Cloning Complexity: Alternate Taxes and the Federal-State Relationship

Abstract:     
Congress has a long history of creating alternatives to the regular income tax. Initially the emphasis was on capital gains, income averaging and the self employment tax. Later legislation expanded the scope to AMT, lump sum distributions, the kiddie tax, IRA distributions and other realms. Most states derive their rate base in some way from the federal model. Consequently they must decide to either incorporate these features of the law or leave them out of the design. Tower, Hinson and Hall explore how these statutes contribute to the complexity of our federal tax system and detail how the states’ responses compound the problem. Remedies exist, and the study results point the way to a workable solution.

Keywords: Tax Reform, Personal Income Tax

JEL Classifications: H24

Accepted Paper Series