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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and local
levels. We are a 501(c)(3) nonprofit
organization.
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Help from Our Friends:
What States Can Learn from Tax
Reform Experiences across the
Country
Key Findings
• State tax reform is a difficult process, but states like Utah, Indiana, and North
Carolina, and the District of Columbia, illustrate that reform can be successful
when it happens in a diligent and thoughtful way. Other states can learn much
from these experiences.
• All four of these jurisdictions lowered tax rates, broadened tax bases, and
simplified their tax structures, improving their competitiveness.
• Tax reform does not need to be a one-year effort. Indiana, for instance,
instituted its reforms over a five-year time frame.
• The use of tax triggers helped North Carolina and the District of Columbia
ensure that they had sufficient revenues to pay for government services.
• Kansas, however, illustrates an unsuccessful example of tax reform.
Dramatically cutting a state’s revenue source, without offsetting spending or
tax changes, puts the state’s fiscal health in jeopardy. These problems were
exacerbated by Kansas’s special pass-through exemption, which narrowed the
state’s tax base.
Nicole Kaeding
Director of Special Projects
Jeremy Horpedahl
Scholar, Arkansas Center for Research in Economics
FISCAL
FACT
No. 587
May 2018
A version of this article will appear in the forthcoming book The Citizen’s Guide to
Understanding Arkansas Economic Data from the Arkansas Center for Research in
Economics.
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Introduction
Reforming and modernizing a state tax code is a herculean task, but states considering re