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The Impact of Marginal Business Taxes on State Manufacturing

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type="main"> We estimate the impact of manufacturer business taxes on value added during the 1990s for 15 manufacturing sectors in 20 U.S. states. When the tax climate is properly measured as the potential liability arising from new investment in a state, we estimate that a 10 percent reduction in the effective tax liability is associated with a 3.5 to 5.3 percent increase in value added for the state's targeted manufacturing industry. When we isolate the value of industrial incentives from the basic tax system in our theoretically preferred marginal tax measure, we find that a 10 percent reduction in liability achieved by way of lowering taxes is associated with a 4.5 percent increase in value added while an equivalent reduction achieved by way of increasing incentives is associated with only 1.2 percent industrial growth, the latter elasticity not statistically different from zero.
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  • Richard Funderburg & Timothy J. Bartik & Alan H. Peters, "undated". "The Impact of Marginal Business Taxes on State Manufacturing," Upjohn Working Papers fbpfjrs, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:fbpfjrs
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    File URL: http://onlinelibrary.wiley.com/doi/10.1111/jors.12031/abstract;jsessionid=466F2D0821F08324D2ACB95EA62272DB.f04t02
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    Cited by:

    1. Shaoming Cheng & Hai (David) Guo & Cathy Yang Liu, 2020. "Incentivized for Leveling the Playing Field: Do State Economic Incentives Compensate for High Taxes?," Economic Development Quarterly, , vol. 34(2), pages 101-115, May.
    2. Paul F. Byrne, 2017. "Have Post-Kelo Restrictions on Eminent Domain Influenced State Economic Development?," Economic Development Quarterly, , vol. 31(1), pages 81-91, February.
    3. Federico Belotti & Edoardo Di Porto & Gianluca Santoni, 2021. "The effect of local taxes on firm performance: Evidence from geo‐referenced data," Journal of Regional Science, Wiley Blackwell, vol. 61(2), pages 492-510, March.
    4. Jeremy Arkes, 2020. "Teaching Graduate (and Undergraduate) Econometrics: Some Sensible Shifts to Improve Efficiency, Effectiveness, and Usefulness," Econometrics, MDPI, vol. 8(3), pages 1-23, September.
    5. Timothy J. Bartik, 2012. "The Future of State and Local Economic Development Policy: What Research Is Needed," Growth and Change, Wiley Blackwell, vol. 43(4), pages 545-562, December.

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    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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