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The Future of the State Corporate Income Tax: Reflections (And Confessions) of a Tax Lawyer
State Tax Notes (1999)
  • Richard Pomp, University of Connecticut School of Law
From the perspective of a tax lawyer, this article explains why the corporate income tax is unlikely to be a main source of increased tax revenue for many states in the short term. The three factors leading to this conclusion are (1) the exploitation of weaknesses in state tax structures by tax attorneys and accountants, (2) wasteful laws drafted by legislatures intent on providing tax incentives, and (3) surreptitious tax-planning techniques. The second and third factors are sometimes linked; provisions passed by legislatures trying to incentivize economic development may encourage and facilitate exploitative tax-planning techniques.  

This article questions massive tax incentives offered by states to attract corporations and spur economic growth, while recognizing the likely continuation of these policies for political reasons. The article further explains the advantages and disadvantages of the double-weighted sales factor, single sales factor, and evenly weighted formula adopted by UDITPA. The next section of the article argues in favor of combined reporting, which would eliminate certain tax planning techniques that result in a loss of tax revenue to the states. This section also explains the negative effects of state decisions to abandon worldwide combined reporting, such as the erosion of the state tax base. The article concludes by imploring state legislatures to amend and adequately maintain their tax structures, while recognizing the strong political headwinds against this type of tax reform.
Publication Date
March 22, 1999
Citation Information
Richard D. Pomp, The Future of the State Corporate Income Tax: Reflections (And Confessions) of a Tax Lawyer, in The Future of State Taxation (D. Brunori ed. 1998), reprinted in 16 State Tax Notes 939 (1999).