The article written by Ben Casselman and published in May highlights the problem which states face after the implementation of the federal tax cuts. The federal overhaul tax cut is taxed upon millions of American businesses and families. However, the implementation of the law is showing an unintended effect of raising the state-tax bite in each of the states which have an income tax. The state legislators and the governors are now figuring out how to adjust their codes for protecting their residents to pay more. Even though the Act signed by President Trump does not directly affect the budgets of states. However, it cuts the federal rates, which means more income is going to be liable to taxation. These federal changes are going to have big effects on the state budgets and the taxpayers.
According to the author, it is expected that most of the states will experience an unlegislated increment in their taxes. It has been analyzed that the residents of Minnesota are expected to pay more than $400 million in additional taxes to the state. It has raised concerns in the states, and the governors are finding ways of returning this amount to its people. This effect is not going to be expected in the nine states which have no broad-based income tax. However, other than these nearly every state is expected to feel the consequences. The federal overhaul tax has either capped or eliminated exemptions and deductions which have resulted in broadening of the income for some families. At the federal level, the changes in the legislation are mostly offset for quite some families by the increase in child tax credit and lowered tax rates. Some of the states have taken action already by using the extra revenue as one way of lubrication for the deal-making (Casselman, 2018).
Reference
Casselman, B. (2018, May 12). Federal Tax Cuts Leave States in a Bind. Retrieved from https://www.nytimes.com/2018/05/12/business/economy/state-tax.html?rref=collection%2Ftimestopic%2FIncome%20Tax
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