Governors: Tax reform shouldn't make life harder for states

The National Governors Association is telling federal policymakers seeking tax reform not to infringe on states’ ability to run their own revenue structure.

In a new statement of principles, the governors association suggests that it wants to protect the current exclusion for municipal bond interest and the state and local tax deduction – both key provisions for state and local governments.

The bipartisan group of governors also urged federal officials to work with states as they strive to rewrite the tax code, and say that a tax revamp should not shift any costs or mandates on to states.

“Tax reform is a crosscutting issue with broad policy and revenue impacts for states,” Gov. Tom Corbett of Pennsylvania, a Republican, said in a statement.

“Decisions at the federal level have consequences for states. Therefore, no fundamental tax reform can succeed without an intergovernmental effort,” added Gov. Steve Beshear of Kentucky, a Democrat. “We also need to protect our ability to innovate because what we’re doing at the state level on tax reform can help drive what happens at the national level.”

The NGA’s statement is notable because of the wide ideological range of the country’s governors. Beshear and Corbett led the association’s tax reform task force.

The state and local tax break is one of the bigger ticket deductions, along with those for charitable giving and mortgage interest. State and local officials have also pushed to protect the municipal bond preference, which is one of the primary ways they finance infrastructure projects.

Both Democrats and Republicans in Washington have called for overhauling the tax code. But the two parties are still far apart over how much revenue the government should collect, which remains a big hurdle for coming together on a reform plan.

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