The Cash Flow and Behavioral Effects of Switching to a Single Sales Factor on State Taxation

Abstract

ABSTRACT: This study examines the impact that switching to a single sales factor (SSF) formula for state corporate income tax apportionment has on local employment. Resolving previous conflicting work, I find that SSF increased employment only for locally based firms, resulting in economically insignificant aggregate employment gains. Beyond contributing to the policy debate, the study also introduces a new database that provides location-specific, establishment-level information for both public and privately owned firms.