The Economic Incidence of Additional State Business Taxes

22 Pages Posted: 4 Dec 2016

See all articles by Robert J. Cline

Robert J. Cline

Ernst & Young LLP

Andrew D. Phillips

Ernst & Young LLP

Joo Mi Kim

Independent

Thomas S. Neubig

Tax Sage Network

Date Written: January 11, 2010

Abstract

This study provides state-by-state estimates of the economic incidence of a 10 percent increase in business taxes in each state, holding taxes in all other states constant. Combining detailed state-by- state information on total state and local taxes that are the legal liability of business with an economic incidence model that reflects each state’s economy, this study estimates the amount and share of the business tax increase borne by in-state residents through higher prices and lower incomes, along with the amount and share exported to out-of-state residents.

The results of this study indicate that taxes imposed initially on business are primarily borne by residents in higher prices or reduced wages and jobs, with only a modest share exported to taxpayers in other states (other than in extractive states) or shifted to capital owners. That result reflects the growing reality of increased business tax competitiveness and capital mobility both nationally and internationally.

Keywords: tax, incidence, state

JEL Classification: H20, H22, H25, H32, H71

Suggested Citation

Cline, Robert J. and Phillips, Andrew D. and Kim, Joo Mi and Neubig, Thomas S., The Economic Incidence of Additional State Business Taxes (January 11, 2010). Available at SSRN: https://ssrn.com/abstract=2879202 or http://dx.doi.org/10.2139/ssrn.2879202

Robert J. Cline

Ernst & Young LLP ( email )

1225 Connecticut Ave NW # 700
Washington, DC 20036
United States
202-327-6000 (Phone)

Andrew D. Phillips

Ernst & Young LLP ( email )

1225 Connecticut Ave NW # 700
Washington, DC 20036
United States

Joo Mi Kim

Independent ( email )

No Address Available

Thomas S. Neubig (Contact Author)

Tax Sage Network ( email )

4807 Autumn Lake Way
Annandale, VA
United States

HOME PAGE: http://www.taxsagenetwork.com

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