The first large area of conformity is federal definitions of individual income. Twenty-seven states begin with federal adjusted gross income (AGI) as their income tax base, six states use federal taxable income, and three states use federal gross income.
What does this mean in the context of federal tax reform? How states define their tax bases matters a great deal for potential revenue impacts.
Take, for instance, a state that uses federal taxable income or AGI as its starting point. It would likely see an increase in revenue under the House and the Senate tax plans
Due to the elimination of deductions under both plans, the federal tax base would become broader. Absent state-level changes, states would also have a larger tax base without correspondingly lower rates, leading to more revenue.