The $14.5 billion represents what states lose due to exclusions, deductions, credits, and planning opportunities beyond what the federal tax system offers to corporations. That is, the federal government would collect that much more than the states do if it applied state corporate tax rates to the federal corporate tax system.
“If states plugged those leaks so that their tax bases were as broad and tax avoidance opportunities as few as exist at the federal level, they could significantly reduce their corporate tax rates without any loss of revenue,” Martin A. Sullivan, who conducted the analysis, writes in today’s State Tax Notes.
Moreover, the problem of states losing revenues due to excessive write-offs is getting worse, according to Sullivan, who is a contributing editor to Tax Analysts, the parent company of State Tax Notes.
He proposes that states reform their corporate tax systems in ways that would maintain current revenues while scaling back writes-offs, enabling states to cut corporate income tax rates without losing revenue.
To read Sullivan’s article, go to the Tax Analysts home page. To interview Martin Sullivan, e-mail Wendy Lewis or call 703 533-4404.
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