Martin A. Sullivan (Tax Analysts), Can States Swap Sales Taxes for Income Taxes?, 138 Tax Notes 789 (Feb. 19, 2013):

Among the 44 states with significant income tax
revenue, only a few could repeal their income taxes,
replace the lost revenue with sales taxes, and keep
sales tax rates below 8% with their current
sales tax base (or, for those without sales taxes, with
a tax base equal in breadth to the average of other
states). They are New Hampshire, Alaska, Montana,
Hawaii, and Florida. Two more states, New Mexico
and Alabama, might also be able to repeal their
income taxes and keep sales tax rates below 8% if they aggressively expanded their sales tax
base. In general, states where a tax swap is most
likely have relatively low income tax collections
and relatively low sales tax rates.

If states already had broad-based consumption
taxes in place, a widespread phaseout of state
income taxes might be a real possibility. Concerns
about regressivity could be addressed with a sales
tax rebate to low-income households. But as long as
states rely on sales taxes that exclude most services
and include business inputs, the difficulties in most
states will be insurmountable and the desirability
questionable.

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