02172cam a22002417 4500001000600000003000500006005001700011008004100028100002200069245015000091260006600241490004100307500001500348520118500363530006101548538007201609538003601681700002201717710004201739830007601781856003701857856003601894w6614NBER20161209085609.0161209s1998 mau||||fs|||| 000 0 eng d1 aGoolsbee, Austan.10aCoveting Thy Neighbor's Manuafacturingh[electronic resource]:bThe Dilemma of State Income Apportionment /cAustan Goolsbee, Edward L Maydew. aCambridge, Mass.bNational Bureau of Economic Researchc1998.1 aNBER working paper seriesvno. w6614 aJune 1998.3 aThis paper investigates the economic impact of the apportionment formulae used to divide corporate income taxes among the states. Most apportionment formulae, by including payroll, turn the state corporate income tax at least partially into a payroll tax. Using panel data from 1978 - 1994, the results show that this distortion has an important effect on state-level employment. For the average state, reducing the payroll weight from one-third to one-quarter increases manufacturing employment around 3% and the result is highly robust. The results also indicate that apportionment changes have important negative externalities on other states in that the effects of the apportionment formula on aggregate employment is zero. Every job gained within a state from an apportionment change is taken from another state. This externality suggests that the U.S. would be better off if the apportionment formula were set at a federal level. The paper also shows that because the payroll component of the tax is administered on top of the existing payroll tax, the deadweight loss from this component of state corporate income taxation may be significant, despite the low tax rates. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aMaydew, Edward L.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w6614.4 uhttp://www.nber.org/papers/w661441uhttp://dx.doi.org/10.3386/w6614