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Understanding Business Taxes: Trends, Incidence, and Impacts on State Budgets

This overview provides insights into various aspects of business taxes, including definitions, trends in state business tax collections, and the implications of legal and economic incidence on consumers, employees, and owners. Key topics include the rise of gross receipts taxes, combined reporting practices, and recent changes in state taxation policies. The document explores challenges in tax administration and reflects on the impact of budgets and elections on business taxation, providing a comprehensive look at how these factors influence taxpayers and the economy.

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Understanding Business Taxes: Trends, Incidence, and Impacts on State Budgets

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Presentation Transcript

  1. Overview • What Are “Business Taxes”? • State Business Tax Trends • Budgets & Elections

  2. What Are Business Taxes? • Legal v. Economic Incidence • All Taxes Fall on Real People: Consumers, Employees, Owners • Legal Incidence Matters • Legal incidence affects economic incidence • Voters aren’t economists

  3. State & Local Business Taxes, FY06

  4. Business Tax Collection Trends

  5. State Business Tax Trends • Gross Receipts Taxes • Mandatory Combined Reporting • Disclosure • NCCUSL & UDITPA, Property Tax Reform, SSTP…

  6. Gross Receipts Taxes: Next Big Thing? • History • WA, WV (repealed 1987), IN (repealed 2002) • Delaware, Hawaii, New Mexico? • Today • New Jersey (sunsets after 7/1/2006) • Kentucky, Michigan, Ohio, Texas • Tomorrow: Illinois, ??? • COST Study & Policy Position

  7. Unitary Combined Reporting Rises Again • Combined Reporting for CIT • 17 states (including VT, 2005) • NY? (2007), MI (2008), WV (2009) • 2007 proposals: IA, MD, MA, MO, NM, NC & PA • MTC Model • COST Position • Combination (or Consolidation) for Non-Income Taxes: KY, OH, TX

  8. Disclosure • Reportable Transaction Statutes: • 2004: CA • 2005: IL, CT, MA, MN, NY • 2006: UT, WV • 2007: OR (MT legislation failed again) • MTC Model & “51-State Spreadsheet” • CBPP & “Full Disclosure”

  9. NCCUSL & UDITPA • National Conference of Commissioners on Uniform State Laws (NCCUSL) • Independent, lawyers appointed by each state • e.g., Uniform Commercial Code • Uniform Division of Income for Tax Purposes Act (UDITPA) • Promulgated by NCCUSL in 1957 • MTC requested review • Issues • Process (and MTC Compact)

  10. Property, Sales & Other Taxes • Personal Property / Franchise Tax Cuts • “Property Tax Reform” • Usually only residential real estate taxes • Usually shift taxes to business • SUT Base Expansion (IL, MI, NJ, PA) • SUT Increase (FL, ID, SC) • Attacks on SUT Refund Process (GA, TX)

  11. Tax Administration: COST Scorecard

  12. Budgets & Elections • K-12 education • Medicaid • Pension obligations & OPEB • Infrastructure • Balance of Power: Ds v. Rs

  13. PIT Liability / Withholding • Problems facing Taxpayers • Inconsistent standards for filing / withholding • Selective enforcement / compliance burden • 110th Congress: H.R. 3359 • 100% of wages taxable in resident state • 60 day de minimis threshold for nonresidents • All days taxable once threshold reached • Athletes/entertainers not protected

  14. Questions? Joseph R. Crosby 202/484-5225 jcrosby@statetax.org

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