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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
The mystery of falling state corporate income taxes
Daniel J. Wilson
Abstract

The share of corporate profits in the U.S. collected by state governments via the corporate income tax has fallen sharply in the past quarter century. Some commentators have even referred to this as the "disappearance" of the state corporate income tax (SCIT). Such claims, of course, are an exaggeration--after all, a longer perspective reveals that the share of profits collected by state corporate income taxes was actually lower in the 1960s than it is now. Nonetheless, state public finance experts and state policymakers surely are correct in noting that, since around 1980, corporate income taxes have become an increasingly smaller share of total state tax revenues and a smaller share of businesses' costs. ; This Economic Letter attempts to unravel the mystery of falling state corporate income taxes by analyzing the primary determinants of these taxes and reviewing how they have changed in the last 25 years.


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Daniel J. Wilson, "The mystery of falling state corporate income taxes" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 35, 2006.
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Keywords: Corporations - Taxation ; Taxation ; Income tax
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