State Tax Haven Legislation and Corporate Income Tax Revenues
43 Pages Posted: 9 Feb 2017 Last revised: 29 Nov 2018
Date Written: November 28, 2018
In response to the rise of foreign tax haven usage by multinational corporations, several U.S. states have enacted laws that require income from affiliated entities operating in tax haven jurisdictions to be included on the firm’s state income tax return. We examine the revenue effects of this legislation. Employing a variety of alternative empirical approaches including state and year fixed effects regressions, a difference-in-differences specification, and a synthetic control methodology, our results provide consistent evidence of a positive association between the enactment of tax haven legislation and state corporate income tax revenues in all enacting states except West Virginia. Our study contributes to the state tax policy literature and the literature on tax havens. Moreover, given that states continue to consider implementing, changing, or repealing tax haven legislation, our results inform this current policy debate.
Keywords: Tax Havens, State Tax Haven Legislation, State Corporate Income Tax; State Corporate Income Tax Revenue
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