#TBT to Some Vintage Tax Foundation Research That is Even More Important Today

June 02, 2016

Happy Thursday! I found some cool items in the Tax Foundation archives that can still teach us a lot of important lessons today. Here’s a few choice ones:

Economists Agree: Gross Receipts Taxes Belong in the Dustbin of Tax History (2007): In this post, Andrew Chamberlain explains how gross receipts taxes are an old and resoundingly discredited idea. From the post:

Just as long-extinct species get few mentions in modern zoology texts, few public finance textbooks even mention gross receipts taxes anymore. They're typically treated as a historical curiosity, mentioned only as an example of bad policy from a dimmer intellectual age on par with mercantilism, cost-push inflation and Peter the Great's beard tax.

This is especially prescient today as Oregon voters are poised to consider a very hefty gross receipts tax this November that would burden consumers in the state with the highest rates in any state.

Viscusi on Paternalist Policies (2007): This post highlights an interview with prominent economist Kip Viscusi on using tax and regulatory policies to shape behavior:

If you restrict people from taking jobs, if you restrict the foods that they eat, if you place limits on how much they can weigh, all of these things will reduce their welfare as they perceive it. The proper role of government is to give people enough information so they can make reasonable decisions, and after that step aside and allow them to make their own choices.

Today, this is especially important as the FDA has recently enacted regulations that will severely limit consumer choice in the market for vapor products and cigars, and the Philadelphia mayor is peddling a tax proposal to tax soda at 48 times the rate of beer.

Iowa Candidates Propose Corporate Income Tax Cuts (2010): My colleague Joe Henchman here comments on the Iowa gubernatorial primary, where then-candidate, and today-governor Terry Branstad (R) proposed cutting the corporate income tax rate from 12 percent to 6 percent.

Nationwide, states' reliance on the corporate income tax has been falling over time, from a high of 9.5% in 1977 to about 5 percent today. The nightmarish administrative complexity associated with apportioning income from multistate companies to the various states, combined with a mess of inconsistent apportionment and nexus rules designed by each state to maximize tax revenue, results in a tax that raises very little revenue while imposing enormous costs on the economy.

Iowa has been a leader in other tax reforms and has a chance to be a leader here as well.

This year, we released a comprehensive review of Iowa’s tax system with a menu of tax reform options for state officials to consider. Among them are options for lowering the state’s 12 percent corporate income tax to as low as 3.9 percent. It’s getting a lot of great coverage from local media here, here, and a must-read op-ed by my colleague Jared Walczak here!

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