fbpx

Latest Posts

Home

Facebook

Twitter

Search
About

Georgia and Idaho cut taxes following federal tax reform

The federal tax bill passed in December is already impacting tax policy at the state level. As Jared Walczak of the Tax Foundation writes,

Because state tax codes typically conform to many of the provisions of the federal tax code, the new federal law has broad-ranging implications for states. Many base-broadening provisions at the federal level flow through to states, which may experience higher collections due to some combination of the repeal of the personal exemption, the loss or curtailment of certain itemized deductions, the limitation of the interest deduction, and other changes. How these provisions affect revenues varies from state to state, but most states can expect higher collections because of federal tax reform.

Lawmakers in Georgia and Idaho decided to give that money back, and then some, in the form of rate reductions and other changes to their own tax codes.

In Idaho, where the State Tax Commission estimated that conformity with the new tax law would increase state revenue by $97.4 million, Gov. Butch Otter (R) recently signed House Bill 463, which:

  • Adopts a 0.475 percentage point across-the-board individual income tax rate cut;
  • Incorporates the new, higher federal standard deduction ($12,000 for individual filers);
  • Follows the repeal of the personal and dependent exemptions;
  • Creates a new $130 per child tax credit to offset the loss of the personal exemption; and
  • Reduces the corporate income tax rate by 0.475 percent.

The bill represents a net tax cut of $104.5 million, as it provides $201.9 million in tax relief while assuming $97.4 million in additional revenue due to federal conformity. (See previous coverage here.) Another pending measure would increase the child tax credit to $205, which would cost an additional $25 million. The bill has passed the House and is now awaiting action in the Senate.

In Georgia, where federal tax reform is anticipated to increase state revenues by $5.2 billion over five years, Gov. Nathan Deal (R) signed state tax reform legislation which phases the top individual and corporate income tax rates from 6.0 to 5.5 percent by 2020 and doubles the standard deduction (to $4,600 for single filers). The bill carries a fiscal impact of about $5.5 billion over five years and thus, as with Idaho’s bill, represents a modest tax cut, going slightly beyond the new revenue anticipated from conformity. (See previous coverage here.)

The federal tax bill provides states with an additional revenue buffer. It also offers an incentive to compete for additional domestic investment expected under the new law. It is already proving to be a compelling impetus for state reform. These pressures are sure to be felt in Minnesota, as well.

John Phelan is an economist at the Center of the American Experiment. 

Comments

Subscribe

Categories

Upcoming Events

  • Morning in Minnesota: St. Cloud

    Location: St. Cloud

    Sign up HERE! Courtyard by Marriott St. Cloud 404 West Saint Germain Street St. Cloud, MN, 56301 Please join Center of the American Experiment on Tuesday, July 21 for breakfast with Center policy fellow and education expert Catrin Wigfall as she explains K-12 education in the state and its persistent disparities despite decades of increased spending. Following her presentation, Catrin will lead a Q&A session. 7:30 AM Check In and Breakfast 8:00 AM Presentation 9:00 AM Conclude   Catrin Wigfall is a Policy Fellow at Center of the American Experiment. She is also the director of EducatedTeachersMN and EmployeeFreedomMN. Catrin’s…

    Register Now
  • Kristi Noem: The Courage to Reject a Shutdown

    Location: Online

    Sign up HERE! Join us Wednesday, July 8th for an interview with South Dakota Governor Kristi Noem over Zoom. In response to COVID-19, Noem defied the norm of a statewide shutdown and let South Dakotans choose for themselves what safety precautions to take. Tune in to this live online event to hear how Governor Noem preserved her state’s economy while still keeping citizens safe. Wednesday, July 8th at Noon CT Sign up HERE!  

    Register Now
  • Morning in Minnesota: Marshall

    Location: Marshall Golf Club

      Sign up for this event HERE! Please join Center of the American Experiment on Thursday, July 16 at Marshall Golf Club for a breakfast with Center economist, John Phelan, as he discusses Minnesota’s economic future. Following his presentation, John will lead a Q&A session. 7:30 AM Check In and Breakfast 8:00 AM Presentation 9:00 AM Conclude John Phelan is a graduate of Birkbeck College, University of London, where he earned a BSc in Economics, and of the London School of Economics where he earned an MSc. He worked in finance for ten years before becoming a professional economist. He…

    Register Now