Study Predicts Changes to Federal Corporate Taxes Will Grow State Tax Base 12 Percent

Chris Gaetano
Published Date:
Mar 6, 2018

While the Tax Cuts and Jobs Act slashed corporate tax rates at the federal level, the change could have the ironic effect of increasing them at the state level, according to the Wall Street Journal. The legislation, which the Republicans passed in December, cut the corporate tax rate to 21 percent and attempted to balance it by restricting many of the breaks companies had for years taken for granted. This had the effect of increasing companies' taxable income. Given that state governments did not change their own corporate tax rates in the meanwhile, a larger share of a company's income is now considered taxable at the state level. This is estimated to have the effect of growing the corporate tax base by an average of 12 percent over a decade, though there is wide variation depending on the corporate tax laws of each individual state: Arizona, Pennsylvania and Vermont are expected to see a 14 percent increase, while Mississippi is projected to be just 4 percent. The Journal, though, said that companies are unlikely to accept this tax base expansion quietly, and so might increase state-level lobbying efforts. 

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