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Is There a Role for Gross Receipts Taxation?

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  • Testa, William A.
  • Mattoon, Richard H.

Abstract

States are showing renewed interest in using Gross Receipts Taxes (GRTs) as a method for taxing business. This paper discusses the advantages and disadvantages of GRTs along three dimensions—as a stand alone tax against standard tax principles, as a replacement for an existing business tax structure, and finally as a "fill–in" or corrective tax to rebalance a state’s tax system. In addition, the paper offers estimates of current state and local tax levies on business relative to estimates of the benefits that business receives through public services. The paper concludes that the GRT is not a first best option, and that an origin–based value added tax would be a preferred business tax structure.

Suggested Citation

  • Testa, William A. & Mattoon, Richard H., 2007. "Is There a Role for Gross Receipts Taxation?," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(4), pages 821-840, December.
    • Handle: RePEc:ntj:journl:v:60:y:2007:i:4:p:821-40
    DOI: 10.17310/ntj.2007.4.08
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    Citations

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    Cited by:

    1. Alberto Porto & Marcelo Garriga & Walter Rosales, 2017. "El Impuesto a los Ingresos Brutos y Alternativas de Reforma," Department of Economics, Working Papers 112, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    2. David Merriman, 2016. "What determines the level of local business property taxes?," Working Papers 16-2, Federal Reserve Bank of Boston.
    3. Elisabeth Gugl & George R. Zodrow, 2014. "The Efficiency of “Benefit-Related” Business Taxes," Working Papers 1406, Oxford University Centre for Business Taxation.
    4. Hansen, Benjamin & Miller, Keaton & Weber, Caroline, 2022. "Vertical integration and production inefficiency in the presence of a gross receipts tax," Journal of Public Economics, Elsevier, vol. 212(C).
    5. Jonathan Rork & Laura Wheeler, 2010. "An Exploration of Various Corporate Tax Structures in Georgia: Some Effects of Moving from Three-Factor Apportionment of Corporate Income to a Gross Receipts Tax," Chapters, in: Sally Wallace (ed.), State and Local Fiscal Policy, chapter 6, Edward Elgar Publishing.
    6. Alberto Porto & Diego Fernández Felices & Jorge Puig, 2019. "Análisis de las tasas municipales en la Provincia de Buenos Aires," CEFIP, Working Papers 034, CEFIP, Universidad Nacional de La Plata.
    7. Iswahyudi, Heru, 2020. "The problem of gross receipts taxes in Indonesia: Economic distortions and policy options," MPRA Paper 100617, University Library of Munich, Germany.
    8. Alberto Porto & Marcelo Garriga & Walter Rosales, 2017. "El Impuesto a los Ingresos Brutos y Alternativas de Reforma," IIE, Working Papers 112, IIE, Universidad Nacional de La Plata.
    9. Benjamin Hansen & Keaton Miller & Caroline Weber, 2017. "Getting into the Weeds of Tax Invariance," NBER Working Papers 23632, National Bureau of Economic Research, Inc.

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