Correlation in State and Local Tax Changes

36 Pages Posted: 10 Aug 2020 Last revised: 23 May 2023

See all articles by Scott R. Baker

Scott R. Baker

Northwestern University, Kellogg School of Management, Department of Finance; National Bureau of Economic Research (NBER)

Pawel Janas

Kellogg School of Management - Department of Finance

Lorenz Kueng

Swiss Finance Institute; University of Lugano - Faculty of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2023

Abstract

We develop a comprehensive dataset of state and local taxes from 2000--2015 that includes personal income taxes, property taxes, corporate income taxes, sales taxes, estate taxes and excise taxes. We illustrate how state and local taxes have changed over time, over business cycles, and to what extent different taxes co-move within a state or county. We document large differences in the mix of taxes across states and local jurisdictions and note that these differences have become more pronounced over time. Political ideology has strong predictive power over changes in tax rates, and these effects vary substantially across tax types. Moreover, we find that taxes of different types tend to co-move within a jurisdiction, highlighting the importance for researchers to take into account the entirety of the tax system, rather than just a single tax type, when examining responses to tax changes.

Keywords: Local taxes, state taxes, income tax, corporate income tax, sales tax, property tax, excise tax

JEL Classification: H20, H71, H72, H77

Suggested Citation

Baker, Scott R. and Janas, Pawel and Kueng, Lorenz, Correlation in State and Local Tax Changes (March 1, 2023). Swiss Finance Institute Research Paper No. 20-115, Available at SSRN: https://ssrn.com/abstract=3648513 or http://dx.doi.org/10.2139/ssrn.3648513

Scott R. Baker (Contact Author)

Northwestern University, Kellogg School of Management, Department of Finance ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pawel Janas

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

Lorenz Kueng

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

HOME PAGE: http://www.sfi.ch/en/

University of Lugano - Faculty of Economics

Via Giuseppe Buffi 13
Lugano, TI 6904
Switzerland

HOME PAGE: http://www.usi.ch/en

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://cepr.org/

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