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State Investment Tax Incentives: A Zero-Sum Game?

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  • Robert S. Chirinko
  • Daniel J. Wilson

Abstract

Though the U.S. federal investment tax credit (ITC) was permanently repealed in 1986, state-level ITCs have proliferated over the last few decades. Are these tax incentives effective in increasing investment within the state? How much of this increase is due to investment drawn away from other states? Based on a panel dataset for all 50 states, we find a significant channel for state tax incentives on own-state economic activity and document the importance of interstate capital flows. Whether state investment incentives are a zero-sum game is less certain and depends on the definition of the set of competitive states.

Suggested Citation

  • Robert S. Chirinko & Daniel J. Wilson, 2007. "State Investment Tax Incentives: A Zero-Sum Game?," CESifo Working Paper Series 1895, CESifo.
  • Handle: RePEc:ces:ceswps:_1895
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    References listed on IDEAS

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      More about this item

      Keywords

      state tax incentives; interstate tax competition; business taxes;
      All these keywords.

      JEL classification:

      • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
      • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
      • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
      • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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