Open AccessOn the Political Economy of State Corporate Tax Reforms in the U.S.
Author(s) -
Eliakim Kakpo
Publication year - 2019
Publication title -
research in applied economics
Language(s) - English
Resource type - Journals
ISSN - 1948-5433
DOI - 10.5296/rae.v11i3.15043
Subject(s) - corporate tax , economics , tax reform , tax competition , market economy , politics , endogeneity , value added tax , state (computer science) , tax incidence , tax avoidance , economic policy , monetary economics , ad valorem tax , indirect tax , political economy , macroeconomics , political science , algorithm , econometrics , computer science , law
This paper discusses the political economy of U.S. state corporate tax reforms. Using a unique dataset of state effective corporate tax rates over the period 1969-2015, I observe that business tax changes are associated with tax competition, swings in economic cycles, and left-right political ideology. In contrast, long-term debt and budgetary pressures do not correlate with state corporate tax policies. Moreover, I document a regional heterogeneity and notice a slowdown in state tax changes after the Federal Reform Act of 1986. These findings matter for the empirics of corporate tax incidence, which is increasingly concerned with the endogeneity between tax reforms and other economic developments.