Income and Productivity

• Inv. Tax Credit
• Corp. Income Tax
• Capital's Apportionment Wgt.

investment (equipment & structures) tax credit — A credit against the corporate income tax. The amount of the credit is typically a percentage of the capital investment (sometimes above a base threshold) that the corporation does within the state.

corporate income tax — A tax on corporate income. All but four states have a corporate income tax or a similar business tax such as a franchise tax, though some states exempt certain sources of income, such as interest income, from taxation.

capital (property) apportionment weight — The weight assigned to property in a state's formula for apportioning a corporation's national (federal) income to that state. Each state can choose this formula independently of other states. Historically, nearly every state apportioned a corporation's national income based on an equally-weighted average of the shares of the corporation's sales, payroll, and property that are located in the state. Over the past four decades, however, states have increasingly lowered the weights on payroll and property (and increased the weight on sales) in this average as a means to incentivize job creation and capital investment in their state. For this reason, the lowering of the property apportionment weight can be considered an investment tax incentive similar to raising an investment tax credit or lowering the corporate income tax rate.

• Inv. Tax Credit
• Corp. Income Tax
• Capital's Apportionment Wgt.

In 1969, New York became the first state to enact an investment tax credit (ITC). But as this animation shows, states increasingly enacted ITCs in the forty years since, and also continually upped the ITC rate. (See Chirinko & Wilson, 2007 NTA Proceedings for more detail.) Scroll over any bar in any year to see that state's tax rate in that year. (States are arranged alphabetically.)

This animation shows that nearly all states have changed their corporate income tax rate a number of times over the past forty years. There was a general upward trend in rates from 1969 to the early 1990s, followed by a modest downward trend since then. (See Chirinko & Wilson, 2007 NTA Proceedings for more detail.) Scroll over any bar in any year to see that state's tax rate in that year. (States are arranged alphabetically.)

In 1963, Iowa was the only state with a corporate income tax that did not have equal weights on sales, payroll, and capital (property) in its formula for apportioning a corporation's national income to that state; Iowa had a 100% weight on sales. Starting in the 1970s, as this animation shows, more and more states moved to a lower weight on capital (and payroll, not shown) as a way to encourage businesses to locate their capital and employment in their state. (See Chirinko & Wilson, FRBSF WP 2008-03 for a discussion of this trend.) Scroll over any bar in any year to see that state's capital apportionment weight in that year. (States are arranged alphabetically.)

• Inv. Tax Credit
• R&D Tax Credit
• Jobs Tax Credit
• Avg. Tax