The Influence of Corporate Income Taxes on Investment Location: Evidence from Corporate Headquarters Relocations
58 Pages Posted: 11 Nov 2016 Last revised: 8 Aug 2018
Date Written: January 1, 2018
This study examines the specific effects of jurisdictions’ corporate tax policies on firms’ corporate headquarters location decisions. For identification, we rely on changes in state corporate income tax rates across time and states. On average, a 1% reduction in rate is associated with a reduction in the likelihood of cross-state headquarters relocation ranging from 9.3% to 27%. Further examination of the unique tax policy features within the state apportionment system support the interpretation that taxation drives this effect. We contribute to the literature on corporate decision-making by showing how state income taxation policy affects real corporate decisions with significant economic consequences for the company and the state.
Keywords: Headquarter Relocation, Corporate Tax, Income Apportionment Formula, Tax Planning
JEL Classification: J24, H25, H26, H20
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