Research

Publications

With Don Bruce, Journal of Public Economics, September 2021, volume 201, #104476

We present the first empirical analysis of the relationship between sales tax collection obligations, or nexus, and business activity. The recent Supreme Court decision in the Wayfair case upended the long-standing physical presence requirement for sales tax nexus and opened the door for states to enforce sales tax collection obligations on remote sellers that have sufficient economic presence in the buyer's state. In an effort to inform the ongoing policy discussion, we make use of state-level panel data to explore the extent to which changes in sales tax nexus were associated with changes in business establishment formation and employment between 1979 and 2014. Our results suggest that increasing sales tax base breadth by 1 percentage point generates 0.14 percent additional firms and establishments and 0.2 percent higher employment levels. Furthermore, increasing the share of online companies with nexus by 1 percentage point translates into 0.1 percent additional (small) firms as the sales-tax-collection obligation is dispersed among a larger share of firms. Results from a simulation show that unwinding half of the observed base narrowing could have generated as many as 90,350 firms, 113,600 establishments, and 2.9 million jobs during the time period. These results provide suggestive evidence of the future impact of sales tax base recovery that will result from more neutral nexus standards in the post-Wayfair world.


Working Papers

Broadband Internet and Business Activity

Invited presentations: 2020 SEA conference, 2021 EEA conference, 2021 CEA conference, and 2021 IIPF annual congress

Does the diffusion of broadband-capable networks enhance business activity and entrepreneurship? Does the narrowing of the Digital Divide spur rural economic growth? To answer these questions empirically, I examine one of the Federal Communication Commission's largest broadband deployment programs to date -- Phase II of the Connect America Fund. Exploiting plausibly exogenous variation in the deployment of wired broadband connections during the 2015-18 period, my county-level difference-in-differences results produce persistent gains in the number of firms, establishments, entrepreneurs, employment, and wages. Firm growth is driven by small, young, and rural firms. A cost-benefit analysis reveals that the benefits from CAF II outweigh the costs by a factor of 42.


Work in Progress

Business Dynamism in the 21st Century: Origins of the Slowdown

In this paper, I explore Business Formation Statistics (BFS) data, which report the number of individuals and corporations applying for Employer Identification Numbers (EINs) at the state-week level. I investigate a relatively unexplored cause of declining business dynamism: the sharp and permanent drop in high-propensity business applications that occurred during the onset of the Great Recession. Unlike previous studies that have identified gradual changes in the economic landscape as leading causes of the decline in business dynamism, this paper identifies a particular point in time that generated a high-impact, structural discontinuity in business application quality.

All About That Base: State Corporate Tax Bases and Business Activity

This paper examines how changes in the breadth of state corporate tax bases affect business activity. Although prior research has made significant strides toward understanding how state corporate tax rates influence corporate activity, start-up activity, the location decisions of firms, income inequality, the welfare of workers, and the capital outlays of firms, few studies explore the relationship between the corporate tax base and economic outcomes. This is especially troubling given that changes in state corporate tax bases occur more frequently than do rate changes and that base changes are generally not associated with rate changes in the United States.


Policy Reports

Long-Term Economic Outlook for the State of Tennessee

Boyd Center for Business and Economic Research, 2021

With William Fox, Don Bruce, Celeste Carruthers, Matt Harris, Lawrence Kessler, and Alannah Shute

This report provides a 15-year economic outlook for the state of Tennessee. Compiled for the Governor, this report examines how expected future growth in output, personal income, employment, and technological advancement will impact the state economy. The report also examines how ongoing economic trends will impact state and local tax collections.

Boyd Center for Business and Economic Research, 2021

With Lawrence Kessler, Alex Norwood, and William Fox

This policy report examines Knoxville Utilities Board's (KUB) plan to install fiber-to-the-home (FTTH) across its 688-square-mile electrical grid. The plan, which would offer download/upload speeds of 1 gigabits-per-second (Gbps) at a monthly rate of $65, would lead to customer cost savings between $18.5 and $85.7 million. The ultra-fast upload speeds, which are 25 times faster than top competitors, would also generate time savings for subscribers. In addition, the plan would likely generate economic and social benefits to the greater Knoxville region, including greater output growth, reduced unemployment spells, and reductions in rural depopulation.

Boyd Center for Business and Economic Research, 2021

This policy report examines the 2020 surge in business applications using state-level Business Formation Statistics (BFS) data. It provides policymakers, economists, and business professionals a detailed examination of where and when the pandemic surge in business applications was most prevalent. The five states that reported the most permanent and temporary business closures due to the COVID-19 Pandemic (California, Texas, Florida, New York, and Illinois) are in fact the same states that led the nation in 2020 business applications. These results tell a story of greater entrepreneurial activity where existing business landscapes have been most disrupted.

Boyd Center for Business and Economic Research, 2020

With Lawrence Kessler, Don Bruce, Celeste Carruthers, William Fox, Enda Hargaden, Vickie Cunningham, and Alex Norwood

This is the 45th annual economic report compiled for the Governor of the state of Tennessee. It includes a detailed analysis on the Tennessee economy and both short-run (business cycle-sensitive) and long-run (trend-based) forecasts of economic indicators. This volume pays particular attention to the COVID-19 Pandemic and its impact on the state economy. Designed to disseminate the most up-to-date and pertinent economic information regarding the state economy, this report aids planners and decision-makers in both the public and private sectors.

Connect Knox: Greater Knoxville Economic Report Card

Boyd Center for Business and Economic Research, 2019

With Don Bruce and Timothy Kuhn

This report, which was prepared in conjunction with the Knoxville Chamber and the Knox County Metropolitan Planning Commission, serves as a report card to track the economic progress of Knox county, the nine-county Knox region (including Knox, Grainger, Jefferson, Sevier, Blount, Loudon, Roane, Anderson, and Union counties), and the state of Tennessee.