Recent Tax Developments
in Other States
Texas Taxpayers and Research Association
Annual Membership Meeting
Austin, Texas
October 11, 2007
Council On State Taxation
Overview
• What Are “Business Taxes”?
• State Business Tax Trends
• Budgets & Elections
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Council On State Taxation
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
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Council On State Taxation
State & Local Business Taxes, FY06
Business Tax
Collections
(billions)
% of Total
One-Year
Growth
Property tax on business property
$204.8
37.0%
9.0%
Sales & use tax on business inputs
124.7
22.5
11.6
Corporate income tax
51.8
9.4
23.1
Unemployment insurance
36.4
6.6
2.5
Excise taxes
25.7
4.6
4.7
Public utility taxes
24.5
4.4
-2.2
Business & corporate license tax
22.4
4.0
7.4
Individual income tax on business income
21.4
3.9
13.1
Insurance premiums tax
14.8
2.7
5.3
Other business taxes
27.0
4.9
25.2
$553.7
100.0%
10.2%
Total State & Local Business Taxes
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Council On State Taxation
Business Tax Collection Trends
State & Local Business Taxes (share of total S&L taxes)
60.0%
55.0%
50.0%
45.0%
40.0%
35.0%
30.0%
1980
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1985
1990
1995
2000
2005
Council On State Taxation
State Business Tax Trends
• Gross Receipts Taxes
• Mandatory Combined Reporting
• Disclosure
• NCCUSL & UDITPA, Property Tax
Reform, SSTP…
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Council On State Taxation
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– WA, WV (repealed 1987), IN (repealed 2002)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
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Council On State Taxation
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 NonIncome Taxes: KY, OH, TX
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Council On State Taxation
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”
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Council On State Taxation
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)
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Council On State Taxation
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)
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Council On State Taxation
Tax Administration: COST Scorecard
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Top States
Bottom States
Alaska: A
Arizona: A
Hawaii: A
Idaho: A
Iowa: A
Montana: A
South Carolina: A
Virginia: A
North Carolina: DConnecticut: D
Louisiana: D
Rhode Island: D
Alabama: CCalifornia: CTexas: CCouncil On State Taxation
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Council On State Taxation
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Council On State Taxation
Budgets & Elections
• K-12 education
• Medicaid
• Pension obligations & OPEB
• Infrastructure
• Balance of Power: Ds v. Rs
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Council On State Taxation
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
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Council On State Taxation
Questions?
Joseph R. Crosby
202/484-5225
jcrosby@statetax.org
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Council On State Taxation