Tax Policy Center Blog: Get Rid of State Corporate Income Taxes

May 18, 2010

Professor Tracy Gordon at the University of Maryland argues on the center-left Tax Policy Center blog why we should "get rid of the state corporate income tax":

In 1983, Ronald Reagan proposed eliminating the federal corporate income tax. Last week, Michael Boskin took up the charge. I have another idea: Get rid of the state corporate income tax.

State corporate income taxes are lineal descendants of the federal version and share many of its flaws. They doubly tax income at the firm and individual level, penalize businesses that organize as corporations, and reward debt versus equity finance. They also are very sensitive to the business cycle, and tend to plunge when the economy sags.

But wait… there's more. Businesses often span many states. States differ in their rules for reporting and apportioning corporate income. Multi-state corporations hire vast armies of tax planners to exploit these differences.

Full piece here.

(Hat tip: Roth CPA)


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