The Labor Incidence of Capital Taxation: New Evidence from the Retail Sales Taxation of Manufacturing Machinery and Equipment

40 Pages Posted: 5 Jul 2014 Last revised: 20 Jan 2017

See all articles by John L. Mikesell

John L. Mikesell

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Justin M. Ross

Indiana University - School of Public & Environmental Affairs

Date Written: January 19, 2017

Abstract

This paper seeks to produce evidence on the labor incidence of the taxation of machinery and equipment purchases by manufacturers under the state general sales tax. For the identification strategy, we exploit tax policy discontinuities among adjacent counties along state borders. The main results demonstrate that, on average, there are no significant losses or gains to manufacturing labor from adjusting this tax. The main results are robust to specifications of controls and state specific time trends. The identification strategy also passes a falsification test where counties are differenced from a randomly selected county.

Keywords: capital tax, sales tax, tax incidence

JEL Classification: H2, H7, H25, H71

Suggested Citation

Mikesell, John L. and Ross, Justin M., The Labor Incidence of Capital Taxation: New Evidence from the Retail Sales Taxation of Manufacturing Machinery and Equipment (January 19, 2017). Available at SSRN: https://ssrn.com/abstract=2462288 or http://dx.doi.org/10.2139/ssrn.2462288

John L. Mikesell

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States
812-855-0732 (Phone)
812-877-7802 (Fax)

Justin M. Ross (Contact Author)

Indiana University - School of Public & Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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