Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, April 8, 1995 TAG: 9504100036
SECTION: NATIONAL/INTERNATIONAL PAGE: A-2 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
At the very least, whatever cuts are passed would send state officials scrambling to revise tax rates and state laws to avoid running in the red.
``When the feds make changes at a relatively late date ... it becomes very problematic for us,'' said Gary Clark, tax administrator in Rhode Island. ``They can deficit spend and we can't.''
Of all states, Rhode Island would be most affected. Its income tax is a simple percentage of residents' federal tax liability, and it would be the only state automatically hit by the contract's $500-per-child credit and $145 reduction in the so-called marriage penalty that affects two-earner couples.
However, an additional 35 states, including Virginia, and the District of Columbia will feel the impact to one degree or another, according to the Federation of Tax Administrators, which represents state tax collectors.
Most of them use the federal definition of adjusted gross income as the starting point for their own income taxes while others use taxable income, which is adjusted gross income minus exemptions and deductions.
Harley T. Duncan, executive director of the federation, estimated states would lose $50 billion over the next 10 years if they did nothing to offset changes in federal law.
And making such changes is not as straightforward as it seems, he said. Some, such as offsetting the effect of new federal depreciation rules for investment in new equipment, would require businesses to maintain two sets of books - one for federal taxes and one for state. Also, the more state law differs from federal law, the more a state must do its own auditing.
``The whole idea of conformity is to make it simpler so the taxpayer can avoid making an entirely new set of calculations,'' he said. ``For the state, it's simpler to administer and easier to enforce.''
by CNB