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1 Jared Walczak, Tax Reform Moves to the States: State Revenue Implications and Reform Opportunities following Federal Tax Reform 1 (2018)

handle is hein.taxfoundation/txrefmvs0001 and id is 1 raw text is: 









SPECIAL
REPORT
No. 242
Jan. 2018


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
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@2018 Tax Foundation
Distributed under
Creative Commons CC-BY NC 4.0
Editor, Rachel Shuster
Designer, Dan Carvajal
Tax Foundation
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Washington, DC 20005


Tax Reform Moves to the States:

State Revenue Implications and Reform

Opportunities Following Federal Tax Reform

Jared Walczak
Senior Policy Analyst


Key   Findings


*  States incorporate provisions of the federal tax codes into their own codes
   in varying degrees, meaning that federal tax reform has implications for state
   revenue  beyond any broader economic  effects of tax reform.

*  Because  the base-broadening provisions of the new federal tax law often
   flow through to states, while the corresponding rate reductions do not,
   most  states will experience a revenue increase. The vast majority of filers
   will receive a tax cut at the federal level, but they could easily see a state tax
   increase unless states act to prevent one.

*  Eighteen states and the District Columbia have rolling conformity with the
   Internal Revenue Code, meaning  that they will conform to relevant provisions
   of the new federal law automatically, while nineteen must update their fixed-
   date conformity statutes to adopt the new provisions. The remaining states
   only conform selectively.

*  The largest revenue increases will be in states which conform to the now-
   repealed federal exemption, either directly or by linking their own personal
   exemptions  to the number of exemptions claimed at the federal level. States
   which conform  to both the standard deduction and the personal exemption
   will also experience a revenue increase.

*  Six states will incorporate the new 20 percent deduction for pass-through
   business income unless they decouple from the provision or change their
   income  starting point from federal taxable income to federal adjusted gross
   income.

*  Unless they act, most states will not conform to an important pro-growth
   element  of federal tax reform, the provision providing for immediate
   expensing of investments in machinery and equipment. The additional
   revenue from  base broadening elsewhere-including restrictions on interest
   deductibility-may provide an opportunity to conform to this provision.


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taxfoundation.org

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