More on BNRT

We haven't heard much lately about the Business Net Receipts Tax (BNRT) proposal of last fall from the California Commission on the 21st Century Economy (COTCE). But, if you're still interested in the topic, Dr. Charles McLure of the Hoover Institution has an interesting article on it and its problems, published in Hastings Law Review. It has a great title - "The Business Net Receipts Tax: A Dog That Will Not Hunt." It was posted to the TaxProf Blog on July 2.

Dr. McLure concludes that "the BNRT is a dog—a dog that will not hunt; it should not be seriously considered, much less adopted." He notes that almost no one supports it including some COTCE commissioners, labor, the business community, public interest advocates, academics and some elected officials.

Various problems posed by the BNRT are pointed out and clearly explained. McLure also notes inconsistencies in how the tax work versus how it is perceived as well as just what type of tax it is. He notes some inconsistencies such as whether it is really intended to tax businesses on benefits they receive (which seems to be the case in that a company with only sales in CA but no property or payroll would be subject to BNRT) or taxing consumers on the benefits they receive (as a sales tax would). He notes the inconsistency of the COTCE statement: “The BNRT is designed to tax the value a business adds to its production of products and services in California
and thus attempts to approximate the benefits of services and programs utilized by the business.” If that were truly the case, the tax apportioned to CA would be based on payroll and property in the state rather than only sales in the state.

I highly encourage a reading of the article for a good understanding of the economics of the BNRT and its inherent weaknesses as a replacement for much of the state level sales tax, the corporate income tax and the high end of the personal income tax.