Yes, I know they’re calling it a “business net receipts tax” (BNRT), but a value-added tax is essentially what it is. And it’s the core feature of the long-awaited final report issued today by California’s Commission on the 21st Century Economy, which envisages a massive transformation of the state’s corporate and individual tax structures.

The BNRT “is designed to tax the value a business adds in its production of products and services in California at a relatively low rate,” the report notes. In simple terms, a business would calculate the tax by first aggregating its gross receipts from all sources, then deducting the cost of all purchases from other firms to arrive at a figure for net receipts. That figure multiplied by the BNRT rate — which the Commission suggests should be around 4 percent when fully phased in — gives you the BNRT liability.

This type of multistage tax has traditionally aroused deep suspicion among U.S. corporate taxpayers, with good reason, as I wrote here. The chances are good, though, that businesses will swing behind it this time, given the tempting prospect held out by the report of a complete elimination of the state’s corporate income tax (currently just below 9 percent) and the 5 percent statewide sales tax to boot (except for sales of gas and diesel fuels).

There’s another factor at play, too – the very novelty of the value-added approach (at least in the U.S. frame of reference) may be attractive to the growing number of California taxpayers who feel that a radical solution is needed for a system that’s admitted on all hands to be seriously broken. As the Urban Institute’s Rudolph G. Penner pointed out back in June in a paper advocating a national VAT, introducing a shiny new tax may be a better way forward than trying to raise rates or waging endless political battles to reform existing tax structures.

If the California BNRT flies, we’ll surely be hearing more calls for a value-added tax at the federal level. ###