Federal tax revamp could force changes in Illinois law

Crain's Chicago Business reports:

Hearings, and maybe changes in state tax law, might be needed to avoid unintended negative consequences from—or take advantage of—the massive rewrite of federal tax law that was enacted just before the holidays.

Anderson Economic Group, a research firm with offices here and in Michigan, wrote leaders of three states—Illinois, Michigan and New York—warning that the loss of the individual exemption in the federal code could whack Illinois taxpayers by forcing them to pay more state income taxes. In Illinois alone, Anderson said, the tax hit could amount to $500 million a year. The firm is asking the state to make it clear that will not be the case.

Losing the personal deduction for state tax purposes really would hurt here because, while the federal code lowered tax rates, the rates didn't change in Illinois.

Officials in New York and California are considering ways to tweak their income taxes to allow them to remain fully deductible under the federal tax code, rather than be capped along with property and other local taxes at a maximum $10,000 a year. New York Gov. Andrew Cuomo has discussed converting his state's income tax into a fully-deductible payroll tax, with California lawmakers pondering whether to allow taxpayers to make a deductible charitable donation to the state in lieu of paying income taxes.

The struggles of Blue America....