North Carolina lawmakers are seeking to shift much of the state’s tax burden off its wealthiest citizens and most profitable businesses and onto its low- and middle-income residents. After initially proposing to eliminate the state’s income tax outright, Republicans are instead introducing a flat income tax rate across all earning levels. The proposal unveiled Thursday would also expand the reach of sales taxes in the state, which hits low-income families hardest, and comes on top of the March repeal of a tax credit for 900,000 working families in the state.

The state’s effective tax rates already favor the rich. The North Carolina Justice Center, a progressive think tank in the state, explains that the richest one percent of tarheels pay 6.5 percent of their income in combined sales and income taxes at the state level, while the lower 80 percent of earners pay between 9 and 10 percent combined. Yet Republicans propose to give that top one percent a tax cut while hiking rates for those already paying more:

NCJC adds that the lost revenue from this plan “could be as high as $573 million” per year. Given that state law requires balanced biannual budgeting, the tax proposal is likely to force major cuts to public services if approved.

If all of this sounds familiar, it should. Supply-side economists have pushed for this sort of regressive tax reform in the name of economic growth for over 30 years, at all levels of American governance. Art Laffer, the chronically misleading godfather of this widely discredited approach to tax policy, helped press for the initial repeal proposal from North Carolina’s conservatives. Laffer’s had a prominent hand in the broad wave of state-level supply-side tax reform proposals since last year, and statehouse Republicans seem prepared to continue believing him even after his research for the American Legislative Exchange Council has been shown to be error-riddled.

The federal poverty line, $23,550 for a family of four, is considered the minimum amount a family needs to get by. Yet many families need much more to cover all the costs they face and truly feel economically secure. Most Americans say a family of four needs nearly $60,000 to “get by.”

State policies play a big role in helping families to achieve this sense of economic security. Yet a new scorecard from Wider Opportunities for Women (WOW) has found that most states don’t have a comprehensive policy regime. While some stand out in a few areas, no state has fully addressed all of the needs of working families.

Looking at 85 different policies, including the minimum wage, Earned Income Tax Credit (EITC), family and sick leave, public education spending, savings and retirement support, and support for child care, health care, and housing, the scorecard granted each state a grade on “their potential to improve the economic security of workers, families, and retirees.” No state in the country received an A or B grade – the highest, for Washington, was a B-. Most states received grades between a C+ and a C-, while four got the lowest, a D+. An overview of how each state fared can be found in this map:

The states that fared best are those that have strong policies on the minimum wage and EITC. Many states also improved their grades thanks to policies that promote savings and eliminate asset eligibility tests for social programs. Yet most fared poorly on family leave, paid sick days, flexible work arrangements, and unemployment insurance. Many still rely on the low federal floor set in these areas.

While some states may counter that their budgets are constrained, making it difficult to implement more robust policies, WOW’s report found that the grades were “not strongly related to a state’s median income, budget size or fiscal health.” Therefore, it found, “these factors do not define a state’s ability to improve its residents’ security.”

Many states have been pulling back on these investments, cutting spending on things like public education, child care, and higher ed, often in lieu of raising taxes. This report may provide evidence that there is room to improve policies to support working families.

The highest Powerball jackpot in history, $590.5 million, is waiting to be claimed by the winner in the small town of Zephyrhills, Florida. While the lucky winner may feel a sense of exhilaration, there can be huge down sides of the lottery for those who play, those who win, and the state governments that rely on the revenues.

With odds stacked sky high against actually winning a jackpot, lottery players lose an average of 47 cents on the dollar for each ticket. With such low payouts, tickets act as an implicit tax of 38 percent.

Yet poor people are far more likely to buy tickets than their wealthier counterparts. They spend a larger percentage of their income on the lottery, and many studies of state lotteries have found that low-income Americans account for most of the sales and that sales are highest in the poorest areas. One study found that a reason for this is that “lotteries set off a vicious cycle that not only exploits low-income individuals’ desires to escape poverty but also directly prevents them from improving upon their financial situations.” The loss in income of buying tickets that provide no reward is harder to bear on a slim budget.

Those who win may not be much better off, however. The National Endowment for Financial Education estimates that as much as 70 percent of those who land sudden windfalls lose the money within several years. Lottery winnings have led some to drugs, bankruptcy, and family fractures.

The revenues from lottery tickets act as a regressive tax because states use them to fund many public services, such as education. Lotteries netted 11 states more revenue than their corporate income tax in in 2009. But states don’t fare well either in the long run. While states that have lotteries increased per-capita spending on education at first, after some time they ended up decreasing overall spending, while states without them increased investment. One study found that “nonlottery states spend, on average, 10 percent more of their budgets on education than lottery states.” In fact, lottery revenues may not end up increasing funds and could actually increase budget imbalances. There are only so many tickets that a state’s population can buy, making it a short or medium term fix but not a long term source of revenue.

The chances of winning the Powerball jackpot were very low at just 1 in 175.2 million. One person has likely won it and will now face the challenges of managing a huge influx of new money. The rest of the residents and the state’s revenues are not likely to fare as well.

Republicans love to claim that low-tax states such as Texas enjoy a disproportionate amount of economic success, while higher-tax states like California are economic basket cases. Republican governors in several states are using that rationale to propose gutting their state income taxes (and, in many instances, replacing them with regressive sales taxes).

But a new report from the Institute on Taxation and Economic Policy shows that so-called “high tax states” are actually experiencing more growth and less decline in income than states that are supposedly super-conducive to economic expansion:

In reality, states that levy personal income taxes, including the states with the highest top rates, have seen more economic growth per capita and less decline in their median income level over the last ten years than the nine states that do not tax income. Unemployment rates have been nearly identical across states with and without income taxes.

Here’s the breakdown:

– Four of the nine states without income taxes are actually doing worse than the average state in regards to economic growth per capita: Texas, Tennessee, Florida, and Nevada.

– Five of the nine states without income taxes are doing worse than average in terms of median income growth: New Hampshire, Florida, Tennessee, Alaska, and Nevada.

– Six of the nine states without income taxes had higher than average annual unemployment rates over the last decade: Texas, Florida, Tennessee, Washington, Alaska, and Nevada.

In fact, it was the “high tax” states that did the best in terms of growth, as this chart shows:

AFTON, Iowa — Though some have questioned the influence that Grover Norquist’s anti-tax pledge holds over the GOP, a leading Republican senator left no doubts of its influence at a recent town hall.

An Iowa constituent asked Sen. Chuck Grassley (R-IA) on Tuesday about closing a loophole that allows online companies like Amazon to skirt paying sales taxes. Though Grassley declined to take a firm position on the issue, he explained to the man how Norquist’s influence blocks Congress from closing that loophole. “It may not be a tax increase because the states already have the taxes, but there are people in Washington who define what a tax increase is and they seem to have a lot of political power,” Grassley said, implicitly referring to Norquist. “They’ve gotten people not willing to go out and want to be labeled as a tax-increaser even if they aren’t increasing taxes.” Watch it:

Despite Norquist’s influence, some Republicans are joining Democrats and trying to close the Amazon loophole. Currently, Sen. Mike Enzi (R-WY) and a bipartisan group of 56 members of Congress are sponsoring the Marketplace Fairness Act of 2013, which would allow states to collect sales taxes on online purchases.

The online retail giant Amazon benefits from a large loophole in the federal tax code. Because companies only have to collect sales tax in states where they have a physical presence, Amazon is able to avoid collecting the tax in many states, giving it a way to undermine traditional retailers. But a bipartisan group of 57 members of Congress is trying to change the law to close Amazon’s loophole:

Twenty senators and 37 members of the House from both parties signed on to the Marketplace Fairness Act of 2013 (MFA)—legislation that would allow states to collect taxes on what consumers buy over the Internet.

The measure would finally resolve a decades-old dispute over whether states can collect sales taxes on mail-order and online purchases. Currently, states are barred from requiring out-of-state sellers to collect sales taxes, unless the retailers have a physical presence (or nexus) in their jurisdiction. The MFA would allow states to require sellers to collect these levies no matter where the firms are located.

This loophole gives Amazon (and other online shops) a leg up on its competitors for no real reason. As Michael Mazerov wrote for the Center on Budget and Policy Priorities, there is “no excuse for exempting large companies like Amazon and Overstock that are perfectly capable of collecting tax everywhere — just as their brick and mortar competitors do.”

Applying an online sales tax fairly would also make the tax code slightly more progressive, as “many low-income families would love to shop online to avoid sales tax but can’t because they don’t own a computer or can’t afford high-speed Internet access.” Sales taxes are inherently regressive, and exempting online purchases makes them even more so, as those with the right technology get to skip the tax entirely.

States governed by both Democrats and Republicans have moved to address this issue, but it won’t be truly fixed until Congress takes action.

There’s no shortage of corporate tax giveaways at both the federal and state levels. Lawmakers of all stripes love to use the tax code to subsidize companies, either directly or indirectly.

But in some instances, federal tax breaks for corporations undermine state budgets. As the Center for Budget and Policy Priorities detailed today, one particular tax break will cost states $600 million next year:

The federal government created this tax break, known as the “domestic production deduction,” in 2004. Since most states base their own tax codes on the federal tax code, the tax break was carried over into many states without specific legislative scrutiny or a vote. Now it is costing not only the federal government but also 25 states a large amount of money. By 2014, it will cost these states over $600 million per year.

The deduction — enacted as Section 199 of the federal Internal Revenue Code — allows companies to claim a tax deduction based on profits from “qualified production activities,” a sweeping category that goes well beyond manufacturing to include such diverse activities as food production, filmmaking, and utilities — a substantial share of states’ corporate income tax base.

These deductions are largely worthless, and many states have tossed them overboard. But 25 states still leave it intact:

As CBPP noted, “Firms can claim the domestic production deduction for profits from all qualifying domestic activities — meaning activities that occur anywhere within the United States. As a result, a multi-state firm can claim the deduction in a conforming state for production activities in any state, not just the state where the firm is filing.” They also benefit large firms at the expense of small.

State efforts to encourage corporate growth and job creation through the tax code usually encourage a race to the bottom, as corporations play states off each other in order to secure the most preferential treatment, and then feel no hesitation about up and leaving later. Of course, paying corporations to create jobs is only one of the bone-headed ways states try to generate economic activity.

A favorite tactic for lawmakers on both sides of the political aisle is to use tax incentives as a way to attract jobs to their state. Texas Gov. Rick Perry (R) even referred to his trips to sweet-talk companies into moving “hunting trips.”

The theory is that, by providing tax breaks and other financial supports, a lawmaker will create more jobs in the local economy. But is that what actually happens? According to a new report from Good Jobs First, the answer is a resounding no. All these incentives do is waste taxpayer money that would be better spent on real economic development:

There are three problems with this strategy. It is wasteful because the costs are high and the benefits are low: a tiny number of companies get huge subsidies but the net impact of interstate job relocations is microscopic. It is incredibly unfair to in-state employers, who are forced to pay higher taxes or suffer lower-quality public services (or some of both) when newly arriving companies are excused from paying their fair share of taxes. And some would add that it is a tragic distraction from things that matter more to the U.S. economy, including the trade deficit. [...]

The net effect of these piracy lures and blackmail payoffs is to divert economic development resources away from helping companies expand or start up, where virtually all the job-growth action is. And when many states are still making painful budget cuts, putting lots of eggs in a few corporate baskets reduces funding available for the low-risk, high-payoff investments in education and infrastructure that benefit all employers.

The report notes several states, including Texas, New Jersey, and Georgia, that are throwing taxpayer dollars down this particular rabbit hole. One of the most egregious examples is companies receiving money to bop back and forth across the Missouri-Kansas border in the Kansas City metro area, barely moving at all but receiving huge tax breaks. In one instance, “the 12-mile move landed the company a city and state tax incentive package valued at $64.3 million over 23 years.”

Plenty of companies have no problem pocketing these subsidies and then skipping town or laying off workers. Sears, for instance, received millions of dollars in subsidies from Illinois and then laid off 100 workers.

President Obama today rolled out a list of executive orders and suggested Congressional legislation to reduce gun violence, the first major response to the school shooting in Newtown, Connecticut. It includes banning assault weapons and certain types of ammunition, along with better background checks, as well as some measures to address mental health.

Meanwhile, at the state level, lawmakers are taking a look at some of the tax breaks they dole out to gun manufacturers. As Bloomberg News noted, states have handed out $49 million over the last five years in tax breaks to companies that make guns:

Governments in nine states have awarded at least $49 million in subsidies in the past five years to gun and ammunition makers whose products are under scrutiny after last month’s school shooting in Connecticut.

Almost 85 percent of those tax breaks or grants have gone to two companies: Olin Corp. (OLN), the Clayton, Missouri-based maker of Winchester-brand bullets and shotgun shells, and a unit of Freedom Group Inc., the Madison, North Carolina-based company that produces the rifle used in the Dec. 14 killing of 20 children and six adults at Sandy Hook Elementary School in Newtown.

The ostensible goal of these subsidies is job creation, but handing out tax breaks to create jobs is simply not a viable job creation strategy, which has been shown time and time again. “We need to be a lot more careful and decide what kind of state we envision,” said Florida state Senator Nancy Deter (R) adding that “she doesn’t want Florida to be known for gun manufacturing.” New York state Sen. Liz Krueger (D) has called for her state to drop subsidies for gun manufacturing as well.

Gun safety measures, in addition to preventing human tragedy, also provide economic benefits by cutting down on medical and public safety costs. One study found that “the average household acquiring a gun imposed a net cost on the rest of society of somewhere between $100 to $1,800 per year.”

Gov. Bobby Jindal (R-LA) last week tentatively endorsed a plan that would eliminate his state’s income and corporate taxes, replacing them with an increased sales tax. Such a move would disproportionately impact the poor, in a state where the tax code is already tilted against those with lower incomes.

But Jindal is not alone in this enthusiasm for pushing taxes down the income scale. North Carolina is also looking at replacing its income tax with an expanded sales tax, as Reuters noted:

“We have no choice but to make change,” said Bob Rucho, a Republican state senator in solidly Republican North Carolina, who is leading a push in that state for major tax changes.

Rucho and other like-minded lawmakers have a plan to do away with all state individual and corporate income taxes. The plan would replace lost revenue with a new business license fee and a higher sales tax on goods and services not now taxed by the state, such as legal, accounting and spa services, and food. [...]

Rucho’s plan would remake the North Carolina budget, which now derives 65 percent of its $18.5 billion in total tax revenues from individual income and corporate taxes.

To make up for that much lost revenue, the state sales tax rate would have to rise to 6.53 percent from 4.75 percent, according to a supportive study done by a consulting firm run by Arthur Laffer, a former adviser to Republican President Ronald Reagan and one of the fathers of “trickle-down” economics.

The Tarheel state’s incoming governor, Pat McCrory (R), has called for tax reform, but has yet to embrace any specific proposal.

North Carolina’s tax system already benefits the well off, with the richest 1 percent paying 6.8 percent, compared to 9.5 percent for those making less than $17,000, according to the Institute on Taxation and Economic Policy. Shifting to a larger sales tax will hit low-income residents the hardest, as they spend a much larger percentage of their income on basic needs. Tacking the sales tax onto food will make this change even worse for those at the bottom of the income scale.

Such a shift would also be bad for North Carolina’s economy. As Alexandra Forter Sirota of the North Carolina Justice Center wrote, “relying only on consumption taxes would make our revenue system less stable. When the next downturn hits and consumer spending plummets, North Carolina’s revenue would plummet along with it with no other tax to counter-balance its decline. That would trigger even harsher cuts to education, health care and public safety than we’ve seen in the last few years.”