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The Effects of State Tax Structure on Business Organizational Form

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  • Luna, LeAnn
  • Murray, Matthew N.

Abstract

This study examines business organizational form decisions as a source of tax base mobility. We posit that organizational form responses to state tax policy allow for an indirect means of exploring mobility through business tax planning. Using state-level IRS data for the years 1997–2008, we examine the decision to file as a partnership or corporation and how those decisions are affected by a variety of state tax policies. The results suggest that state tax policy, especially corporate and personal income tax rates, affects business entity choice decisions and impacts business planning opportunities within and across states.

Suggested Citation

  • Luna, LeAnn & Murray, Matthew N., 2010. "The Effects of State Tax Structure on Business Organizational Form," National Tax Journal, National Tax Association, vol. 63(4), pages 995-1021, December.
  • Handle: RePEc:ntj:journl:v:63:y:2010:i:4:p:995-1021
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    References listed on IDEAS

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    1. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2008. "Do countries compete over corporate tax rates?," Journal of Public Economics, Elsevier, pages 1210-1235.
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    3. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    4. Chirinko, Robert S. & Wilson, Daniel J., 2008. "State investment tax incentives: A zero-sum game?," Journal of Public Economics, Elsevier, pages 2362-2384.
    5. Daniel J. Wilson, 2006. "The mystery of falling state corporate income taxes," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec8.
    6. Robert S. Chirinko & Daniel J. Wilson, 2007. "Tax competition among U.S. states: racing to the bottom or riding on a seesaw?," Working Paper Series 2008-03, Federal Reserve Bank of San Francisco.
    7. Aggarwal Rajesh K. & Meschke Felix & Wang Tracy Yue, 2012. "Corporate Political Donations: Investment or Agency?," Business and Politics, De Gruyter, vol. 14(1), pages 1-40, April.
    8. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    9. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, pages 113-134.
    10. Michael J. Cooper & Huseyin Gulen & Alexei V. Ovtchinnikov, 2010. "Corporate Political Contributions and Stock Returns," Journal of Finance, American Finance Association, vol. 65(2), pages 687-724, April.
    11. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    12. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2008. "Do countries compete over corporate tax rates?," Journal of Public Economics, Elsevier, pages 1210-1235.
    13. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, pages 285-307.
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    Cited by:

    1. Juan Bárcena-Ruiz & María Garzón, 2014. "Multiproduct Firms and Environmental Policy Coordination," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 407-431.
    2. Rong, Zhao & Wu, Xiaokai & Boeing, Philipp, 2017. "The effect of institutional ownership on firm innovation: Evidence from Chinese listed firms," Research Policy, Elsevier, vol. 46(9), pages 1533-1551.

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