Strategic Nonconformity to the TCJA, Part I: Personal Income Taxes

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The dire revenue situation that COVID-19 has created for state and local governments is a well documented and looming reality for state legislatures. We and others have explored a variety of ways that states should respond to this crisis in prior articles as a part of Project SAFE (State Action in Fiscal Emergencies), an academic effort to help states weather the fiscal crisis by providing policy recommendations backed by research. We think, as do many others, that in the absence of sufficient federal action, the states should prioritize raising revenue through targeted taxes on economic actors that are best enduring the crisis, rather than cutting services needed to protect state economies or state residents suffering more from the crisis.

With those background goals, this article focuses on the ways that states could raise revenue by rethinking whether and how they conform to the Tax Cuts and Jobs Act. This article is the first in a planned two-part series, with this article focusing on strategic nonconformity with the TCJA for state-level personal income taxes, and with the planned second article in the series to then focus on strategic nonconformity with the TCJA for state-level corporate income taxes.