The prospect of another round of state decoupling from recently enacted federal tax breaks feeds a growing concern about the apparent indifference of federal policymakers to state fiscal problems, several state tax specialists told BNA.

“Every time the federal government acts to expand or contract the tax base, the states must react by increasing their tax rates or decoupling from the federal provisions,” said Walter Hellerstein, professor of law with the University of Georgia. “It’s a messy complicated process. There’s something dysfunctional about the lack of coordination.”

The recent enactment of H.R. 5297, the Small Business Jobs and Credit Act of 2010 (Pub. L. No. 111-240), which includes an extension of 50 percent bonus depreciation and an increase in Internal Revenue Code Section 179 expensing limitations, leaves states with “two bad choices,” Hellerstein said. States can either “adopt bonus depreciation and face acute budget problems or … decouple and contribute to complexity and difficulty in administration.”

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