I sat on a Senate sub-committee this morning that dealt with a bill that would create mandatory combined tax reporting for Iowa businesses.
This issue has been around for many years, the idea is very complex but the outcome is clear, it raises taxes on business. Since we have a vast black hole in the budget this becomes another idea of generating more tax revenue.
It was noted in the study prepared for COST by Ernst & Young LLP, “Understanding the Revenue and Competitive Effects of Mandatory Unitary Combined Reporting” One of the most controversial business tax policy issues currently debated by state legislators, tax administrators, and corporate taxpayers is how a State should determine the corporate income tax base for multistate corporations with multiple businesses and entities. One possible system—MUCR—arbitrarily assigns income to a State, negatively impacts the real economy, has an unpredictable affect on State revenue and imposes significant administrative burdens on both the taxpayer and State.
“A Maryland Business Tax Reform Commission subcommittee on February 1 discussed nitty-gritty details of a recent study that showed combined reporting would have netted the state between $109 million and $170 million in additional revenue in 2006.” (For the study, see Doc 2009-21865 or 2009 STT 190-19.) *Iowa Department of Revenue stated it could increase state revenues from $42-109 million*
Closer analysis of the data shows that retail businesses would have seen the biggest tax increases under combined reporting, revenue officials told the commission’s business tax reporting subcommittee.” (Maryland Business Tax Panel Analyzes Combined Reporting Study by Nicola M. White)
It was stated in the sub-committee that this would only increase the taxes on large corporations, Wal-Mart, 3M, John Deere, Well Fargo. It was made clear by one democrat, that this would actually help small business by making these larger corporations pay more taxes. I adamantly disagree! These larger businesses funnel down work to the smaller businesses or provide low interest loans or product to help them exist.
Iowa’s economy is struggling, unemployment is 6.7%. Rather than creating more ways to kill business, the majority party should be focusing on ways to create more jobs, helping the business climate, and lower the tax burden on all taxing bodies.