The Influence Of State Sales And Use Taxes On Manufacturers’ Capital Expenditures And Employment

Keywords

economic development; sales and use tax; state tax policy; tax incentives

Abstract

This study investigates the relationship between the state sales and use tax (SUT) burden and manufacturing firms’ employment and capital expenditures for the period 1983–2006. Using an instrumental variable model, our results indicate that the SUT burden (i.e., the product between the sales and use tax rate and sales and use tax exemptions) on purchases of materials and machinery is related to changes in capital expenditures and employment, even after controlling for corporate income tax variables and other economic factors. The economic impact of this relationship is relatively small; however, the results have important policy implications in the present lean state budget environment, as state legislators must balance revenue needs with the desire to provide economic development incentives.

Publication Date

7-12-2015

Publication Title

Public Finance Review

Volume

43

Issue

4

Number of Pages

458-484

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1177/1091142113505192

Socpus ID

84930806754 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84930806754

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