Individual Tax Rates and Regional Tax Revenues: A Cross-State Analysis
Regional Studies, Forthcoming
45 Pages Posted: 5 Jul 2010 Last revised: 22 Nov 2016
Date Written: November 2, 2015
This paper analyzes the effects of state-level personal tax rates on state tax revenue and individual welfare. The policy analysis based on a general equilibrium model suggests that tax revenues would benefit from higher wage-income, sales or property taxes, while any increase in dividend-income tax would result in a reduction of revenues. It is also shown that individuals would suffer from an increase in state-level wage-income tax, dividend-tax or sales tax, while they would benefit from an increase in property taxes. The heterogeneity across states is determined by a TaxIndex, a weighted average of initial taxes at the state level.
Keywords: Regional Taxes, State Tax Revenue, Individual Welfare
JEL Classification: H24, H71, R13, R51
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