State Investment Tax Incentives: What are the Facts?

Federal Reserve Bank of San Francisco Working Paper No. 2006-49

25 Pages Posted: 20 Aug 2007 Last revised: 13 May 2010

See all articles by Robert S. Chirinko

Robert S. Chirinko

University of Illinois at Chicago, Department of Finance; CESifo (Center for Economic Studies and Ifo Institute)

Daniel J. Wilson

Federal Reserve Bank of San Francisco

Date Written: November 1, 2006

Abstract

There is an ongoing debate in the U.S. among policymakers and the courts concerning the practical effects of state investment tax incentives. However, this debate often suffers from a lack of clear information on the extent of such incentives among states and how these incentives have evolved over time. This paper takes a first step toward addressing this shortcoming. Compiling information from all 50 states and the District of Columbia over the past 40 years, we are able to paint a picture of the variation in state investment tax incentives across states and over time. In particular, we document three stylized facts: (1) Over the last 40 years, state investment tax incentives have become increasingly large and increasingly common among states; (2) these incentives, as well as the level of the overall after-tax price of capital, are to a large extent clustered in certain regions of the country; and (3) states that enact investment tax credits tend to do so around the same time as their neighboring states.

Keywords: State Tax Incentives, Interstate Tax Competition, Business Taxes

Suggested Citation

Chirinko, Robert S. and Wilson, Daniel J., State Investment Tax Incentives: What are the Facts? (November 1, 2006). Federal Reserve Bank of San Francisco Working Paper No. 2006-49. Available at SSRN: https://ssrn.com/abstract=1007816 or http://dx.doi.org/10.2139/ssrn.1007816

Robert S. Chirinko (Contact Author)

University of Illinois at Chicago, Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

HOME PAGE: http://tigger.uic.edu/~chirinko/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Daniel J. Wilson

Federal Reserve Bank of San Francisco ( email )

101 Market Street
Mail Stop 1130
San Francisco, CA 94105
United States

HOME PAGE: http://www.frbsf.org/economics/economists/dwilson.html

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