The Structure of State Corporate Taxation and its Impact on State Tax Revenues and Economic Activity
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.
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. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Juan Carlos Suárez Serrato & Owen Zidar, 2018. "The structure of state corporate taxation and its impact on state tax revenues and economic activity," Journal of Public Economics, vol 167, pages 158-176. citation courtesy of