State General Business Taxation One More Time: Cit, Grt, or Vat?

We report on findings of the recently completed 2015 Connecticut State and Local Tax Study Panel with a focus on state wide general business taxation. The state's corporate net income (profits) tax violates many of the Palma adopted criteria for a high quality tax system. Drawing on the Panels technical research, the Connecticut Department ofRevenue Services is undertaking further study of the implementation of alternatives to the corporate net income tax, including a broad based/low rate gross receipts tax and a value-added tax, both of which would be imposed uniformly on corporate and non-corporate businesses alike. This paper reviews the merits and demerits of the alternative general business tax structures and presents research findings relating to a revenue neutral replacement of the net income tax with an "entity tax" based on gross receipts or value added.