Members of Congress aren’t the only ones addressing tax reform – state legislatures across the country are gearing up for what looks to be an active 2015 legislative session. After a wave of Republican victories in November, tax reform will be on the legislative docket in many states this year.
Practical and political considerations can make state tax reform a challenge. Take, for example, Wisconsin, which recently published a report that was the culmination of many months of public roundtables to review the impact of the state’s tax laws. Although the report identified numerous issues with the current tax law in Wisconsin, it offered “no suggestions for fixing the problems.” (See Billy Hamilton, Wisconsin’s Tax Cut Infomercial, State Tax Today, Jan. 5, 2015, available at Tax Analysts).
States to watch in 2015 include Nevada and Vermont, both of which are considering tax reform options to raise funds for education. Washington’s Democratic Governor Jay Inslee proposed a new carbon tax and other tax increases to fund billions of dollars in transportation improvements. Republican Bruce Rauner and Democrat Tom Wolf, the newly elected governors of Illinois and Pennsylvania respectively, both campaigned on pledges of tax reform and will certainly attempt to deliver on their promises. However, plans for reform might have to be put on hold while many states deal with immediate budget shortages. Plummeting oil prices will also cause several states to look for ways to replace revenue from extraction that was plentiful over the past few years.
Any 2015 reform will build upon the momentum of recent state legislation. In addition to sweeping tax reform legislation in New York in 2014, several other states saw reform action in recent years. North Carolina eliminated municipal privilege taxes and changed the treatment of NOL carryforwards. And we can’t forget Kansas, which will soon run out of money as it feels the fiscal impact of tax cuts enacted in 2012 and 2013.
Read more state and local tax news at the Sutherland SALT Shaker.