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1 Nicole Kaeding & Kyle Pomerleau, Federal Tax Reform: The Impact on States 1 (2017)

handle is hein.taxfoundation/fdtaxreis0001 and id is 1 raw text is: FISCAL FACT No. 543 Mar. 2017 Federal Tax Reform: The Impact on States Nicole Kaeding & Kyle Pomerleau Economist Director of Federal Projects The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non-profit organization. @2017 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Key Findings: * Congress is considering comprehensively reforming the federal tax code. Leading proposals include the GOP Blueprint offered by House Republicans and the campaign tax plan put forward by President Trump. The plans share a number of similarities, but vary in terms of how they would change federal tax bases. * States, for administrative simplicity for both the state and taxpayers, tend to tie their tax codes to the federal tax code. Because of this conformity, changes made to federal definitions, such as adjusted gross income (AGI), influence the revenue that states collect. * Twenty-seven states use federal AGI as their income tax base, six states use federal taxable income, and three states use gross income. Forty-one states conform to federal definitions of corporate income, either before or after net operating losses. * State individual income tax revenues would likely increase due to the large base expansion occurring at the federal level, but revenue changes from corporate income tax modification is less straightforward. However, the magnitude of revenue of the individual income tax changes would likely be larger than any possible revenue losses from corporate income tax reform. * States have a number of options available to react to any revenue impacts from federal tax reform, such as phase-ins, tax triggers, and contingent enactment clauses. States can also look at ways to reform their tax codes in tandem to further mitigate any deleterious effects. Federal tax reform presents an opportunity for states to consider ways to improve their own tax structures, as was the case with the 1986 federal reforms.

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