New Study of Business & Occupation Tax Pyramiding

We’ve released the latest Chamberlain Economics study this week, which examines tax pyramiding from Washington State’s Business & Occupation (B&O) tax.

Gross receipts taxes like the B&O tax work like a sales tax, except they apply to business inputs as well as final goods. For a baker selling loaves of bread, the flour, electricity and packaging are all taxed first, then the loaf itself is taxed when sold to consumers. These extra layers of taxation get quietly built into the final selling price—something economists call “tax pyramiding.”

Here’s the abstract for the piece:

Using newly released 2002 Washington State input-output data, we provide the first estimates of tax pyramiding from the state’s Business & Occupation (B&O) tax since 2001. We find tax pyramiding is more severe than found by previous studies that did not distinguish between imported and domestically produced products. We find the B&O tax pyramids an average of 3.0 times, ranging from 1.6 times on architectural, engineering and computing services to 16.7 times on petroleum and coal products manufacturing.

A file with some tables of findings is here. If you’d like to learn how we can develop an input-output model like this for your own study, give us a call today.