Uncertainty of Bush-Era Tax Cuts Leaves States in Budget Limbo
In Iowa, for example, an expiration of all tax cuts would result in nearly $36 million in lost revenue for the current fiscal year, ballooning to $124 million in 2012 and $118 million in 2013, the Iowa Independent reported . If congressional Democrats have their way and just those cuts on the highest earners expire, the state will see only about a $6 million drop in revenue this fiscal year, followed by nearly $30 million in 2012 and 2013, the paper said.
Other states that allow taxpayers to deduct federal taxes paid from their state tax liability and stand to lose revenue include Alabama, Louisiana, Missouri, Montana and Oregon.
Generally, President Obama has proposed extending most of the Bush-era tax cuts that affect families making less than $250,000 ($200,000 for a single filer). But Republicans are pressing for an extension of all the tax cuts.
Meanwhile, Bloomberg reported that some Democrats in Congress doubt an accord on the Bush-era tax cuts can even be reached this year. "The big question mark is if Congress doesn't approve the tax cuts before the end of the year," says Ronald Alt, a senior research associate for the Federation of Tax Administrators, a nonprofit that represents state tax-collection agencies. He says the uncertainty could prompt investors to hurry and sell their stocks at the end of this year since a higher capital gains tax could go into effect if Congress doesn't act.