IN THE preceding chapter, business taxation was discussed mainly as it relates to the social control objectives of checking monopoly and recapturing monopoly profits. This chapter deals with problems of selection, particularly as between a cost tax and a net-income tax and as between a general business tax and a corporate business tax. It also discusses the application of business taxes to cooperatives and to publicly owned utilities, and finally, certain problems of business-tax administration, especially at the federal level. Certain special problems, particularly those connected with determining a business net-income base, are presented in Chap. VI.
Obviously there are many degrees of "grossness" among possible business income-tax bases. Gross income is usually defined to include all receipts without any deductions. The objection to this base is that as goods move from one processor to another, values are recounted at successive transfers. The amount of tax paid on goods by the time they reach the consumer will depend on the number of transfers involved in their preparation. Some of this tax can be avoided by the integration of industry, which eliminates transfers in the processing and distribution of goods. It has been suggested that "value added" might serve as a more suitable base than gross income. Under this procedure the cost of goods sold or materials purchased would be deductible. A business pay roll tax applies to a narrower base; it focuses upon one element