Heather M. Area (UC-Hastings; Google Scholar) presents Taxpayer Selections, Itemized Deductions, and the Relationship between the Federal & State Tax Programs, 13 Colum. J. Tax L. 1 (2021) (reviewed by Michelle Layser (Illinois; Google Scholar) right here) at SMU at the moment as a part of its School Discussion board collection:
Virtually 30 million taxpayers who itemized their federal deductions for the 2017 tax 12 months switched to the usual deduction for 2018. The provisions of the Tax Cuts & Jobs Act (“TCJA”) that led to this shift had been supposed to simplify the person revenue tax system. This Article’s empirical research of federal and state tax submitting information, nonetheless, demonstrates that the TCJA’s simplifying impact various state-to-state relying on whether or not a state obligated its taxpayers to make the identical selection for state tax functions (i.e., to itemize deductions or take the usual deduction) because the taxpayer made for federal functions. In states that obligated taxpayers to make the identical selection, taxpayers skilled at the very least some simplification, and tax administration by the IRS and state tax authorities grew to become materially simpler, though the IRS’s simplification profit was dampened to a point. In states that allowed taxpayers to make state tax selections that differed from their federal selections, the TCJA’s simplifying impact for a lot of taxpayers was largely illusory, state revenue tax administration really grew to become extra complicated, and a few tax enforcement prices had been, in impact, shifted from the IRS to state tax authorities. Thus, this Article’s research reveals that state-level guidelines about tax selections undermined the federal coverage purpose motivating the TCJA’s itemization-related modifications.
A taxpayer’s selection whether or not to itemize is only one of many tax elections explicitly offered to taxpayers. Accordingly, this Article’s research of taxpayers’ itemization selections additionally serves for example that illustrates a broader level—state-level guidelines about whether or not taxpayers should make uniform federal and state tax elections create vital, however beforehand underappreciated, interactions between the federal and state tax techniques. Policymakers can’t totally perceive the coverage implications of many federal tax regulation modifications except they respect these federal/state interactions. This Article helps policymakers achieve this.