Is There a State Tax "Fiscal Cliff"? | AccountingWEB

Is There a State Tax "Fiscal Cliff"?

Everywhere you look today (Internet, television, radio, etc.), everyone is talking about the "fiscal cliff" and how action must be taken quickly to prevent falling over the edge (into recession).

Regardless of what action or solution you think our country should take, we can probably all agree that action should occur.  My question is, how will this impact state and local governments? 

States have dealt with their own "fiscal cliffs" over the past few years.  However, unlike the federal government the states have had to balance their budgets each year - whether that meant raising taxes or cutting spending.  The states did what had to be done.  Now it is time for the federal government to respond. 

If the federal government makes tax law changes, what will the states do?  Will those changes negatively impact state government budgets causing the states to look at tax reform as well?  As the states have done over the past few years, will states be forced to increase taxes or cut spending?  If I had to guess, I would say that some states will create "real reform.'" Some states may increase taxes.  Some states may actually decrease taxes due to budget surpluses.

Like the saying goes, "the only constant is change and change is inevitable."  Hence, do as the Marines say, "Improvise. Adapt. Overcome."

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Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website:

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Because state and local taxes are deceptively simple and endlessly complicated.

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