WASHINGTON—In preparation for comprehensive federal tax reform in the 113th Congress, the nation’s governors today released Guiding Principles on Federal Tax Reform.

During the National Governors Association (NGA) State of the States address, NGA Chair Delaware Gov. Jack Markell and NGA Vice Chair Oklahoma Gov. Mary Fallin announced the formation of a Tax Reform Task Force (Task Force) to develop concrete suggestions for federal tax reform that are consistent with the intertwined interests of states and the federal government. The Task Force is led by Economic Development Committee (EDC) Chair Pennsylvania Gov. Tom Corbett and Vice Chair Kentucky Gov. Steve Beshear. Other members of the Task Force include Connecticut Gov. Dan Malloy and EDC Committee members Michigan Gov. Rick Snyder and Virgin Islands Gov. John deJongh, Jr.

The principles focus on federal deductibility of state and local taxes and the interest exclusion on municipal bonds because these topics are top priorities for states. In addition, the principles address the broader issue of ensuring that federal tax reform does not limit or preempt state authority over budget and revenue systems.

“Tax reform is a crosscutting issue with broad policy and revenue impacts for states,” said Gov. Corbett.  “A key issue for states is safeguarding public finance—notably tax-exempt bonds—because it is the primary method to finance infrastructure projects that create jobs and help grow the economy.”

“Decisions at the federal level have consequences for states. Therefore, no fundamental tax reform can succeed without an intergovernmental effort,” said Gov. Beshear. “Taxpayer fairness, deficit reduction and tax expenditures are all driving factors in tax reform, but 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 principles address categories including:

  • State sovereignty;
  • Public finance;
  • Federal reforms;
  • Proportionality; and
  • Economic growth and efficiency.

Visit Guiding Principles on Federal Tax Reform for more information.