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- Title
THE IMPACT OF MARGINAL BUSINESS TAXES ON STATE MANUFACTURING.
- Authors
Funderburg, Richard; Bartik, Timothy J.; Peters, Alan H.; Fisher, Peter S.
- Abstract
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 reduc-tion 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.
- Subjects
UNITED States; BUSINESS tax; UNITED States manufacturing industries; VALUE-added tax; TAXATION of business enterprises; TAXATION
- Publication
Journal of Regional Science, 2013, Vol 53, Issue 4, p557
- ISSN
0022-4146
- Publication type
Article
- DOI
10.1111/jors.12031