Thinking Outside the Box?
Studies in Fiscal Federalism and State–local Finance series
Edited by Sally Wallace
Chapter 6: An Exploration of Various Corporate Tax Structures in Georgia: Some Effects of Moving from Three-Factor Apportionment of Corporate Income to a Gross Receipts Tax
Jonathan Rork and Laura Wheeler INTRODUCTION In 2004, the major tax on corporations in 40 of the 50 states of the USA was some form of a business tax. These taxes are often placed on corporate income as defined at the federal level with various modifications at the state level. Since 2002, however, four states have joined Washington in using some form of a gross receipts tax (GRT) as an alternative form of corporate taxation (Pogue, 2007). A GRT, often referred to as a turnover tax, is a tax placed on the value of goods and services sold. It makes no allowances for costs incurred by a firm and there are often no exemptions for type of sale. The GRT reached its heyday in the 1930s (Mikesell, 2007) and had seemed to fade away as a viable tax option. With the GRT’s recent reincarnation, discussions concerning the pros and cons of such a tax have become more frequent. Missing from these discussions, however, are any empirical exercises that can help shed light on these issues. By utilizing eight years of corporate tax return data in Georgia, we are able to estimate the winners and losers from switching to a GRT. In Georgia, all corporate filers who apportion their corporate earnings have to include their gross receipts; thus we have reliable estimates of gross receipts for over 200,000 filers during this time frame. By creating a revenue-neutral GRT, we are able to compare tax bills under Georgia’s corporate tax system...
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