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The U.S. State Experience Under Formulary Apportionment: Are There Lessons for International Reform?

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  • Kimberly A. Clausing

Abstract

While formulary apportionment eliminates the possibility of shifting income across states, it may heighten the responsiveness of businesses to formula factors. The present analysis uses variation in corporate tax policy decisions of U.S. states over the period 1986 to 2012 to better understand the consequences of formulary apportionment, estimating the tax sensitivity of employment, investment, and sales. With the inclusion of adequate control variables, results indicate that economic activity is not sensitive to U.S. state corporate tax policy choices. Still, tax policy choices have important effects on corporate tax revenues. Findings suggest important lessons regarding possible international adoption of formulary apportionment.

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  • Kimberly A. Clausing, 2016. "The U.S. State Experience Under Formulary Apportionment: Are There Lessons for International Reform?," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(2), pages 353-386, June.
    • Handle: RePEc:ntj:journl:v:69:y:2016:i:2:p:353-386
    DOI: 10.17310/ntj.2016.2.04
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    Cited by:

    1. Ortmann, Regina & Simons, Dirk & Voeller, Dennis, 2021. "Real effects of an international tax reform for MNEs," arqus Discussion Papers in Quantitative Tax Research 265, arqus - Arbeitskreis Quantitative Steuerlehre.
    2. Lampenius, Niklas & Shevlin, Terry & Stenzel, Arthur, 2021. "Measuring corporate tax rate and tax base avoidance of U.S. Domestic and U.S. multinational firms," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    3. Alex Cobham & Petr Janský & Chris Jones & Yama Temouri, . "An evaluation of the effects of the European Commission's proposals for the Common Consolidated Corporate Tax Base," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    4. Joana Andrade Vicente, 2023. "Rethinking corporate taxation in the European Union: how and where to tax Multinational Enterprises," Working Papers REM 2023/0286, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    5. Fabien Candau & Jacques Le Cacheux, 2018. "Taming Tax Competition with a European Corporate Income Tax," Revue d'économie politique, Dalloz, vol. 128(4), pages 575-611.
    6. Zuo, Shengqiang & Wu, Bangzheng & Feng, Jun, 2023. "Does government reduction of the corporate income tax rate increase employment? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 365-372.
    7. Welsch, Anthony, 2023. "The effect of market-based sourcing on labor outcomes," Journal of Public Economics, Elsevier, vol. 225(C).

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