Gross Receipts Tax Plenty Regressive

Published February 27, 2007

To the Editor:

Douglas Kane claims gross receipts taxes are less harmful to low- and middle-income consumers, or “less regressive,” than sales taxes [Commentary, Feb. 27]. The opposite is true. A tax on gross receipts would apply to every business transaction, from farm to processor, to manufacturer, to distributor, to retailer, to the kitchen table. The resulting pyramid of taxes would dramatically increase the final price paid by consumers.

Taxing all business transactions across the board means companies with low profit margins (start-ups, retailers, and small businesses) suffer the most, since they are no longer allowed to deduct losses from their tax liability. Kane calls the gross receipts tax “new,” but in fact, this idea had its heyday in the lead-up to the Great Depression. That ought to raise a cautionary flag.

Trevor Martin ([email protected]) is director of government relations for The Heartland Institute.