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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 and Journal Articles fbpfjrs, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:fbpfjrs
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    Cited by:

    1. 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.
    2. 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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    Keywords

    REGIONAL ISSUES; Business incentives; Tax incentives; Regional and urban studies;

    JEL classification:

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

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