 The effect of market-based sourcing on labor outcomesAnthony Welsch Journal of Public Economics, 2023, vol. 225, issue C Abstract: This study examines how income tax sourcing rules affect business activity in U.S. states. As technology has enabled companies to provide services to consumers globally, a growing number of governments seek to tax service companies based on the customer location (“market-based sourcing”) rather than the location of the company’s labor and capital. Consistent with market-based sourcing reducing the tax cost of locating marginal labor in the state, I find that state adoption of market-based sourcing increases the total number of employees and total labor earnings in affected service industries by roughly 2 to 5 percent, after controlling for concurrent tax policy changes. I find indirect evidence that the effects are mostly attributable to business expansion rather than employee reallocation across states. Market-based sourcing does not seem to adversely affect state corporate tax revenues. This study provides timely insights for policymakers given increased adoption of market-based sourcing by U.S. states and related international proposals. Keywords: Business tax; State government; Labor markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:225:y:2023:i:c:s0047272723001482 DOI: 10.1016/j.jpubeco.2023.104966 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.