Tax, Incorporated: Dynamic Incorporation and the Modern Fiscal State

72 Pages Posted: 16 Mar 2022

See all articles by Adam B. Thimmesch

Adam B. Thimmesch

University of Nebraska College of Law

Date Written: January 21, 2022


The U.S. states nearly universally incorporate the federal tax code into their own laws, and that practice is widely regarded as highly efficient for states, taxpayers, and the federal government. But incorporation is not without cost, and recent federal tax legislation has exposed just how much states’ incorporation methods subject them to unnecessary revenue and policy volatility, especially in times of economic contraction. This Article challenges the existing understanding of tax incorporation through both qualitative and quantitative assessments of state tax incorporation in practice. The Article starts by explaining and evaluating how the costs of incorporation have risen in recent years through an evaluation of the impact of three recent federal bills on the states—the Tax Cuts and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the Consolidated Appropriations Act, 2021. The Article then reports and analyzes the results of a new 50-state survey of six different tax changes contained in those bills. That analysis shows that the form of state incorporation has been highly correlated with whether states ultimately conform to federal tax choices and aligns the state tax literature with the broader academic literature on the predictive power of defaults in legal design. The Article concludes with a series of policy recommendations drawn from states’ diverse practices that will help states to take better control of their own tax bases to more consistently fund the critical social services on which their residents rely.

Keywords: tax, state and local tax, incorporation, federalism, default, tax policy

JEL Classification: H2, H7, K34

Suggested Citation

Thimmesch, Adam B., Tax, Incorporated: Dynamic Incorporation and the Modern Fiscal State (January 21, 2022). Arizona State Law Journal, Forthcoming, Available at SSRN: or

Adam B. Thimmesch (Contact Author)

University of Nebraska College of Law ( email )

103 McCollum Hall
P.O. Box 830902
Lincoln, NE 68583-0902
United States

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