ALEC Is Right | Tax Analysts

This segment is from David Brunori’s latest column, “Sales Tax Holidays and Planet of the Apes,” from Tax Analysts.  This is reproduced with permission from Tax Analysts – www.taxanalysts.com. Please do not further redistribute this or post online without permission from Tax Analysts.

ALEC is Right

By: David Brunori

My liberal friends hate the American Legislative Exchange Council (ALEC), seeing it as part of some grand Koch brothers-inspired conspiracy to make the rich richer and the poor poorer. I don’t hate ALEC, especially since it no longer focuses on social issues. And I think it’s correct on the tax and economics topics.

Recently, it featured a piece denouncing the unfair tax treatment among business groups. Some companies and industries get tax breaks, and some don’t. It all depends on who you know and whose palm you grease. Liberals and conservatives are both guilty of picking winners and losers in the marketplace. ALEC stated:

“Fair marketplace competition requires neutral treatment of businesses irrespective of their product or service, production methods, various financial features (i.e. capital intensity of production, labor intensity of production, use of shipping, use of subsidiary locations, etc.), or business organization. A simple test for sound tax policy in this regard is the following query: are entrepreneurs and business leaders making business decisions for tax purposes? If the answer for a state is ‘‘yes,’’ that state’s tax code is creating market distortions and an unfair competitive balance in affected marketplaces.”

ALEC is absolutely right. Its solution is to move away from income taxation and toward consumption taxation. You may or may not agree. But building a tax system that is as neutral as possible when it comes to business taxation is critical to sound tax policy.