Demographic Changes Presented to NCSL Fiscal Leaders October 5, - - PowerPoint PPT Presentation

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Demographic Changes Presented to NCSL Fiscal Leaders October 5, - - PowerPoint PPT Presentation

Dec 15, 2023 342 likes •646 views

Tax Disrupters: Rapid Technological and Demographic Changes Presented to NCSL Fiscal Leaders October 5, 2017 William F. Fox, Director Technology E-Commerce/digitization Autonomous vehicles William F. Fox, Director

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Tax Disrupters: Rapid Technological and Demographic Changes

Presented to NCSL Fiscal Leaders

October 5, 2017 William F. Fox, Director

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Technology

  • E-Commerce/digitization
  • Autonomous vehicles

August 2016 William F. Fox, Director • cber.haslam.utk.edu 2

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ESTIMATED TOTAL E-COMMERCE SALES

August 2017 William F. Fox, Director • cber.haslam.utk.edu 3

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  • Nexus rules
  • Increase ability to enforce the use tax through

information reporting – Colorado, Nebraska, Washington

  • Income tax filing – 25 states allow individuals to

report use tax liability on income tax returns STATES ARE USING SEVERAL APPROACHES TO ENFORCE TAX AT DESTINATION

June 12, 2017 William F. Fox • http://cber.haslam.utk.edu 4

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BROADER APPROACHES

  • Cooperation – Streamlined Sales Tax

Governing Board (24 states)

  • Federal legislation
  • Marketplace Fairness Act of 2017
  • Remote Transactions Parity Act of 2017
  • Reconsideration of the Quill case – Several

states have legislation to enforce collection on remote sales – Alabama, South Dakota, Tennessee

June 12, 2017 William F. Fox • http://cber.haslam.utk.edu 5

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Autonomous Vehicles

  • Some employment effects in transition
  • Fewer cars manufactured – assembly and

parts

  • Less demand for drivers in taxis and car

sharing services

  • Fewer truck drivers
  • Fewer new cars sold, insured, and financed
  • Will other jobs develop to replace these?

Who will get these jobs?

August 2016 William F. Fox, Director • cber.haslam.utk.edu 6

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Some tax implications

  • Sales tax revenues decline with fewer

vehicles sold

  • Motor vehicle registrations and titles fees

decline

  • Motor fuel tax revenues fall with more

electric vehicles

August 2016 William F. Fox, Director • cber.haslam.utk.edu 7

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Policy options – keep tax structure up-to-date

  • Consider taxing transportation services, such

as vehicle sharing and taxis

  • Carefully consider how to tax other shared

assets with eye towards level playing field

  • Work to overcome the Quill limitation
  • Marketplace Fairness Act
  • Reconsideration by the Supreme Court

August 2016 William F. Fox, Director • cber.haslam.utk.edu 8

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Demographic Issues

  • Growing populations
  • Aging populations – living longer, baby

boomers passing 65

  • Falling birth rates

August 2016 William F. Fox, Director • cber.haslam.utk.edu 9

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U.S. Population Growing More Slowly

August 2017 William F. Fox, Director • cber.haslam.utk.edu 10

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Population Growth

  • Varies widely across states – very fast in some

states such as Arizona and Colorado and very slow in others such as Maine and

  • Pennsylvania. Difference arises mostly from in-

migration.

  • Growth adds tax revenues, but creates

corresponding expenditures which depend on the demographics of the new population, so uncertain how the fiscal position is affected

August 2017 William F. Fox, Director • cber.haslam.utk.edu 11

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Birth Rates Continue to Decline

(Birth Rates per 1,000 Population)

August 2017 William F. Fox, Director • cber.haslam.utk.edu 12

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Birth rates are lower for Under 30

(Birth rates per thousand by mother age)

William F. Fox • http://cber.haslam.utk.edu

13 August 29, 2017

Age Band 2007 Birth Rate Per Thousand 2015 Birth Rate Per Thousand

15-19 42.5 22.3 18-19 73.9 40.7 20-24 106.3 76.8 25-29 117.5 104.3 30-34 99.9 101.5 35-39 47.5 51.8 40-44 9.5 11

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Abpve 65 Population Rising Rapidly

August 2017 William F. Fox, Director • cber.haslam.utk.edu 14

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Population 65 Years and Older, 2016

August 2017 William F. Fox, Director • cber.haslam.utk.edu 15

Less than 15.0% 15.0% to 16.9% 17.0% to 18.9% 19.0% to 19.7% Greater than 19.7%

U.S. Average: 15.2%

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Population Aging in Every State

(Population 65 Years and Older, 2030)

August 2017 William F. Fox, Director • cber.haslam.utk.edu 16

Less than 15.0% 15.0% to 16.9% 17.0% to 18.9% 19.0% to 19.7% Greater than 19.7%

U.S. Average: 20.0%

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Expenditure implications of aging

  • State and local pensions
  • Health care
  • Employees or retirees
  • Low income elderly
  • Education – will the elderly want less?
  • Demand for different services, such as more
  • r different recreation

August 2017 William F. Fox, Director • cber.haslam.utk.edu 17

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Personal Income Tax

  • Effects from aging arise from behavioral

changes and from structure of statutes

  • Behavioral effects
  • Labor force participation varies by age, but will

likely see more transitional retirement

  • Average earnings increase through careers, and

then drop with retirement

  • Income changes to relatively more pensions,

interest and capital gains

August 2017 William F. Fox, Director • cber.haslam.utk.edu 18

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Lower but Rising Labor Force Participation Rate for 55 and Up

August 2017 William F. Fox, Director • cber.haslam.utk.edu 19

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Personal Income Tax

  • Statutory effects
  • Progressivity affects how demographics impact

income tax revenues

  • More limited taxation of capital income
  • 37 states have some type of special provision for

pension income, and all have some favorable treatment for the elderly

  • Only six states tax social security to the same extent as

the Federal Government

  • Many have special treatment for other pensions
  • Other credits and exemptions – GA cost more than $250

million per year a decade ago

August 2017 William F. Fox, Director • cber.haslam.utk.edu 20

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Sales Tax

  • Some consumption smoothing over life but

consumption patterns change with age – middle aged spend the most, oldest and youngest groups spend a little more than half as much

  • Elderly consume more health care and food at

home, so breadth of base affects how sales tax responds

  • Aging population will cause per capita tax

revenues to fall, with the most being in Hawaii, Colorado and North Carolina

August 2017 William F. Fox, Director • cber.haslam.utk.edu 21

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Sales Tax and Millenials

  • How will Millenials lower (at least to this point)

asset accumulation alter sales tax? Fewer cars with car sharing and autonomous vehicles?

  • Sales tax collection and remote sales

August 2017 William F. Fox, Director • cber.haslam.utk.edu 22

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Property tax

  • Again, behavioral effects and statutory effects
  • Millenial effects
  • How will they behave in terms of property
  • wnership?
  • Household formation affects new property
  • Decisions to own versus rent could alter the value
  • f property

August 2017 William F. Fox, Director • cber.haslam.utk.edu 23

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Household Formation has Slowed Dramatically

William F. Fox, Director • cber.haslam.utk.edu 24 January 2017

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New Privately Owned Housing Units Started

August 2017 William F. Fox, Director • cber.haslam.utk.edu 25

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Property tax

  • Behavior - Older people spend less on housing

– want to stay in their home but most ultimately downsize

  • Statutory
  • Age specific homestead exemptions
  • Move into nontaxable nursing homes, etc.

August 2017 William F. Fox, Director • cber.haslam.utk.edu 26

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Policy Options

  • Keep tax bases broad
  • Limit any further age related (and all) exemptions
  • Tax pensions and Social Security under PIT
  • Tax food and services under sales tax
  • What about health care?
  • Homestead exemptions?

August 2017 William F. Fox, Director • cber.haslam.utk.edu 27

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Boyd Center for Business & Economic Research

Haslam College of Business The University of Tennessee, Knoxville 716 Stokely Management Center 916 Volunteer Boulevard Knoxville, Tennessee 37996-0570 phone: 865.974.5441 fax: 865.974.3100 http://cber.haslam.utk.edu

August 2017 William F. Fox, Director • cber.haslam.utk.edu 28