Abstract

http://ssrn.com/abstract=160535
 
 

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Coveting Thy Neighbor's Manuafacturing: The Dilemma of State Income Apportionment


Austan Goolsbee


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Edward L. Maydew


University of North Carolina at Chapel Hill

February 1999


Abstract:     
This paper investigates the economic impact of the apportionment formulae used to divide corporate income taxes among the states. Most apportionment formulae, by including payroll, turn the state corporate income tax at least partially into a payroll tax. Using panel data from 1978-1994, the results show that this distortion has an important effect on state-level employment. For the average state, reducing the payroll weight from one-third to one-quarter increases manufacturing employment around 1.1%, concentrated in manufacturing and with larger effects in the long-run. The results also suggest that apportionment changes have important negative externalities on other states. On average, the aggregate effects of apportionment formula changes are close to zero.

Number of Pages in PDF File: 27

JEL Classification: H25

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Date posted: May 19, 1999  

Suggested Citation

Goolsbee, Austan and Maydew, Edward L., Coveting Thy Neighbor's Manuafacturing: The Dilemma of State Income Apportionment (February 1999). Available at SSRN: http://ssrn.com/abstract=160535 or http://dx.doi.org/10.2139/ssrn.160535

Contact Information

Austan Goolsbee (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Edward L. Maydew
University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)
HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

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