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Why Combined Reporting is Bad for Iowa:
-Multi-state corporate tax managers generally consider combined
reporting a negative factor when evaluating states for new or
expanded industrial plants.
-This tax increase would further stall economic development in
Iowa. Tax increases slow productivity increases that lead to
economic growth.
-Forty-one percent of manufacturers nationwide in 1998 reported they
would seek to lower their state and local tax burden when expanding
or relocating a facility. (G. Thornton Survey of American
Manufacturers, 1998).
-Combined reporting runs counter to the principle of simplicity.
The definition of a unitary business is a subjective determination.
-For small to medium-sized multi-state corporations, a move to
combined reporting creates a costly administrative burden in order
to comply with the complexities of combined reporting.
-Professor William Raabe, (of Samford University), stated in his
1999 report “when a fundamental change in the tax law comes about,
businesses and individuals change their behavior. Other factors
remaining unchanged, taxpayers will move home and jobs, offices and
plants, to find the lower tax liabilities to which they are
accustomed. Taxpayers disadvantaged by a move to combined reporting
are likely to move physical, financial, and human capital out of the
state, in managing their tax costs.”
-States with combined reporting discovered that business taxpayers
reacted negatively to the highly subjective and arbitrary
applications of the method’s rules by courts and administrators.
Since then, legislatures in most other states have unwound combined
reporting from their statutes. The device remains on the books
largely as an election at the taxpayer’s disposal, not as a required
computation.
-Where a move to combined reporting translates into a tax increase
for companies, they will mitigate these circumstances by moving or
passing on the costs to consumers.
Currently, sixteen states require combined reporting. Of the
states that border Iowa-- Illinois, Minnesota and Nebraska require
combined reporting. This fact puts Iowa at a competitive advantage
over those three states, since we do not currently require it.
Ways
& Means Update
Bills introduced in committee this week:
HSB 126- A study bill
modifying the road use tax fund allocations and providing an
effective date.
Bills passed out of
committee this week:
HF 216-
A bill for an act relating to motor vehicle regulation by the
state department of transportation, including motor vehicle
registration and titling, restricted and special driver's licenses
for minors, driver licensing, regulation of commercial vehicles, the
use of flashing lights on certain vehicles, citations for child
restraint violations, permits for vehicles of excessive height or
weight, procedures for motor vehicle dealers, and persons with
disabilities parking, and relating to refunds of taxes on motor fuel
used in taxicabs and buses that provide certain services. |
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