Legislative and regulatory issues to watch in 2012.

• Author: Berger, Barrie Tabin
• Position: Federal Focus

As 2012 gets underway, state and local governments face a variety of measures that could adversely affect them. These include budget and federal deficit reduction proposals that reduce funding to state and local governments, federal tax reform initiatives that might eliminate or curtail the federal tax exemption on municipal bond interest and state and local tax deductions, federal regulation of public pension plans, and numerous rules to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislative and regulatory issues jurisdictions should pay attention to this year include the topics that follow.

FEDERAL BUDGET

Short- and long-term proposals to manage the federal budget include cuts to programs that are important to state and local governments. For example, in the final fiscal 2012 budget, funding for the Community Development Block Grant program, which funds community development activities such as affordable housing, antipoverty programs, and infrastructure development, was cut by nearly $400 million, to $2.9 billion in fiscal 2012. Similarly, the Community Oriented Policing Services program was cut by nearly 60 percent, to $199 million in fiscal 2012, down from $495 million the previous year.

SALES TAXES ON INTERNET SALES

The Marketplace Fairness Act (S. 1832) would allow sales taxes on Internet and catalog sales to be collected by remote means, leveling the playing field between remote vendors and brick and mortar shops. This bill is different from similar versions of legislation introduced in previous years because it would allow states to collect remote sales and use taxes if they adopt the Streamlined Sales Tax Agreement or implement the specified minimum simplification requirements set forth in the bill. The National Conference of State Legislatures has estimated that states could gain as much as $23 billion next year if they are given the means to collect and use sales taxes from Interact and catalog purchases. The GFOA supports the act and will oppose any efforts to include provisions that would limit the amount of tax that local governments can collect on remote sales, as well as mandates for state and local governments to simplify their telecommunication tax structures before being able to collect taxes on remote sales.

TAX DEDUCTIBILITY

Proposals to limit or eliminate the federal deduction of state and local taxes will be a concern. The GFOA continues to support legislation that would permanently...