View Research by Author - Sally Wallace

Publications

State governments derive their revenue from a number of sources, with the individual income tax being one of the most important. Fluctuations in economic activity, particularly in the level of wages and capital income, will influence the level of revenue generated from the income tax. This paper analyzes the impact of recent trends in capital gains realizations on state income taxes. We look at the growth of capital gains relative to the overall tax base and find that the significant growth in capital gains in the 1990s has added to the fiscal pressure that states now face.

In computing taxable income (the base on which the federal income tax falls), individuals are permitted to deduct a series of expenditures. Itemized deductions from adjusted gross income are allowed for specific activities, catastrophic losses, or other taxes paid under the federal individual income tax system. Taxpayers compute their total itemized deductions, compare this total to the standard deduction allowed for their filing status, and subtract the greater amount from adjusted gross income.

Return to list of authors