Tax Policy Handbook for State Legislators

Changes in fiscal federalism over the 20^th century, recessions in the early and late years of the first decade of the 21^st century, and recent extraordinary budget pressures beginning in early 2008 have led lawmakers in many states to take a fresh look at their tax systems and consider whether they meet the current and future needs of their respective governments.  Since 2000, at least 37 states have convened tax study commissions—legislative, executive, private sector or some combination—to examine the state tax structure and recommend changes.

This report is designed to provide new legislators—or legislators who have limited experience in tax policy—with basic tools for evaluating various state taxes. It provides an overview of current state tax systems. It also evaluates each major state tax on seven criteria developed by a group of legislators, legislative staff and other tax experts convened by NCSL in the early 1990s. The seven criteria are reliability, equity, compliance, administrative issues, interstate and international competition, economic neutrality, and accountability.

This report includes:

• Principles for Evaluating State Tax Sources
• State Taxes in Principle
• Sources for More Information on State Tax Rates and Policies