Turnover Taxes in the States

Report Outline
Turnover Tax Plans in State Legislatures
Gross Receipts and General Sales Taxes
Gross Income Taxes in Indiana and Hawaii
Economic Effects of Turnover Taxes
Special Focus

Turnover Tax Plans in State Legislatures

Gross Earnings Taxes in New York and Wisconsin

Vexing financial problems——chiefly the result of diminished tax yields during the business recession, mounting relief and social security costs, and increased state aid to local units——face nearly all of the 43 states whose legislatures are now meeting in regular session. About half of these states already levy either a retail sales tax or some type of business turnover tax. Legislatures in many of the remaining states are now considering taxes of this type either as new sources of general revenue or as a means of financing specific services——particularly old-age pensions. Pension schemes calling for a tax on all business transactions have been offered in a number of legislatures, and strong pressure is being exerted for their enactment.

One of the most far-reaching proposals advanced during the current legislative year is the recommendation of Governor O'Daniel of Texas that the state levy a transactions tax at the high rate of 1.6 per cent, in order to raise an estimated $45,000,000 a year——$25,000,000 for payment of old-age and teachers' pensions and aid to dependent children and $20,000,000 for replacement of the existing state property tax. In a message of January 18, O'Daniel urged submission to the voters of a constitutional amendment (1) guaranteeing payment by the state of $15 monthly old-age pensions, (2) levying a transactions tax of 1.6 per cent, and (3) abolishing the state ad valorem tax on property. He said:

I have made a diligent study of many suggested means of raising the necessary revenue to pay old-age pensions and I recommend that the money be raised by the levying of a 1.6 per cent transactions tax, because I believe this will give the broadest possible base …It is essential that the tax be most widely distributed, to the end that all citizens of Texas will be required to pay a part of this tax and that they will know that they are paying it. Such a tax will then serve as a brake against fantastic schemes which may be advanced in the future.