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The Structure of State Corporate Taxation and its Impact on State Tax Revenues and Economic Activity

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  • Juan Carlos Suárez Serrato
  • Owen M. Zidar

Abstract

This paper documents facts about the state corporate tax structure | tax rates, base rules, and credits | and investigates its consequences for state tax revenue and economic activity. We present three main findings. First, tax base rules and credits explain more of the variation in state corporate tax revenues than tax rates do. Second, although states typically do not offset tax rate changes with base and credit changes, the effects of tax rate changes on tax revenue and economic activity depend on the breadth of the base. Third, as states have narrowed their tax bases, the relationship between tax rates and tax revenues has diminished. Overall, changes in state tax bases have made the state corporate tax system more favorable for corporations and are reducing the extent to which tax rate increases raise corporate tax revenue.

Suggested Citation

  • Juan Carlos Suárez Serrato & Owen M. Zidar, 2017. "The Structure of State Corporate Taxation and its Impact on State Tax Revenues and Economic Activity," NBER Working Papers 23653, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23653
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    References listed on IDEAS

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    1. Juan Carlos Suárez Serrato & Owen Zidar, 2016. "Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 106(9), pages 2582-2624, September.
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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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