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States Can Opt Out of the Costly and Ineffective "Domestic Production Deduction" Corporate Tax Break

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Publication Date: July 2008

Publisher(s): Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Katherine Lira; Nicholas Johnson; Jason Levitis

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Banking and finance (Taxation and tax policy)

Keywords: Regional collaboration; Economic projections; Fiscal projections

Type: Report


With many states facing budget problems due to the weak economy, they can ill afford any unjustified revenue losses. But, 27 states are losing hundreds of millions of dollars in revenue due to a federal corporate tax break known as the "domestic production deduction," which mainly benefits large, profitable, corporations. Twenty other states have disallowed the deduction, including two in 2008. This analysis includes revenue loss estimates for each of the 27 states that allow the deduction.