Trump Tax Plan – Impact on Sales Tax?

There is a long way between a tax proposal, especially one on the scale proposed by President Trump, and adoption. However, when asked to consider whether it (current proposal) would likely have an impact on sales taxes applied by localities and states, our Sales Tax Experts provided the following thoughts:

In theory, if taxpayers lose the federal deduction for state and local taxes, they might pressure their local and state elected officials to lower those taxes because they suddenly “cost” more. On the other hand, what we’ve seen from some state officials, such as NY’s Governor Cuomo, is that they are saying they have to raise more money than ever to offset anticipated federal cuts. These competing interests may cancel each other out.

Realistically, it’s doubtful there would be an immediate impact because states have already budgeted for whatever revenue they anticipate. Even longer-term, it’s likely the usual trends will hold – states that want to lower taxes will do so for other reasons, and states that want to raise them will do likewise.

This will probably have a minimal effect on sales taxes in any case because most states have high enough income taxes that taxpayers who itemize take the deduction for those, rather than sales taxes. As with everything though related to tax… stay tuned.

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Sales Tax Experts

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