Harmful Gross Receipts Taxes
In my recent sales tax study, it was noted that gross receipts taxes are the worst form of sales taxes since it maximizes the economic distortions due to tax pyramiding (which leads to paying a tax on a tax).
A new study by the Tax Foundation further explores the negative economic consequences of gross receipts taxes. Continue reading for the Executive Summary.
Executive Summary
State governments have traditionally raised revenue from business by taxing corporate income. But in recent years the growing difficulty of administering state corporate income taxes has prompted a search for alternative ways of taxing companies. This search for new business taxes has ironically sparked a resurgence in one of the world’s oldest broad-based tax structures: the gross receipts tax, also known as the “turnover tax.