Business Tax Reform

By Tom Campbell

Multi-state tax rules should encourage hiring in California. Many companies do business across state lines. They have income from many sources. Each state wants to tax that income. Some states simply apply a percentage formula, depending on how much of the business' product is sold within the state. For agriculture, extractive industries, thrift and banking industries, California uses a more complex formula. It includes reference to the numbers of employees in California as opposed to other states, the amount of property (including real property) owned in California as opposed to that owned in other states, and the amount of sales made in California. Since California's business tax is high, 8.86%, the 8th largest among the 50 states, the result of using this three-factor test is to create an incentive for companies with operations in many states not to expand employment in California. California should go to the single-factor test, using sales, for all businesses, as other states have done. This removes the tax penalty for expanding employment, or building plants, within California.

Here are the states that have already made this kind of change: New York, Texas, Massachusetts, Illinois, Oregon, and Arizona.

The above are statements on several public policy issues drafted by Tom Campbell, former US Congressman, former California State Senator, former Director of Finance for California, and currently Interim Chairman of the Common Sense Party. They are meant to initiate consideration of several important issues; they are not the official views of the Common Sense Party. Please feel free to submit your own thoughts on these issues on the Open Policy Discussion Page.