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Industrial Marketing

Reform Act of 1986. The goal of this act was to be rev- as a response to revenue crises created by the Great
enue-neutral, neither increasing nor decreasing revenues. Depression. At the state level, definitions of taxable
It provided a reduction in tax rates by expanding the tax income differ from the federal definition and differ
base through the elimination of some tax expenditures. among states. Exemptions, deductions, and rates of taxa-
After passage of the 1986 Tax Reform Act, attention tion vary among states. As of January 2005, Nevada,
shifted to the taxation of capital gains and replacement of South Dakota, Washington, and Wyoming did not
the income tax. Beginning in 1987, capital gains and ordi- impose individual or corporate income taxes; Alaska,
nary income were taxed in the same manner. Then prefer- Florida, and Texas did not impose an individual income
ential treatment was reintroduced for capital gains. tax. Formulas are used to allocate the income of multistate
Commonly proposed alternatives to the income tax corporations among the states in which they operate.
include the value-added tax and national sales taxes, two SEE ALSO Taxation
taxes for which the tax base would be consumption rather
than income. Another alternative is the flat tax on
income. In theory, with one single tax rate—a flat tax— BIBLIOGRAPHY
all taxpayers would pay the same proportion of taxable Brownlee, W. Elliot (2004). Federal Taxation in America: A Short
income in taxes. If the base of taxable income were History. Washington, D.C.: Woodrow Wilson Center Press.
defined as earned income, taxpayers receiving only inter- Federation of Tax Administrators website. http://www.
est and dividends would be excluded from the payment of taxadmin.org. Accessed December 1, 2005.
taxes. Currently interest and dividends are subject to a Witte, John F. (1985). The Politics and Development of the Fed-
eral Income Tax. Madison: University of Wisconsin Press.
double tax. Corporations pay income tax on the earnings
from which dividends and interest are paid, and individu-
als pay income tax on dividend and interest income that Jean E. Harris
they receive. Most flat tax proposals eliminate double tax-
ation.

ADMINISTRATION OF FEDERAL INDUSTRIAL
INCOME TAX MARKETING
The Internal Revenue Service (IRS), which administers SEE Business Marketing
the income tax, is part of the U.S. Department of the
Treasury. Adapting to changes in technology to achieve
the most efficient processing of information is a major
challenge for the IRS. For many years the IRS was organ- INFLATION
ized on a geographical basis, but in 1998 it was reorgan-
ized into four functional divisions differentiated by type SEE Business Cycle
of taxpayer.
For corporate and individual taxpayers that report on
a calendar-year basis, annual tax returns are due on or
before March 15 and April 15, respectively, following the INFORMATION
close of the calendar year. Providing that the tax due is PROCESSING
paid, time extensions for filing returns may be obtained. Information processing is the manipulation of data to
Although the closing dates for the quarters differ, both produce useful information; it involves the capture of
individuals and corporations are subject to payment of information in a format that is retrievable and analyzable.
estimated tax in quarterly installments. Taxpayers who fail Processing information involves taking raw information
to file tax returns or fail to pay taxes are subject to mone- and making it more useful by putting it into context. In
tary penalties, fines, and possible prison sentences.
general, information processing means processing new
data, which includes a number of steps: acquiring,
EXTENSION OF INCOME TAX TO inputting, validating, manipulating, storing, outputting,
THE STATE LEVEL communicating, retrieving, and disposing. The future
Wisconsin was the first state to adopt an income tax in accessing and updating of files involves one or more of
1911. Massachusetts and New York soon followed by these steps. Information processing provides individuals
adopting income taxes when faced with problems related with basic skills to use the computer to process many
to World War I. Most other states adopted the income tax types of information effectively and efficiently. The term

378 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION