States eye revamping tax codes after federal action

WASHINGTON — The federal tax overhaul has caused a lot of angst in some state capitals, but leaders in many states also see a rare opportunity to revamp state tax codes, many of which haven’t been significantly changed in years.

The opportunity comes because the 36 states that use the federal code as a starting point for their own personal income taxes are in a position to realize a generous windfall because the federal law eliminates many tax breaks that states might not adjust.

That unexpected extra money has given states the flexibility to rewrite their tax codes without creating as many losers — and the accompanying political hardship — as most tax revamps entail.

Lawmakers in Iowa, which last changed its overall tax structure in 1997, are looking at broad rate changes and other rewrites. Colorado has been looking at sweeping tax changes since at least 1984, mostly directed at sales taxes, but broader changes are getting a push this year from the federal rewrite. Idaho considered significant tax changes in 2015, but fell short, and now lawmakers and the governor are talking up those changes again. Big tax overhauls also are on the table in Michigan and Missouri.

And in New Mexico, GOP Gov. Susana Martinez last week said it’s time for her state to tackle “the big one” — comprehensive tax reform.

“Let’s finally tackle comprehensive tax reform this session,” she said in her state of the state address, seizing on tax reform in the wake of the federal overhaul, like several other governors.