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
Date Written: January 19, 2017
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: Suggested Citation