IDEAS home Printed from https://ideas.repec.org/p/uma/periwp/wp91.html
   My bibliography  Save this paper

Declining Corporate Income Taxes in the 1990s: A State-by-State Analysis of Effective Tax Rates

Author

Listed:
  • Elissa Braunstein

Abstract

Between 1995 and 2000, inflation-adjusted federal corporate income taxes grew an average of 2.0 percent a year; the annual average for state and local corporate tax revenue actually declined by 0.12 percent during the same period. A number of statelevel studies have documented this decline by showing that corporations are paying a declining share of state taxes. But such results are inconclusive because they do not control for changes in corporate profitability. In this paper we use data from the National Income and Product Accounts to create a time series of corporate profits by state, enabling us to investigate corporate income taxes while controlling for corporate profits. Our findings are striking: out of the 42 states studied, 41 show a statistically significant decline in their effective corporate income tax rates between 1991 and 2001. The average decline for all states is 4.6 percent per year, which means that effective corporate income tax rates fell by a little over one-third over the decade of the 1990s and into 2001. After accounting for the impact of the growth in income of S corporations, this means that states lost about $11 billion on corporate income tax revenue in fiscal 2002 due to the decline in effective corporate income tax rates.

Suggested Citation

  • Elissa Braunstein, 2004. "Declining Corporate Income Taxes in the 1990s: A State-by-State Analysis of Effective Tax Rates," Working Papers wp91, Political Economy Research Institute, University of Massachusetts at Amherst.
    • Handle: RePEc:uma:periwp:wp91
    as

    Download full text from publisher

    File URL: https://per.umass.edu/fileadmin/pdf/working_papers/working_papers_51-100/WP91.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Reuven Avi-Yonah, "undated". "Corporations, Society and the State: A Defense of the Corporate Tax," University of Michigan John M. Olin Center for Law & Economics Working Paper Series umichlwps-1005, University of Michigan John M. Olin Center for Law & Economics.
    2. Fox, William F. & Luna, LeAnn, 2002. "State Corporate Tax Revenue Trends: Causes and Possible Solutions," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(3), pages 491-508, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amar Gande & Kose John & Vinay B. Nair & Lemma W. Senbet, 2020. "Taxes, institutions, and innovation: Theory and international evidence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1413-1442, December.
    2. Chiarini, Bruno & Ferrara, Maria & Marzano, Elisabetta, 2022. "Tax evasion and financial accelerator: A corporate sector analysis for the US business cycle," Economic Modelling, Elsevier, vol. 108(C).
    3. Joann Martens Weiner, 2005. "Formulary Apportionment and Group Taxation in the European Union: Insights from the United States and Canada," Taxation Papers 8, Directorate General Taxation and Customs Union, European Commission, revised Mar 2005.
    4. Durst, Michael C., 2016. "Improving the Performance of Natural Resource Taxation in Developing Countries," Working Papers 12797, Institute of Development Studies, International Centre for Tax and Development.
    5. William F. Fox & LeAnn Luna, 2005. "Do Limited Liability Companies Explain Declining State Corporate Tax Revenues?," Public Finance Review, , vol. 33(6), pages 690-720, November.
    6. Avi-Yonah Reuven S., 2011. "Citizens United and the Corporate Form," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 1(3), pages 1-56, December.
    7. Margalioth Yoram & Sulganik Eyal & Eldor Rafael & Edrey Yoseph, 2009. "A Cost of Tax Planning," Review of Law & Economics, De Gruyter, vol. 5(1), pages 155-162, April.
    8. Robert Tannenwald, 2004. "Massachusetts business taxes: unfair? inadequate? uncompetitive?," Public Policy Discussion Paper 04-4, Federal Reserve Bank of Boston.
    9. Hakelberg, Lukas & Rixen, Thomas, 2020. "Is Neoliberalism Still Spreading? The Impact of International Cooperation on Capital Taxation," SocArXiv tvneu, Center for Open Science.
    10. Steven Sheffrin & Rujun Zhao, 2021. "Public perceptions of the tax avoidance of corporations and the wealthy," Empirical Economics, Springer, vol. 61(1), pages 259-277, July.
    11. Cornia, Gary & Edmiston, Kelly D. & Sjoquist, David L. & Wallace, Sally, 2005. "The Disappearing State Corporate Income Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(1), pages 115-138, March.
    12. Travis Chow & Sterling Huang & Kenneth J. Klassen & Jeffrey Ng, 2022. "The Influence of Corporate Income Taxes on Investment Location: Evidence from Corporate Headquarters Relocations," Management Science, INFORMS, vol. 68(2), pages 1404-1425, February.
    13. Richard H. Mattoon, 2004. "The state of the state and local government sector: fiscal issues in the Seventh District," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 28(Q I), pages 2-17.
    14. Lutz Preuss, 2012. "Responsibility in Paradise? The Adoption of CSR Tools by Companies Domiciled in Tax Havens," Journal of Business Ethics, Springer, vol. 110(1), pages 1-14, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uma:periwp:wp91. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Judy Fogg (email available below). General contact details of provider: https://edirc.repec.org/data/permaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.