In my blog post from January 8, 2015, I outlined how the state fiscal crunch was going to catch up with the states and that tax reform would be needed to keep pace with the growing expenditures. Well, its started.
So far this legislative session, discussion drafts, proposed legislation, and comments in “state of the state” addresses have addressed tax reform head-on. For example, the Alabama Governor has proposed a series of income tax, sales tax, and tobacco tax measures to help bridge the state’s $700 million budget shortfall. The Pennsylvania Governor has proposed changes to increase personal income tax and sales tax, but reduce corporate income tax and property taxes. Nevada’s Governor has proposed legislation to impose a “hybrid” business tax system and move to a progressive fee structure away from a flat $200 per business license fee. Nevada does not have a corporate income tax.
In Georgia, legislation has been proposed to increase sales tax rates, expand the tax base to more services, remove the exemption from food, and impose a new 5% communications tax. Not sure if that will fly, but it does show that tax reform is being seriously considered in some corners. The state of Louisiana has called for a study to “overhaul” the states tax system. Many states are also considering adopting unitary reporting over the separate reporting for corporations doing business in their state.
How much progress is made this year on these initiatives is uncertain, but, as predicted, states are seriously looking at making changes to their tax structure and sales tax changes is a central part of these changes. Stay tuned!
Ned Lenhart, President