A prolonged economic slump, political challenges at the state and federal level and long-term structural budget issues continued to impact states in 2011. While the big picture seemed to stay about the same, significant changes in many of the states really did come about this year, inspired by governors and legislatures empowered to make some difficult choices, and buttressed by active judiciary systems willing to decide SALT matters of importance.
Some states made the decision to raise taxes; others tried reforming their tax systems. It is not surprising that the disparate tax policies tried by the states are outgrowths of their overall budget situations. For example, some states have been successful at substantially reducing their structural budget gaps, and as a result have not made major changes to their tax structures in the past several years.
In contrast, other states continued to struggle with closing their structural deficits despite modest improvements in revenue levels, in large part because of the effect of large pension obligations and other nonnegotiable costs. These states have tended to make more substantial changes to their tax structures. For a review of the most important SALT events in the past year,“SALT Top Stories of 2011,” a SALT alert developed by Grant Thornton’s SALT National Tax Office professionals.
Stay tuned for updates on what 2012 will bring! We want to hear what state and local tax developments affected your department this year. Post a comment below!