What Tax Reform Means for States and Americans
This week marks the most substantial tax reform made by Congress since 1986. According to the Tax Foundation, this reform could boost the economy by increasing GDP and wages, creating thousands of new jobs, and making the US more competitive on a global level.
While the bill isn’t perfect, it is a start. Robert McClure, president of the James Madison Institute, explained that one of the bill’s merits is that it sparked real, principled discussion about specific tax issues among elected leaders. And it gives the country an opportunity to have a similar dialogue about government spending, especially since the bill will increase the national debt.
In the meantime, tax reform is a reality, and states, families, and individuals are wondering what to make of it. The Tax Foundation has released several resources that state think tanks can reference to help local taxpayers understand how their paychecks, families, and businesses will be impacted.
Summary of the Tax Cuts and Jobs Act
Preliminary Analysis of the Tax Cuts and Jobs Act
Who gets a tax cut with the new tax reform? This Tax Foundation chart and explanation presents eight example households to show what changes American individuals and families can expect.
Federal Tax Reform: The Impact on States
States will need to monitor how the tax changes will impact their revenues. Ideally all states will conform to the federal changes for administrative simplicity, and the key will be getting lawmakers to think about the big picture and the bill as a whole, which, in general, would cause states to see an increase in tax collections. That windfall will give them flexibility to enact some long-overdue reforms to their own tax systems and conform to specific federal provisions that—in isolation—might cost them a bit of revenue. This paper covers some of these issues. Stay tuned for an updated version from the Tax Foundation.
The Impacts of Jobs and Incomes by State
The Tax Foundation’s model “estimates that the plan would result in the creation of roughly 339,000 new full-time equivalent (FTE) jobs, while increasing the after-tax incomes by 1.1 percent in the long run, meaning families would see an after-tax income boost of 1.1 percent by the end of the decade, even after temporary individual income tax cuts expire.”
Pass-Through Deduction Won’t Flow Through to Most States
“If states simply do nothing in response to federal tax reform, most will experience an increase in revenue due to the provisions of the federal tax reform bill. That’s because the base-broadening provisions flow through to most state tax codes, but the corresponding rate reductions do not. And now we discover that one significant base narrower—the pass-through deduction—won’t affect most states, either.”
Does Your State’s Corporate Income Tax Code Conform with the Federal Tax Code?
“In general, states are more conformed on corporate income than individual income, but even when conformed on the definition of level, many states decouple on other provisions.” Learn more.
2018 State Business Tax Climate Index
This index is a great resource for gauging how efficiently states raise revenue and identifying how they can improve their tax codes. This year, Tax Foundation shares the data in a more user-friendly, interactive website where you can click on each state to see how it ranks and compares with its neighbors.
Facts & Figures 2017: How Does Your State Compare?
This resource is a quick guide to state-specific tax information, such as tax rates, collection, and more.
Bookmark and follow Tax Foundation’s blog to keep up with the latest resources, analysis, and commentary on tax issues across the country.
