Bipartisan Tax Solutions Alive and Well at NCSL State and Local Tax Working Group

Erlinda A. Doherty is NCSL’s Director of the Budgets & Revenue Committee and leads the Executive Committee on State and Local Taxation Task Force. Prior to joining NCSL, Erlinda served on the Finance Committee of the South Carolina Senate for 5 legislative sessions, analyzing and compiling the state’s $7 billion budget, as well as staffing any fiscal-related legislation, including major legislation shoring up the state’s pension system. Erlinda’s diverse experience also encompasses government, congressional, and international relations positions in the federal government, the U.S. Army, and the private sector. Erlinda earned a Master’s degree in Public Policy from Georgetown University, as well as a Bachelor’s in Political Science and Middle Eastern Studies from Rutgers University.

Jackson Brainerd is Program Principal who oversees state tax, economic development, and gambling policy and staffs NCSL’s Task Force on State and Local Taxation and its Budgets and Revenue Standing Committee. Prior to joining NCSL in 2014, Brainerd graduated from Colorado College with a B.A. in Political Science and spent time with Governor John Hickenlooper’s Office of Correspondence. His written work and research on state fiscal policy has been cited by Bloomberg, Politico, Reuters, NPR, and the Wall St. Journal, among other publications.

Jackson, Erlinda, I really appreciate your joining us to tell us about the work of the NCSL Working Group on State and Local Taxation.

NCSL (National Conference of State Legislatures) was founded in 1975 and quickly became the preeminent national organization for legislatures. In 1999 the Executive Committee established the “Task Force on State and Local Taxation of Communications and Electronic Commerce.” That Task Force’s charge evolved to cover corporate income taxes and other multistate tax issues and it is now simply the Task Force on State and Local Taxation. The Task Force was named the Tax Organization of the Year in 2016 by State Tax Notes.

Russ: The history above represents an expansion in interests and influence. What accounts for the success and influence of the Task Force?

Jackson: The success of the SALT Working Group is due in part to its longevity. It is NCSL’s longest standing task force; most of them disband after just a couple of years. As you mentioned, SALT was initially formed at the turn of the century to address the issue of remote sales tax collection. This turned out to be a topic that couldn’t be neatly resolved in a couple of years. When progress on the remote sales issue was slow, the group branched out into other areas of tax policy. Those ongoing efforts provided fertile ground for relationship-building and information-sharing. Many of our legislative members have been part of the Task Force for a long time and they’re all well-versed in multistate tax issues. The Task Force has also collaborated with the private sector to further its mission, so we have a number of long-standing relationships with leading groups from a wide array of industries.

Russ: The Task Force was an early supporter, even an instigator of Streamlined Sales Tax, and has maintained its interest and involvement through the development of the organization into the current Governing Board. Why was the SST movement of such great importance to the Task Force?

Jackson: The Streamlined Sales Tax Project was an essential part of the effort to convince the federal government to provide for a national framework for the collection and remittance of remote sales taxes. Prior to the creation of SST, NCSL and other state and local organizations had worked since the late 1980s to reverse or mitigate the effects of two Supreme Court decisions (National Bellas Hess vs. Illinois and Quill vs. North Dakota) that had prevented states from requiring an out-of-state retailer to collect sales tax on items sold to state residents and hoped to convince Congress to assist them. The hope was that if states could prove they could work together to simplify their sales tax systems, then Congress wouldn’t view the imposition of collection requirements on remote retailers as overly burdensome. The Task Force created model legislation that directed state revenue departments to enter multistate discussions to simplify sales taxes, which eventually paved the way for the Streamlined Sales Tax Agreement. The goal of prodding Congress into action ultimately failed, but the SST movement clearly played a significant role in convincing the Supreme Court to overturn Quill in 2018, and the SSTGB’s ongoing mission of promoting sales tax simplification and uniformity still aligns with many of our Working Group’s priorities.

Russ: What have been some of the other major initiatives of the Task Force, and what characterizes the issues the Task Force selects as a priority.

Jackson: The Task Force generally focuses on multi-state tax issues related to the state/federal fiscal relationship. We’re not in the business of telling states what they should and should not tax; rather, we want to ensure that states continue to have the ability to maintain and modernize their revenue systems without undue interference from the federal government. We have tended to encourage uniformity when it comes to certain multi-state tax issues, which is generally desirable from a tax policy perspective, but uniformity can also serve to rebuff potential federal incursions into state taxing authority. In the past, the Task Force crafted model language around the implementation of E911 fees and the taxation of non-resident disaster responders. We’ve also adopted best practices or principles around a wide range of topics, including the taxation of online travel companies and short-term rental marketplaces, the taxation of cloud-based services, and tax expenditure reporting.

Russ: Those initiatives are a very significant set of tax issues. Looking to the future, what do the current Task Force leaders see as emerging issues they would like to focus on?

Erlinda: It’s no secret that state revenue systems have not kept pace with economic changes that are now challenging the relevance of many tax categories. Value created in today’s economy increasingly does not involve property, consumption habits have shifted, physical goods continue to be replaced with similar, digital versions and capital and workers are more mobile than ever. Helping states respond to these changes and modernize their tax systems is a priority for the Working Group.

We have increasingly focused on supporting a National Framework for taxing the expanding Digital Goods and Services market. NCSL will also continue to work on efforts to ensure the solvency of Social Security for generations to come. Additionally, NCSL will continue to engage on cryptocurrency issues as it becomes a more widely used medium.

Russ: Marketplace Facilitators, Digital Goods, Communications, these are headliner issues. The Task Force does a lot of work on more mundane topics, like tobacco taxes and E911 fees, on a continuing basis. How would you describe the value of that steady attention to these “smaller” topics?

Jackson: By focusing on “smaller” topics, NCSL can provide a wide range of expertise on all tax issues affecting states and keep states aware of the impact federal legislation may have on state legislation. This is especially important when considering that different states rely on different types of revenue.

Covering a broad range of issues also helps keep our meetings interesting and our members well-informed and up to date on state tax policy in general. Plus, you never know when a more niche topic area will enter the spotlight. Tobacco taxes are a good example; the recent explosion in popularity of e-cigarettes and vaping devices was accompanied by many questions about how such products should be taxed. We were able to provide a forum for those discussions when the topic was still just beginning to percolate and garner national attention.

Russ: State sovereignty is important. So is the need to develop tax systems that work in a global and changing economy, to quote the Task Force, “in a manner that does not impede economic growth, provides clarity and simplicity to taxpayers and ensures the necessary revenue for appropriate government functions.” That’s a tough balancing act. How does the Task Force manage that, and what are some examples of how that balancing act has worked?

Jackson: It is a bit of a balancing act. Even though the Working Group has promoted the benefits of uniformity in certain instances, we recognize that there can be political or fiscal barriers to achieving it and we don’t prod states into pursuing policies that they think would impinge on their sovereignty. We try to pursue bipartisan topics that both public and private sector representatives can agree need to be addressed. If you can garner a substantial amount of buy-in, it’s easier to persuade more skeptical parties to come aboard.

The model legislation the Working Group approved around marketplace facilitators is a good example. We didn’t put it forward with the expectation that states would adopt the language wholesale, but with the hope that it could be used to provide some helpful guidance for states who were looking for an approach to taxing such platforms that had the approval of both Democrats and Republicans, along with many in the business community.

Russ: Most of us who have had careers in or with government would be hard pressed to name a time that has been more deeply partisan. Yet the Task Force has continued to function in a highly bipartisan manner. What do you think are the characteristics of the organization and its members that account for that ability?

Erlinda: I think there are several factors at play. Many of the priority issues of the Task Force over the years have not been particularly partisan. Especially when it came to remote sales tax collection, the “Kill Quill” supporters were from both parties and a wide array of business industries. Some of the more “niche” issue areas that have received task force attention are also, frankly, somewhat dense and boring and aren’t easily boiled down to left vs. right polemics.

Furthermore, the charge of NCSL is to represent the legislative bodies of all states and territories, which comprise members from across the political spectrum. The leadership of state legislatures varies across the political spectrum. NCSL’s standing committees build upon this by each having a bipartisan co-chair as well as bipartisan legislative staff representation. Additionally, our policy directives and resolutions require bipartisan majorities to pass. Bipartisanship is the lifeblood of our organization, so we are unwavering in our commitment to it. I think our members understand and appreciate the value of having a truly a bipartisan entity advocating on behalf of states at the federal level and have seen that such an approach can produce tangible and lasting results.

Russ: How would you describe the roles sponsors play for the Task Force?

Jackson: NCSL would not be able to do our important work without the help of our sponsors. Sponsors play an integral role in providing funding as well as expertise to the committee’s work. Many of our sponsors are represented by tax wonks who have worked in state tax/revenue departments as well as the private sector and are willing to lend their deep knowledge to task force discussions and in the development of tax force policies and resolutions.

Russ: Most small and medium size businesses don’t have the resources to be sponsors of the Task Force. Are there ways for them to follow and be involved in the work the Task Force does on issues of importance to them?

Jackson: We strive to provide balanced perspectives at our Working Group meeting sessions and have hosted many small business-affiliated associations to discuss various tax issues. NCSL is happy to work with businesses that want to engage, and we’re always open to hearing new ideas from businesses of all sizes. Our meeting agendas and presentation materials are publicly available on our website. Our priorities flow from our legislative membership, so if state legislators are hearing about pressing small business tax issues in their state, there’s a good chance it’ll be on the agenda at our meetings.

Russ: Looking back 20 years from now, what would the Task Force leaders like to say was accomplished?

Erlinda: First and foremost, that the SALT Working Group accomplished its original purpose of giving states the ability to collect remote sales taxes and helped change the national sales tax landscape for the better. Beyond that, we hope that the Working Group was able to help guide states towards effective tax policy solutions on a wide array of issues, that it helped lay the groundwork for continuing bipartisan collaboration, and that it facilitated many lasting friendships.