From my AEI colleague Alan D. Viard:

On November 12th, the Supreme Court heard oral arguments in Maryland Comptroller v. Wynne, in which a Maryland couple, Brian and Karen Wynne, contend that their state's income tax treatment of income earned across state lines discriminates against interstate commerce. Like other states with income taxes, Maryland taxes residents on income earned both in and out of the state and also taxes nonresidents on income earned in the state. But, one aspect of Maryland's policy is uniquely severe. Other states offer residents a full credit for taxes they paid to other states on out-of-state income, up to the amount of tax they pay at home on that income. Maryland offers only a partial credit, forcing residents to pay some tax at home on out-of-state income, no matter how much they paid to the states in which they earned the income.

It can be tricky to predict the Court's decisions from the oral arguments. But, several Justices' comments and questions suggest that there may be a majority willing to uphold the Maryland tax system. They may even accept Maryland's sweeping argument, supported by the Obama administration, that states can stop offering any credits at all if they wish. That would spell trouble for the national economy, which depends on the free flow of labor and business income across state lines.

The day before the Court heard the case, Dr. Viard laid out the issue in an op-ed.

If the Court rules in Maryland's favor, it will pave the way for states to put heavier tax penalties on Americans who earn income across state lines, disrupting the free working of the open national economy on which our prosperity depends.

He and two other of my AEI colleagues, Kevin A. Hassett and Alex Brill, wrote an amicus brief outlining their thoughts in detail. In it, in the words of Viard, they urge "the Court to reject" the "dangerous position" held by Maryland and the Obama administration.

Maryland and the administration claim that states don't have to give any credits at all for taxes paid to other states. The way they see it, even Maryland's partial credit is a favor that the state legislature can take away any time it pleases.

Viard also held a conference at AEI on the subject, which you can watch here.

Will the Court get it right? Dr. Viard concludes:

It will probably be at least a few months before the Court decides the case. Right now, though, things don't look promising for neutral tax treatment of interstate income.

-- Michael R. Strain is a resident scholar and economist at the American Enterprise Institute. You can follow him on Twitter at

The Turkish Petroleum Law, a touchstone for goals of attracting foreign investors to Turkish petroleum industry entered into force on 11 June 2013 and has been introduced as a revolution in oil and gas industry as it was leveling the playing field for foreign investors and removing the privileged rights of the state company.

However the expectations in taxation of income remain unchanged contrary to the expectations during the draft law and the sum of the income tax deductions on net income on behalf of the petroleum right owners is set not to exceed 55 percent. This was actually the result of animadversions of some environments saying that there will be considerable tax loss if it is applied not to exceed 40 percent and the parliament decided to remain it unchanged.

Apart from this a new type of incentive by means of deduction has been provided to limited liable tax payers that did not exist during the former law. Accordingly, the limited liable tax payers are allowed to deduct 5% of their taxes on payments made from their self-employment income.

The law also defines the taxation regime for joint business activities of petroleum right owners saying that they are subject to taxation separately even they established a partnership for conducting petroleum operations.

In taxation of the petroleum operations of foreign companies, article 3/3 of the Corporate Tax Law, saying that the revenues and profits derived from operations of the foreign companies through their permanent representatives or office in Turkey are defined as the revenue in limited liable taxpayers, is not applicable for foreign petroleum operation even they derive revenue in same way.

Under new Turkish Petroleum Law, the revenues derived from production in return for the capital corresponding to the investment for operations of the foreign limited liable tax payer holding petroleum rights is also amortizable until regaining the capital amount to be calculated on the current exchange rates. This shall not apply for the royalty.

Expenses of exploration, relinquishment and drilling and incidental drilling costs that are not productive shall be capitalized discretionary providing those items are approved by the Ministry of Energy and Natural Resources. The costs of economic values and the expenses to achieve the economic value made by the petroleum right owner together with installments shall either be amortized or recorded as capitalized excluding the costs and expenses of exploration, incidental drilling and drilling of wells. The amortization ratios are determined separately for each petroleum field by the Ministry of Energy and Natural Resources and the Ministry of Finance jointly taking the reserve conditions into account.

The import or delivery of all materials, equipment, fuel and land, sea and air transportation vehicles particular to petroleum affairs and providing they are approved by the General Directorate of Petroleum Affairs are exempt of custom duty and the conducted transactions and issued papers related to those are exempt of charges and duties under Turkish Petroleum Law. In former law the equipments were not counted as subject to the exemptions however the new law clarified it distinctively and put an end to discussion about interpretation of the law. However the materials required for construction, erections and the operation of the building services and those required for administrative activities are not allowed the exemption. Drilling towers and equipments obtained in this respect are also allowed to be used for geothermal activities providing the application of petroleum right owner and approval by the Ministry of Energy and Natural Resources. The materials approved by the General Directorate of Petroleum Affairs and imported in this respect are also not subject to conformity assessment of Turkish Standards Institute. The aforesaid tax exemptions continue even if the materials are transferred between petroleum right owner to be used for petroleum operations however this again requires permission from General Directorate of Petroleum Affairs. In cases where the materials are transferred for non petroleum operations purposes and for use or sale in Turkey, all applicable taxes effective on transfer date are applied during the importation and usage however in transfer of materials having less than one year economic life the values of the materials are determined at the time of transfer or exportation.

The petroleum right owner whom imported or transferred these materials does not have the possessory rights of the materials unless ten years period has been passed commencing the date of the clearance of the materials and all imported materials to be used for petroleum operations are allowed to be exported with the permission of the General Directorate of Petroleum Affairs.

As per the requirement of the Turkish Petroleum Law the materials imported to be used in petroleum operations, cash funds and other assets are registered by the General Directorate of Petroleum Affairs and petroleum right owners are only allowed to transfer their cash fund and rights thereto and other assets including the capital assets to abroad providing that they reserve the sum required for the payment of any outstanding taxes, duties, fees, rentals and Royalties and upon application to the General Directorate of Petroleum Affairs.

The petroleum right owner, at any time, has right to request for transfer that will be set off against its capital however the transfer of the other transferrable net assets is possible at the end of the three months period of current year upon completion of the transfer of the capital. A petroleum right owner is also free to keep the foreign currency generated from the export of the petroleum in abroad. This amount is subject to offset against the capital imported to Turkey and the transfer of net values exceeding that amount.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Governor Brian Sandoval has tapped the director of the Nevada Department of Taxation to be one of the top deputies on his personal staff.

Sandoval announced Monday that Chris Nielsen will work as his deputy chief of staff starting on Friday. Hell replace Jackie Bryant, who is leaving to work at the Washoe County District Court.

Nielsen has served in the attorney generals office and as a legal adviser to former Gov. Jim Gibbons before moving to the taxation department.

Sandoval said Nielsen will be a strong addition to his administration heading into the upcoming legislative session.

The popular governor has vowed to lead an effort to revamp the way state services are funded, but hasnt said whether a budget hell unveil in a few weeks will involve new taxes.


Tax systems are generally evaluated on the basis of a number of criteria, especially in regard to equity or the fairness of a particular tax system as well as the so-called allocative efficiency of the tax itself, that is, how the tax affects individual well-being either through the direct effect of paying the tax or the indirect effect (described as distortionary) caused by the tax on commodities or services.

In economic theory it has been observed that the allocative efficiency of direct (progressive) taxes is superior to that of indirect (regressive) taxes.

Put differently, raising taxes through a direct tax like income tax would imply a lesser burden on individuals than the same amount raised through an indirect tax like excise duty or ad valorem tax.

The reason for this is that indirect taxation increases the burden on individuals since it distorts their choices as a result of price changes. An indirect tax, therefore, has a greater negative effect on markets than a direct taxation. From an economic (and social) welfare perspective, paying direct taxes is considered fair especially when (assuming minimal tax avoidance and evasion) income tax takes a larger percentage from the income of high-income earners than it does from low-income individuals. In any event, high income earners would still be better off (in terms of the choices they make) in a tax regime which is primarily based on income taxation.

In recent years, however, we have seen a gradual and partial shift from income to more indirect taxation, and the 2015 Budget is no different with the imposition of additional indirect taxes. The further switching from a direct to a more indirect tax regime will affect both individuals and markets but has become inevitable given the political commitment to reduce the tax rates for high-income earners.

What, you may ask, are the advantages of indirect taxation? First, there is no theoretical certainty that allocative efficiency applies in the case of direct taxation but Ill put this theoretical argument aside.

Second, the administrative costs of a direct tax are higher than those of an indirect tax, since a direct tax regime may have many exemptions. In fact, from an administration cost point of view, indirect taxes are considered superior.