Economic Effects of Apportionment Formula Changes: Results from a Panel of Corporate Income Tax Returns

30 Pages Posted: 8 May 2006

See all articles by Kelly D. Edmiston

Kelly D. Edmiston

Center for Insurance Policy & Research / NAIC; University of Kansas - School of Medicine; University of Missouri; Baker University

Date Written: December 2005

Abstract

Empirical studies of the economic effects of changes in state corporate income tax apportionment policies generally have used highly aggregated state-level data. This study uses individual firm level data, from 1992-2002 State of Georgia corporate income tax returns, to evaluate economic development and revenue aspects of increasing the sales factor weight (and uniformly lowering weights on payroll and property) in state corporate income tax apportionment formulas. We find elasticities indicative of a substantial impact on local sales (-6.5 percent), payroll (2.0 percent) and property (2.1 percent) following a move to double-weighted sales. For the average firm, increases in Georgia payroll and property were $37,110 and $190,829, respectively, while the decrease in Georgia sales was $634,367. Using 1994 figures (the year prior to double-weighting), this amounts to state-wide payroll and property increases of $0.6 billion and $3.1 billion, respectively, and a gross receipts decrease of approximately $10.4 billion.

Keywords: Apportionment, state corporate income tax

JEL Classification: H25, H73

Suggested Citation

Edmiston, Kelly D., Economic Effects of Apportionment Formula Changes: Results from a Panel of Corporate Income Tax Returns (December 2005). Available at SSRN: https://ssrn.com/abstract=899629 or http://dx.doi.org/10.2139/ssrn.899629

Kelly D. Edmiston (Contact Author)

Center for Insurance Policy & Research / NAIC ( email )

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University of Kansas - School of Medicine ( email )

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University of Missouri ( email )

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Baker University ( email )

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