Revenue Effect of Mandatory Worldwide Combined Reporting by State

Universal adoption of mandatory worldwide combined reporting (WWCR) in states with corporate income taxes would boost state tax revenue by $18.7 billion per year.

The revenue effects of mandatory WWCR would vary across states. We estimate that 38 states and the District of Columbia would experience revenue increases totaling $19.1 billion. The top 10 states by revenue potential are: California ($3 billion), Florida ($2.4 billion), Pennsylvania ($1.5 billion), Illinois ($1.2 billion), New Jersey ($910 million), Tennessee ($891 million), Virginia ($787 million), New York ($737 million), Georgia ($731 million), and Maryland ($717 million).

Among states experiencing revenue gains, those with especially narrow or porous corporate income tax bases would see among the largest revenue increases. This makes sense as these states are currently the most vulnerable to tax avoidance and are thus positioned to see the most dramatic changes from adopting the broader and less gameable tax base afforded by WWCR. Florida, for example, would see corporate tax revenues rise by more than 41 percent per year. Other notable percentage increases include Virginia (37 percent), Georgia (35 percent), Maryland (32 percent), Pennsylvania (31 percent), and Tennessee (26 percent).

Just five states would see revenue declines from adopting mandatory WWCR, and those declines are estimated to total $400 million.

These estimates are calibrated to 2025 corporate profit and tax levels. The actual, short-term revenue impact in 2025 would, however, likely be smaller because there would be residual effects from the old system that would make realizing the full revenue potential of mandatory WWCR a multiyear process. In states where large companies have been paying zero corporate income taxes for many years, for example, those companies have likely stockpiled net operating losses and tax credit carryforwards they will be able to use once implementation of WWCR leaves them with pre-credit tax liability.