The Influence of State Taxation and Regulation On Selected Bank Activities

The effects of state tax and regulatory policies on the location of real, financial, and portfolio choice activity of banks are investigated. The results show that banks have increased their efforts to avoid tax and regulatory policies since the 1980 Depository Institutions Deregulation and Monetary Control Act. Delaware and South Dakota have been very effective in designing policies to attract banking, but they appear to have benefited from first-mover advantages. Overall, the effects of taxes and regulations remain small, probably because the regulatory and technological environments have only recently become conducive to interstate tax-avoidance behavior.