All Aboard the Tax Volatility Train
The passage of the 2017 Tax Cuts and Jobs Act was the beginning of tax change, not the end. It's likely to touch off plenty more changes ahead ... so be prepared to take advantage of them if you can.


For more than three decades, the American tax system has chugged along smoothly.
Dear states, please state the state of your state
While federal reform was the media’s primary focus, another major consequence was the automatic impact of the new federal laws on state income tax laws.
Across the country, many states will raise more revenue (i.e., individuals will pay more state income tax) as a result of the new federal tax laws. This is especially the case for states that allow a personal exemption deduction, since it was repealed as part of federal tax reform. Consequently, most states will need to proactively pass new laws that either agree or disagree with the new federal tax laws. In some cases, states may decide to reduce tax rates to avoid collecting additional revenue. Or maybe they won’t. Only time will tell.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Instead of minor tweaks to their tax laws, some states are following that same set of comprehensive tax reform tracks and considering significant changes to modernize their own tax codes. Iowa, for example, is debating its most comprehensive reform in decades.
As another possibility for reform, some states are trying to creatively offset the negative economic effects of the new federal laws. The primary cause for this effort is the $10,000 cap on deductions for state and local taxes. Taxpayers with high income and property taxes were negatively impacted by this limitation, and states such as New York, New Jersey, California and others are proposing to set up charitable funds where taxpayers can make donations (that would be fully deductible for federal income tax purposes), and then receive a credit back on their state income tax return. In essence, this allows taxpayers to substitute charitable gifts for income tax payments.
Taxes and creativity have long shared a productive history, and this effort is no exception. While this attempt to circumvent the new federal tax law may seem like an effort doomed to fail, New York recently passed such legislation, and other states are aggressively pursuing a similar option. Passing the new law is one thing, but it’s likely the IRS will contest this effort, and litigation in court seems inevitable.
Volatility Means Opportunity
Major tax reform is not simple, and when done this quickly, there are bound to be issues that pop up. The 2017 Tax Act is really the start, not the end, of implementing broader reforms that will resonate throughout the entire country, every state and every household. But where there is volatility there is opportunity. Just like stock market volatility can present compelling opportunities to buy and sell investments, tax volatility over the coming years will likely present compelling opportunities to restructure your tax profile to possibly improve your current tax situation.
All of the turnover is bound to be a bit confusing, even for the experts, so be sure that you’re working with your financial adviser and tax specialists to stay up to date new opportunities. If you are planning to meet with a planning professional to discuss how volatile tax laws will impact your future, consider and discuss the following questions:
- What is the longer-term impact of new tax laws on your finances?
- How can you leverage new tax laws to minimize the share of your retirement assets that federal and state governments own?
This material is not a substitute for professional tax advice or services, nor should it be used as a basis for any decision or action that may affect your financial situation. Before making any decision or taking any action that may affect your situation, you should consult a qualified professional adviser.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Brian Vnak is Vice President, Wealth Enhancement Group, advising clients on income, gift, trust and estate tax issues.
-
Donating Complex Assets Doesn't Have to Be Complicated
If you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Travel trends you can expect this summer
The Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
Donating Complex Assets Doesn't Have to Be Complicated
If you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Think a Repeal of the Estate Tax Wouldn't Affect You? Wrong
The wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term Care
Many people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Social Security Pop Quiz: Are You Among the 89% of Americans Who'd Fail?
Shockingly few people have any clue what their Social Security benefits could be. This financial adviser notes it's essential to understand that info and when it might be best to access your benefits.
-
Such Attractive Yields in High-Grade Munis Are Rare and May Not Last Long
According to this munis expert, the last time munis were this cheap was a brief period in 2023. If you kicked yourself for missing out then, you have a second chance now.
-
Financial Analyst Sees a Bright Present for Municipal Bond Investors
High-tax-bracket investors have an excellent opportunity to secure low-volatility, high-quality returns at yield levels rarely seen in over a decade.
-
I'm an Insurance Pro: How Not to Get Dumped by Your Insurance Agent
Your insurance agent or broker might show you the door if you do any of these five things. Being a good customer is about more than paying your bill on time.
-
Two Estate Planning Issues You Should Never Overlook
This estate planning attorney explains why proper asset titling and beneficiary designations make a big difference when it's time to transfer your wealth.