Both red and blue states will react to the new limits on State and Local Tax (SALT) deductibility for federal taxes. Red states will continue to reduce the top individual rates; blue states will slow or stop planned increases.
A re-elected Republican Congress would, in 2019, enact tax reform 2.0 that will limit or end tax deductibility of state and local corporate income taxes to pay for further rate reduction below 21%.
Look for both the red and blue states to drop their state corporate income taxes. And all states will test the limits of the Wayfair decision.
The Wayfair decision allows cross-border taxation without physical nexus — personal and corporate income taxes as well as sales taxes.
Lastly, North Carolina remains the model for red states establishing “triggers” that automatically cut tax rates when revenue growth hits a certain goal.