A Natural Resource Theory of Unitary Taxation

Empirical evidence supports the tentative hypothesis that unitary taxation encourages natural resource recovery in states well endowed with timber, fuels, and nonfuel minerals. Consequently, if combined apportionment is a stable institution in any state, it will remain so while extractive industries, with higher upstream than downstream profitability, continue to dominate the state's economy. Over time, however, nonproducing states will abandon unitary taxation to prevent integrated firms from disinvesting within their borders and expanding operations in states with a hospitable investment climate. Since states, like firms, must compete with one another, unitary taxation will become less important as state economies become less dependent on the recovery of natural resources. 43 references, 1 figure, 4 tables.