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State business tax climate: how should it be measured and how important is it?

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  • Robert Tannenwald

Abstract

States are more concerned than ever before about their business tax climate. Over the past two decades, profound technological and political changes have enhanced employers' geographic mobility and extended their geographic range, thereby intensifying economic competition both within the United States and throughout the world. This study ranks the business tax climate of 22 states, including the six within New England. It finds only modest differences in business tax climate among most states. Within the region, New Hampshire and Massachusetts have the most attractive business tax climates.> The study also estimates the importance of business tax climate in determining where manufacturers invest in plant and equipment. Business tax climate exerts only a small, highly uncertain effect on such investment. States may be more likely to stimulate their economy by enhancing public services valued by business.

Suggested Citation

  • Robert Tannenwald, 1996. "State business tax climate: how should it be measured and how important is it?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 23-38.
    • Handle: RePEc:fip:fedbne:y:1996:i:jan:p:23-38
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    Citations

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    Cited by:

    1. Vijay K. Mathur, 1999. "Human Capital-Based Strategy for Regional Economic Development," Economic Development Quarterly, , vol. 13(3), pages 203-216, August.
    2. Robert Tannenwald, 2004. "Massachusetts business taxes: unfair? inadequate? uncompetitive?," Public Policy Discussion Paper 04-4, Federal Reserve Bank of Boston.
    3. Robert Tannenwald & Nick Turner, 2004. "Interstate fiscal disparity in state fiscal year 1999," Public Policy Discussion Paper 04-9, Federal Reserve Bank of Boston.
    4. Jerram C. Betts & Cletus C. Coughlin, 1996. "The location of new foreign-owned manufacturing plants in the United States and Seventh Federal Reserve District," Assessing the Midwest Economy GL-5, Federal Reserve Bank of Chicago.
    5. W. Robert Reed & Cynthia L. Rogers, 2004. "Tax Cuts and Employment in New Jersey: Lessons From a Regional Analysis," Public Finance Review, , vol. 32(3), pages 269-291, May.
    6. jalil, Ahmad, 2013. "Fiscal Capacity, Fiscal Effort and Fiscal Performance of State Governments in Peninsular Malaysia: The Case of Land Tax," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 47(1), pages 139-154.
    7. Peter S. Fisher, 1997. "Tax and spending incentives and enterprise zones," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 109-138.
    8. Charles Ian Mead, 2001. "State user costs of capital," Working Papers 01-3, Federal Reserve Bank of Boston.
    9. Feld, Lars P. & Kirchgassner, Gebhard, 2003. "The impact of corporate and personal income taxes on the location of firms and on employment: some panel evidence for the Swiss cantons," Journal of Public Economics, Elsevier, vol. 87(1), pages 129-155, January.
    10. W. Robert Reed & Cynthia L. Rogers, 2005. "Tax Cuts and Employment Growth in New Jersey: Lessons From a Regional Analysis," Urban/Regional 0506010, University Library of Munich, Germany.
    11. Timothy J. Bartik, "undated". "Discussion [of the Effects of State and Local Public Services on Economic Development by Ronald C. Fisher]," Upjohn Working Papers tjb1997, W.E. Upjohn Institute for Employment Research.
    12. Fuerst, Franz & Mollenkopf, John, 2005. "Are Local Economic Development Incentives Promoting Job Growth? An Empirical Case Study," MPRA Paper 11444, University Library of Munich, Germany.
    13. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 519-549, September.
    14. Richard Funderburg & Timothy J. Bartik & Alan H. Peters & Peter S. Fisher, 2013. "The Impact Of Marginal Business Taxes On State Manufacturing," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 557-582, October.
    15. Richard M. Vogel, 2000. "Relocation Subsidies: Regional Growth Policy or Corporate Welfare?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 32(3), pages 437-447, September.
    16. repec:rre:publsh:v:37:y:2007:i:2:p:109-19 is not listed on IDEAS
    17. Patrick Button, 2015. "Do Tax Incentives Affect Business Location? Evidence from State Film Incentives," Working Papers 1507, Tulane University, Department of Economics, revised Aug 2017.
    18. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
    19. Michael Wasylenko, 1997. "Taxation and economic development: the state of the economic literature," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 37-52.
    20. Philippe Van Cauwenberge & Peter Beyne & Heidi Vander Bauwhede, 2016. "An empirical investigation of the influence of municipal fiscal policy on firm growth," Environment and Planning C, , vol. 34(8), pages 1825-1842, December.

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    Keywords

    state finances; Taxation;

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