Taxation-State and Local Commons^™

Turnover Taxes: Their Origin, Fall From Grace, And Resurrection, Richard Pomp

Faculty Articles and Papers

The turnover tax, a hallmark of developing nations and even once blamed for Spain’s decline, has made a comeback in the states, starting with Ohio.

A turnover tax is a gross receipts tax that is applied every time a good or service “turns over,” that is, every time the good or service transfers from one entity to another for consideration. The tax base is therefore turnover, and the measure of the tax is gross receipts.

In this article, Professor Richard Pomp examines the turnover tax’s deep roots dating back to ancient Athens, and tracks its course from the time the …

Resisting The Siren Song Of Gross Receipts Taxes: From The Middle Ages To Maryland’S Tax On Digital Advertising-Abstract, Richard Pomp

Faculty Articles and Papers

A turnover tax, more commonly known as a gross receipts tax, has a long and sordid history. The tax has ancient roots, first appearing when economies were primitive and underdeveloped, with few alternatives for raising revenue. A turnover tax makes no pretense of taxing profits, income, consumption, wealth, or other bases that have come to be accepted as legitimate around the world. Instead, it taxes business activity, and is fundamentally different in concept, and inferior to, either a well-designed retail sales tax or a value-added tax.

Economists throughout the ages have nearly universally condemned turnover taxes; some even blame the …

Responding To The Pandemic: A Case Study, Richard Pomp

Faculty Articles and Papers

This article describes how Connecticut, despite catching a fiscal break from the pandemic, has failed to seize the opportunity to enact meaningful reform targeted at its $90 billion debt.

The article begins by explaining why Connecticut fared well during the pandemic. Many wealthy taxpayers moved into Connecticut from New York City. The increase in their stock-market driven income taxes, as well the sales tax boost from secondary and tertiary purchases by homebuyers, has eliminated Connecticut’s short-term budget deficit. The State is sitting on a $3 billion rainy-day fund.

Next, the article examines several tensions between the democratic governor, Ned Lamont, …

Never Let A Good Crises Go To Waste, Richard Pomp

Faculty Articles and Papers

A problem with temporary tax study commissions is that by the time their findings are released, changes in the political environment may have rendered their suggestions worthless. Permanent standing commissions are needed. The temporary crisis of the current pandemic, an opportunity for tax reform, illustrates this point.

In this article, Professor Pomp argues for the creation of a permanent state body tasked with managing tax reform. It would perform research and analysis, educate legislatures about how current law operates, initiate proposals, and draft legislation. Being permanent, such a body would be proactive enough to respond to a temporary crisis.

In …

A Report To The Connecticut Office Of Policy And Management Regarding A Proposed Payroll Tax, Richard Pomp

Faculty Articles and Papers

This Report analyzes a 5% payroll tax that would be imposed on employers in the amount of the Connecticut wages they pay to their employees. An anticipated response to this tax is that employers would shift this tax to their employees by reducing their wages by the cost of the tax. In this case, there would also be a reduction of the existing personal income tax rates by 5 points, but only if there were a reduction in wages. The effect would be to eliminate the 3% and 5% brackets, and would only be applicable to wages; it would not …

Things Not Worth Doing Are Especially Not Worth Doing Poorly: The Maryland And Nebraska Taxes Of Digital Advertising, Richard Pomp

Faculty Articles and Papers

In this article, Professor Pomp reviews and critiques the recent attempts by Maryland and Nebraska to tax digital advertising.

Maryland has proposed a gross revenue tax on digital advertising with a progressive rate structure. Though the tax is based on Maryland revenue, the rate is determined by global revenue. While resembling an exemption with progression approach, commonly utilized in income taxes to assess a taxpayer’s ability to pay, gross receipts taxes like this one are not concerned with ability to pay. And the approach discriminates against taxpayers engaged in interstate commerce, since out-of-state business activity leads to a higher rate …

Myth Vs. Reality: Airbnb And Its Voluntary Tax Collection Efforts, Richard Pomp

Faculty Articles and Papers

In this report, Professor Pomp debunks the claims presented in several reports commissioned by the American Hotel and Lodging Association (Hotel Association). Despite hotel profits reaching all time highs, the Hotel Association has continued to attack Airbnb.

Part I serves as an introduction to Airbnb and its solution to an administrative challenge confronted by tax jurisdictions. Airbnb operates a platform that links guests looking for short-term rental opportunities with hosts offering such services.

There are potentially millions of hosts who are unaware that they are subject to municipal taxes on short-term rentals. Municipalities lack the resources required to track down …

Modernizing The State Corporate Income Tax: Market-Based Apportionment For Content Providers, Richard Pomp

Faculty Articles and Papers

This Issue Paper discusses how technology has overtaken the traditional ways the states tax the income of “content providers” that operate broadcast and cable networks, sell advertising, and produce content such as movies and television programs. This content is licensed at wholesale to distributors and along with the advertising, is watched by customers of these distributors on their televisions, smart phones, tablets, gaming consoles, and computers— either in their homes or on the move.

The so-called “model” for taxing multistate businesses like content providers--the Uniform Division of Income for Tax Purposes Act (UDITPA)--was developed in 1957 and has been adopted …

Report Of The Hearing Officer, Multistate Tax Compact Article Iv [Uditpa] Proposed Amendments, Richard Pomp

Faculty Articles and Papers

The Uniform Law Commission (ULC) promulgated its model Uniform Division of Income for Tax Purposes Act (UDITPA) in 1957. UDITPA provides a model law for dividing the income of a multistate corporation among the states in which it is doing business. UDITPA is incorporated into the Multistate Tax Compact, which is administered by the Multistate Tax Commission.

UDITPA has never been amended since its original adoption more than fifty years ago. The ULC attempted a revision in 2006 but abandoned it in response to business pressures. The MTC stepped into the vacuum and undertook its own reforms. It proposed five …

Taxing Smarter And Fairer: Proposals For Increased Accountability And Transparency In The Connecticut Tax Structure, Richard Pomp

Faculty Articles and Papers

The Connecticut tax structure contains glaring defects, especially in the corporate income tax, which have allowed it to hemorrhage to a point where, for some of the largest corporations in the state, it is essentially a voluntary tax. The corporate income tax must be revitalized in order to reduce the massive losses that have resulted from both an aged tax infrastructure and the Legislature’s failure to equip the Department of Revenue Services with a statutory regime to slow the erosion of the tax base.

This Report discusses how and why Connecticut’s rickety tax structure is resulting in a loss of …

Corporate Tax Policy And The Right To Know: Improving State Tax Policymaking By Enhancing The Legislative And Public Access, Richard Pomp

Faculty Articles and Papers

This report examines the need for disclosure of state corporate income tax data in order to facilitate more thoughtful tax policymaking as well as accountability and openness in government. While disclosure of federal income tax data has been resolved by the SEC’s required disclosures of public corporations, the only states that have laws mandating disclosure of information relating to their state’s income tax are Arkansas, West Virginia, and Massachusetts.

Firm-specific disclosure of corporate tax information at the state level is necessary for informed tax policy, essential to public understanding of corporate tax reform issues, and will complement SEC mandated disclosures. …

State Tax Reform For The Eighties: The New York Tax Study Commission, Richard Pomp

Faculty Articles and Papers

No abstract provided.

Federal Tax Concepts As A Guide For State Apportionment Of Dividends, Richard Pomp, Rebecca S. Rudnick

Faculty Articles and Papers

In ASARCO, Inc. v. Idaho State Tax Commission, the Supreme Court rejected Idaho’s definition of income, and limited the apportionability of dividends, interest, and capital gains. The Court held that a unitary business relationship did not exist between ASARCO and the dividend payors, but did not address whether such a relationship was a sufficient precondition or a necessary one.

This article addresses two federal tax doctrines that may provide insight into state taxation of dividends: (1) the “effectively connected” doctrine, and (2) the Corn Products doctrine. The article first provides a detailed examination of the facts in ASARCO, and discusses …

Can Tax Policy Be Used To Stimulate Economic Development?, Richard Pomp, Sandra Kanter, Kenneth D. Simonson, Roger Vaughan

Faculty Articles and Papers

These remarks were prepared for the Multistate Tax Commission’s State and Local Business Tax Symposium at American University. The panel addressed the pressure on state and local officials to adopt tax incentives to prevent businesses from leaving their jurisdiction or to attract new business. The panel questions whether firms actually choose their location based on state and local taxation, or whether tax incentives are simply a result of political pressure. Further issues raised were the effect of property taxation on the price of land and whether revenue forgone by tax incentives is proportional to the benefits received. Equity concerns are …

What Is Happening To The Property Tax?, Richard Pomp

Faculty Articles and Papers

An important change may be taking place in the distribution of the property tax. Residential property is seemingly paying an increasing share of the property tax, whereas commercial, industrial, and agricultural properties are paying less.

This article identifies the trends responsible for the potential property tax burden shift. Numerous property tax reforms may have contributed to the erosion of the property tax. These reforms include: (1) administrative improvements, (2) modern assessment tools to achieve uniformity, (3) attempts to equalize assessments, (4) property tax abatements, (5) exemptions for personal property, and (6) exemptions for livestock and farm equipment. The article proposes …

Tax Exempt Property And The Cities: Striking A Balance, Richard Pomp

Faculty Articles and Papers

All states grant a property tax exemption to certain non-profit organizations. Tax-exempt property further erodes many cities’ tax bases. Connecticut has recently adopted legislation in an attempt to solve this problem. This legislation, proposed by Professor Richard D. Pomp, provides municipalities with state subsidies for property taxes lost due to tax-exempt hospitals and colleges.

This article is the reprinted testimony of Professor Pomp before the Connecticut State Finance Committee. Professor Pomp outlines the proliferation of tax-exempt property in Connecticut, which contributes to forgone revenue for major cities. Tax-exempt property not only results in diminished tax revenue, but also imposes additional …

Discussion Draft Prepared For The Greater Hartford Chamber Of Commerce's Task Force On Tax Exempt Property, Richard Pomp

Faculty Articles and Papers

This Discussion Draft explains analyzes various approaches for municipalities to obtain revenue from tax-exempt property, and was prepared for the Hartford Chamber of Commerce’s Tax Force on Tax-Exempt Property.

It begins by examining the implementation of service charges, such as charges for various municipal services, in lieu of a traditional property tax. Because measuring actual consumption of services like fire and police are impractical, alternative approaches to approximate a user charge are explored.

The Discussion Draft then examines state payments to municipalities under a PILOT (payment in lieu of taxes) which Connecticut was using to offset municipal losses due to …