I'm doing some reporting on corporate income taxes, and looking at why collections are shooting up so fast in almost all 50 states (See this NGA/NASBO study, page 35). The short answer is that corporate profits are way up. But when I spoke with Joe Huddleston, executive director of the Multistate Tax Commission, he added an interesting wrinkle.
Part of the answer, Huddleston said, has to do with the federal Sarbanes-Oxley law. Everyone knows that big business hates all the paperwork that goes along with Sarbanes-Oxley. What I'd never considered was that the paperwork might also translate into bigger state tax bills.
"Sarbanes has at least over the short term required a level of transparency in corporate transactions that we've never seen before," Huddleston told me, noting that legal tax evasion known as "tax planning" has slowed a bit. "Post-Sarbanes, those kinds of planning activities have become more difficult, and the ability of the states and federal government to look through these complex structures has gotten much better."
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