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Economic Effects of Apportionment Formula Changes


  • Kelly D. Edmiston

    (Federal Reserve Bank of Kansas City)

  • F. Javier Arze del Granado

    (World Bank)


Empirical studies of the economic effects of changes in state corporate income tax apportionment policies generally have used highly aggregated state-level data. This study uses individual firm-level data, from 1992 to 2002 State of Georgia corporate income tax returns, to evaluate economic development and revenue aspects of increasing the sales factor weight (and uniformly lowering weights on payroll and property) in state corporate income tax apportionment formulae. The authors find elasticities indicative of a substantial impact on local sales (-6.5 percent), payroll (2.0 percent), and property (2.1 percent) following a move to double-weighted sales. For the average firm, increases in Georgia payroll and property were $37,110 and $190,829, respectively, while the decrease in Georgia sales was $634,367. Using 1994 figures (the year prior to double-weighting), this amounts to statewide payroll and property increases of $0.6 billion and $3.1 billion, respectively, and a gross receipts decrease of approximately $10.4 billion.

Suggested Citation

  • Kelly D. Edmiston & F. Javier Arze del Granado, 2006. "Economic Effects of Apportionment Formula Changes," Public Finance Review, , vol. 34(5), pages 483-504, September.
  • Handle: RePEc:sae:pubfin:v:34:y:2006:i:5:p:483-504

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    Cited by:

    1. Martini, Jan-Thomas & Niemann, Rainer & Simons, Dirk, 2014. "Management incentives under formula apportionment: Tax-induced distortions of effort and compensation in a principal-agent setting," arqus Discussion Papers in Quantitative Tax Research 168, arqus - Arbeitskreis Quantitative Steuerlehre.
    2. Hansjörg Blöchliger & José Maria Pinero Campos, 2011. "Tax Competition Between Sub-Central Governments," OECD Economics Department Working Papers 872, OECD Publishing.
    3. Jan Thomas Martini & Rainer Niemann & Dirk Simons, 2014. "Management Incentives under Formula Apportionment - Tax-Induced Distortions of Effort and Compensation in a Principal-Agent Setting -," CESifo Working Paper Series 4908, CESifo.

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    apportionment; state corporate income tax;


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