Correction on Corporate Tax Apportionment

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As a side note to my post about the effects of tax changes on the residency decisions of “star scientists,” I stated:

If corporate income taxes have a wage component when calculating the percentage for the particular state, the effect is even greater, and wages make up one-third of the calculation for apportioning the tax in Rhode Island.

This was correct for the time period described in the study, but a change in the law that went into effect this year changes it.  As of January 1, 2015, Rhode Island General Law 44-11-14 calls for the state corporate income tax to be calculated entirely on revenue: “total receipts from sales or other sources during the taxable year which is attributable to the taxpayer’s activities or transactions within this state during the taxable year.”

This being the case, according to the study’s authors, cutting corporate taxes in Rhode Island should have no effect on encouraging top-shelf scientists to move to the state or to remain, if they’re already here.  The reduction in the corporate income tax that the General Assembly passed as part of its fiscal year 2015 budget — spearheaded by then-new Speaker Nicholas Mattiello (D, Cranston) — was only a cut in the rate.  Changes in the law made it revenue neutral, so it wouldn’t isn’t clear whether it would have helped or hurt the scientists reflected in the study.



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