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The Effect of State Corporate Income Tax Rate Cuts on Job Creation

The Effect of State Corporate Income Tax Rate Cuts on Job Creation Abstract This paper compares the employment growth of states that enacted corporate income tax rate cuts in the past 23 years with those making no changes. Overall employment comparisons from 1990 to 2012 suggest that a reduction in the corporate income tax rate is associated with faster job creation. The states that cut corporate income tax rates started with slower employment growth than the states that made no changes. However, the growth gaps between the two groups of states disappeared in about five years after the tax cuts were made. Regression results confirm the observation that lower corporate tax rates have a significant and positive effect on employment growth. The enactment of a tax rate cut also has the additional but temporary benefit of promoting job creation as businesses adjust to the new tax rate. However, this benefit is temporary and only occurs during first year of the enactment of a tax cut. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

The Effect of State Corporate Income Tax Rate Cuts on Job Creation

Business Economics , Volume 48 (3): 11 – Jul 1, 2013

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Publisher
Springer Journals
Copyright
2013 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.1057/be.2013.21
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper compares the employment growth of states that enacted corporate income tax rate cuts in the past 23 years with those making no changes. Overall employment comparisons from 1990 to 2012 suggest that a reduction in the corporate income tax rate is associated with faster job creation. The states that cut corporate income tax rates started with slower employment growth than the states that made no changes. However, the growth gaps between the two groups of states disappeared in about five years after the tax cuts were made. Regression results confirm the observation that lower corporate tax rates have a significant and positive effect on employment growth. The enactment of a tax rate cut also has the additional but temporary benefit of promoting job creation as businesses adjust to the new tax rate. However, this benefit is temporary and only occurs during first year of the enactment of a tax cut.

Journal

Business EconomicsSpringer Journals

Published: Jul 1, 2013

References