State Tax Snapshot: Is Single-Party Control the Perfect Storm for Tax Reform?

When viewed through the prism of partisan control, the states and federal government have become mirror images of one another. Control of the U.S. House and Senate remains divided between Republicans-who control the House-and Democrats--who control the Senate. While the Democrats also have the White House, any hope meaningful tax reform will depend on partisan compromise.

Meanwhile, there are 36 states in which the executive branch and both chambers of the legislature are controlled by the same party, according to a chart compiled by Multistate Associates, a state government relations consulting firm.   

"Single party control is much more conducive to tax reform," Jeffrey N. Saviano, Principal, Ernst & Young LLP when discussing the 2012 election results at Bloomberg BNA's Tax Policy & Practice Summit.

Firmly in Democratic control is California, which began 2013 with a Democratic governor and super-majority of Democrats in both houses of the legislature. In his State-of-the-State Speech Gov. Jerry Brown (D) lauded the passage of a 2012 ballot initiative raising the income tax and sales tax and proposed enhanced tax credits for small businesses that hire workers.

But many more states are controlled by members of the Republican party, who have already begun firming up plans to alter tax codes. Some of the states poised for tax reform, according to a recent New York Times article, include Louisiana and Nebraska, where the governors have proposed replacing the corporate and personal income taxes with a higher sales tax.  Kansas governor Sam Brownback (R) has proposed extending a temporary sales tax increase to help pay for his plan to eventually end his state's income tax.

Policy experts might disagree over issues such as whether it is fair to subject lower earning individuals to higher sales tax rates. But the general consensus is that single-party control will likely pave the way to important business tax reforms in 2013.

By Steven Roll

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