Abstract
The present study attempts to determine the effect of state personal and corporate tax rates on firm location at the 2-digit SIC level. Using a random effects model on a data set of 14000 observations, the present study finds that a state's personal tax rate has a negative effect on firm location but that a state's corporate tax rate has no statistically-significant effect on firm location. These results suggest that the locational decision of a firm is affected more by the impact that high personal taxes will have on the manager's and/or owner's income than by the negative impact of high corporate tax rates on firm profits.
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