Changes in the federal tax structure have a significant effect on state income tax collections because most states base their tax structure on the federal tax structure.

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Most states use the federal tax code as a starting point for their own tax codes, so changes to federal tax law can have a ripple effect on state tax collections. For example, if the federal government lowers tax rates or increases deductions, many states will make similar changes to their own tax codes, which can impact state revenue.

Changes in the Federal Tax Structure Have a Significant Effect