ABSTRACT
This chapter discusses the role of corporate income and franchise taxes in state tax systems. It presents the contribution that corporate taxes make to state revenues and emerging revenue trends. Policy makers are very concerned that state tax revenues grow in pace with personal income. Corporate profits before taxes, statistics reported regularly in the national income and product accounts, are a reasonable indicator of the income of the corporate sector. The role of the tax as a revenue generator is at odds with its highly visible role as an indicator of business climate. In most states, the starting point for the calculation of state taxable income conforms closely with the definition of federal income. The issue of nexus is a hot point of contention in state corporate taxation. In general, corporate franchise taxes are a tax on a firm’s assets.
