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1 Jared Walczak, Designing Tax Triggers: Lessons from the States 1 (2016)

handle is hein.taxfoundation/dstxtrig0001 and id is 1 raw text is: TAXS FOUNDATION FISCAL FACT No. 526 Sept. 2016 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non-profit organization. @2016 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Designing Tax Triggers: Lessons from the States By Jared Walczak Policy Analyst Key Findings * Tax triggers, a series of tax reductions or tax policy changes implemented over time subject to meeting pre-established revenue (or similar) targets, are an increasingly popular mechanism for phasing in tax reform measures subject to revenue availability. * Well-designed triggers limit the volatility and unpredictability associated with any change to revenue codes, and can be a valuable tool for states seeking to balance the economic impetus for tax reform with a governmental need for revenue predictability. Some triggers are designed to target a certain degree of revenue growth, while others operate within a framework of overall reductions or seek to maintain revenue neutrality. * Eleven states and the District of Columbia have turned to tax triggers to implement contingent tax rate reductions or other reforms in recent years, but the designs of these triggers have varied widely. * Baselines, benchmarks, exclusions, and implementation mechanisms all require careful consideration in tax trigger design. Well-designed triggers specify baseline revenue levels and establish meaningful benchmarks which mitigate the influence of year-over-year revenue volatility.