Yet, surprisingly little attention has been paid to the effect federal tax reform might have on state tax systems across the country. Because most state, individual and corporate income tax systems rely heavily on federal rules, definitions and calculations, what happens with federal tax reform has broad ramifications on state taxation. Fundamental income tax reform at the federal level, like that being proposed in the House GOP blueprint, could result in significant changes to state tax bases and the methods by which states collect state income taxes. For states to successfully adapt to federal tax reform, it’s important to open the dialogue now. At the outset, state revenue would likely decline, but because eliminating or reducing tax expenditures broadens the tax base, long-term state revenue could increase.

Source: Forbes February 17, 2017 16:25 UTC