This week on the SALTovation podcast, we continue our conversation with Katherine Loughead, Senior Policy Analyst at the Tax Foundation, on various state and local tax issues. Katherine discusses the impact of the Tax Cuts and Jobs Act (TCJA), the trend of state tax reform and relief, and the challenges of tax policy in a complex political landscape. Katherine also touches on the importance of broadening tax bases and lowering rates, as well as the need for simplicity and transparency in tax laws.
Topics discussed in this episode:
- The TCJA eliminated the deduction for entertainment expenses and imposed limitations on state tax deductions, which has had a significant impact on high-tax states.
- Many states have been implementing income tax rate reductions in recent years to promote tax competitiveness and economic growth.
- New Mexico and South Dakota have broad sales tax bases, which has motivated them to reduce sales tax rates.
- The complexity and lack of transparency in tax laws can create challenges for businesses and taxpayers.
- There is a growing trend of states exploring new revenue sources, such as digital advertising taxes and wealth taxes, but it is important to consider the impact on economic growth and avoid picking winners and losers.
Quotables:
- "In an ideal world, if you want to really have an ideal tax system where you can create a lot of economic growth and have simplicity, you should do things this way. But it gets messy because politics is politics and so you have to work within that system and do the best you can. But we like to talk to lawmakers about how ideally tax codes should look like they were designed on purpose. But a lot of times people are coming in and out of the legislature and new governors have vastly different agendas.” -Katherine Loughead [01:37]
- "This has definitely been the biggest wave of state income tax reform and relief the U.S has ever seen. With so many states reducing their rates, and many times, not just once, but several states have come in and reduced their rates twice over the last three years, several times. A lot of them are prescribing future rate reductions and then when revenue continues to come in stronger than they expected, they're able to then adjust those and bring rates down a little bit lower.” -Katherine Loughead [07:29]
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