TAXES/TRUMP AS PRESIDENT: “State legislatures across the U.S. will be wrestling in coming months over how to respond to federal income-tax cuts that, paradoxically, could raise tax bills at the state level.
Many states typically follow the federal government’s rules for deductions, exemptions and other breaks. When federal rules change, as they did under the law passed late last year, state rules often do, too.
State lawmakers must choose whether to conform their systems to the new federal rules, cut tax rates to prevent rising tax burdens or spend potential revenue windfalls.
The outcomes will be determined in state legislative sessions now opening across the country…
The new federal legislation curtailed many tax breaks, such as individual deductions for mortgage interest and tax-preparation fees and business deductions for interest and entertainment expenses. While federal rate cuts more than offset those changes, state tax rates haven’t changed. So if states adopt the new, broader federal income tax base, it could mean higher state taxes for many…
Accepting federal definitions makes tax compliance easier, but states don’t have to use those rules. In the past, many have rejected federal bonus-depreciation rules, which let companies deduct most of the cost of capital investments such as heavy equipment in the first year. The new federal law allows full, immediate deductions for those same purchases, and states may again choose not to incorporate the change into their state income-tax systems.”
-Richard Rubin, “States Grapple With Federal Tax Cut That May Raise State Taxes,” The Wall Street Journal online, Jan. 23, 2018 05:30am