Andrew Young School

Proposals to substantially reduce or eliminate the state income tax and replace the lost revenue through a higher sales tax rate, an expanded sales tax base, or some combination of the two, are being considered in a dozen states, specifically Georgia, Hawaii, Idaho, Kansas, Louisiana, Missouri, Nebraska, New Jersey, Ohio, Oklahoma, Oregon and South Carolina (Hamilton 2012). While no state has fully repealed its income tax and replaced it with an expanded role for the sales tax, Oklahoma and Kansas have significantly reduced their income tax rates. In addition, proposals such as the Fair Tax (Boortz and Linder 2005; 2008) and the Flat Tax (Hall and Rabushka 2007) that call for substituting a broad-based national consumption tax for the existing federal income tax have been an important topic of on-going policy discussion and research.