Multi-jurisdictional Taxing Rights: Determinants and Implications

54 Pages Posted: 13 Dec 2024

See all articles by Katie Boylen

Katie Boylen

University of Wisconsin-Madison - Department of Accounting and Information Systems

Stacie Kelley (Laplante)

University of Wisconsin - Madison

Mary E. Vernon

University of Illinois at Chicago - Department of Accounting

Date Written: November 07, 2024

Abstract

Motivated by the OECD's Pillar 1 focus on a reallocation of taxing rights of residual profits to market jurisdictions, we investigate U.S. state-level determinants and implications of sales-focused taxing rights. In the past two decades, U.S. states shifted the focus of taxing rights from personnel and physical capital to the amount and location of sales. Salesfocused taxing rights typically benefit in-jurisdiction firms and increase the number of out-ofjurisdiction firms subject to taxation. Examining post 2000 data, our evidence suggests states select sales-focused taxing rights when such policies would benefit their constituents. We also find that taxing rights explain little of the variation in tax revenues but appear to play a bigger role in influencing employment and investment compared to other state tax and non-tax characteristics. Our study jointly considers multiple aspects of taxing rights over a long period and informs domestic and foreign policymakers on multi-jurisdictional taxing rights.

Keywords: state corporate income tax, apportionment, taxing rights

JEL Classification: H25, H71, H72, H73, H20, M41

Suggested Citation

Boylen, Kathleen and Kelley, Stacie and Vernon, Mary, Multi-jurisdictional Taxing Rights: Determinants and Implications (November 07, 2024). Available at SSRN: https://ssrn.com/abstract=5018525 or http://dx.doi.org/10.2139/ssrn.5018525

Kathleen Boylen

University of Wisconsin-Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Stacie Kelley

University of Wisconsin - Madison ( email )

975 University Avenue
Madison, WI 53706
United States
608-265-3494 (Phone)
608-265-3494 (Fax)

Mary Vernon (Contact Author)

University of Illinois at Chicago - Department of Accounting ( email )

601 South Morgan Street
University Hall, Room 2303
Chicago, IL 60607
United States

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