TY - JOUR
T1 - The structure of state corporate taxation and its impact on state tax revenues and economic activity
AU - Suárez Serrato, Juan Carlos
AU - Zidar, Owen
N1 - Funding Information:
We are especially thankful to Tim Bartik for providing detailed comments on an early draft as well as to Jim Poterba, Josh Rauh, and Tom Neubig. We also thank Tim Bartik, Dan Wilson and Robert Chirinko, Nathan Seegert, and Jamie Bernthal, Dana Gavrila, Katie Schumacher, Shane Spencer, and Katherine Sydor for generously providing us with data on components of the state corporate tax structure. Tim Anderson, Stephanie Kestelman, Matt Panhans, Francesco Ruggieri, Linh Nguyen, and John Wieselthier provided excellent research assistance. This work is supported by the Kauffman Foundation and the Kathryn and Grant Swick Faculty Research Fund at the University of Chicago Booth School of Business. We declare that we have no relevant or material financial interests that relate to the research described in this paper.
Publisher Copyright:
© 2018 Elsevier B.V.
PY - 2018/11
Y1 - 2018/11
N2 - This paper documents facts about the state corporate tax structure — tax rates, base rules, and credits — and investigates its consequences for state tax revenue and economic activity. We present three main findings. First, tax base rules and credits explain more of the variation in state corporate tax revenues than tax rates do. Second, although states typically do not offset tax rate changes with base and credit changes, the effects of tax rate changes on tax revenue and economic activity depend on the breadth of the base. Third, as states have narrowed their tax bases, the relationship between tax rates and tax revenues has diminished. Overall, changes in state tax bases have made the state corporate tax system more favorable for corporations and are reducing the extent to which tax rate increases raise corporate tax revenue.
AB - This paper documents facts about the state corporate tax structure — tax rates, base rules, and credits — and investigates its consequences for state tax revenue and economic activity. We present three main findings. First, tax base rules and credits explain more of the variation in state corporate tax revenues than tax rates do. Second, although states typically do not offset tax rate changes with base and credit changes, the effects of tax rate changes on tax revenue and economic activity depend on the breadth of the base. Third, as states have narrowed their tax bases, the relationship between tax rates and tax revenues has diminished. Overall, changes in state tax bases have made the state corporate tax system more favorable for corporations and are reducing the extent to which tax rate increases raise corporate tax revenue.
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U2 - 10.1016/j.jpubeco.2018.09.006
DO - 10.1016/j.jpubeco.2018.09.006
M3 - Article
AN - SCOPUS:85054334605
SN - 0047-2727
VL - 167
SP - 158
EP - 176
JO - Journal of Public Economics
JF - Journal of Public Economics
ER -