2007, a jury found Edward Brown guilty of three counts of federal tax evasion, and a few weeks later his wife, Elaine, was found guilty on seventeen tax fraud related charges.

Combined, the two did not report about 2 million dollars in taxable income and were each sentenced to five years in prison.

Who are these people? Elaine was a dentist, and Ed was retired from a pest control business. The couple lived in New Hampshire. Doesn’t seem too exciting, does it?

But what really inducts this couple into the hall of shame is that after being found guilty, they refused to surrender to the federal government. A lengthy, armed standoff ensued. Why would they do this, facing gunned men and the US Government against them? The Browns said they had not been shown any legitimate law requiring them to pay taxes, so they felt they should not be forced to pay.

Where are they now? Edward Brown is imprisoned at the United States Penitentiary at Marion, Illinois. Elaine Brown is imprisoned at the Federal Medical Center, Carswell, near Fort Worth, Texas.

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do i have to file city income tax for chicago?

Obama-nomics: Written on a Word Processor

Barack Obama is channeling Ronald Reagan. Not in policy (his proposed tax cuts are not that big) but in tactics. The question is: Can the president-elect convince Congress to spend well over $1 trillion without leaving any fingerprints.

Having learned from Reagan’s legislative successes—notably the Tax Reform Act of 1986—and from Bill Clinton’s failures—see health reform—it appears Obama will never propose any specific economic stimulus legislation. Instead, he is merely sending Congress ideas, and leaving the dirty work of writing a proposal to the Hill. The New York Times Jackie Calmes did a nice post on this the other day.

But not only is Obama’s stimulus what Jackie called the “the paperless plan,” his proposals themselves seem infinitely flexible. For instance, the Obama people let it be known that a key element of the stimulus would be a tax credit to encourage businesses to hire new workers. But when that idea ran into resistance, Obama, as they say, threw it under the bus.

By this morning, Obama aides put out the word that the jobs credit was A) dead or B) about to be significantly retooled. In its place, perhaps, new energy credits. Energy. Employment. Whatever.

It all reminds me of  Don Regan, who was Reagan’s Treasury Secretary. The morning Treasury rolled out its detailed version of Tax Reform (known back in the day as Treasury  I), Regan was questioned by reporters about some particularly controversial provisions. Not to worry, Regan shrugged, it is all written on a word processor. His clear implication: It was easy enough to rewrite. Btw, for those too young to remember, a word processor was something like a laptop, only it couldn’t get you on the Web.     

Obama is coming to Washington with much the same attitude. He’s being even more clever when it comes to the exceedingly unpopular TARP. The incoming president wants Congress to authorize the second $350 billion of this bank bailout money, but instead of asking for the funds himself, he let George Bush do the heavy lifting on his behalf. Poor Bush, I’m sure, would rather be packing. 

Don’t get me wrong. I had real doubts about the jobs credit. But the are serious economists who do not. It would have been nice if Congress, say, held a hearing to hear both sides of the argument.

Similarly, there is nothing wrong with a proposal as complex as the stimulus getting tweaked along the way. And, as Reagan showed, a certain amount of flexibility makes for excellent legislative politics. 

But sooner or later, Obama, who voted present so often in the Illinois legislature, is going to have to get his hands dirty and take responsibility for unpopular, but necessary initiatives. That, after all, is why they let you stay in the big white house and use the fancy office.

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When IRS stimulus checks are withheld for back child support, how long does it take to get the check?