On the Political Economy of State Corporate Tax Reforms in the U.S.

Eliakim Kakpo


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.

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DOI: https://doi.org/10.5296/rae.v11i3.15043

Copyright (c) 2019 Eliakim Kakpo

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Research in Applied Economics ISSN 1948-5433

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