Abstract

http://ssrn.com/abstract=226336
 
 

Citations (31)



 


 



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 - Accounting Area

June 1998

NBER Working Paper No. w6614

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 3% and the result is highly robust. The results also indicate that apportionment changes have important negative externalities on other states in that the effects of the apportionment formula on aggregate employment is zero. Every job gained within a state from an apportionment change is taken from another state. This externality suggests that the U.S. would be better off if the apportionment formula were set at a federal level. The paper also shows that because the payroll component of the tax is administered on top of the existing payroll tax, the deadweight loss from this component of state corporate income taxation may be significant, despite the low tax rates.

Number of Pages in PDF File: 29

working papers series


Download This Paper

Date posted: August 4, 2000  

Suggested Citation

Goolsbee, Austan and Maydew, Edward L., Coveting Thy Neighbor's Manuafacturing: the Dilemma of State Income Apportionment (June 1998). NBER Working Paper No. w6614. Available at SSRN: http://ssrn.com/abstract=226336

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 - Accounting Area ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)
919-962-4727 (Fax)
HOME PAGE: http://www.kenan-flagler.unc.edu/Faculty/search/detail.cfm?person_id=51

Feedback to SSRN


Paper statistics
Abstract Views: 768
Downloads: 28
Citations:  31

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 1.484 seconds