65 Pages Posted: 21 Dec 2014 Last revised: 6 Feb 2017
Date Written: February 1, 2016
We examine the effects of differences in income tax rates on commuting times. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commuting patterns, but has different effects depending if taxes are residence or employment based. Empirically, tax differentials have large effects on commuting times for affluent households and mobile households. We demonstrate the assumptions under which commute times are a sufficient statistic to measure the spatial welfare effects of tax policies. The model and empirical design can be used by economists to study other policy differences.
Keywords: Tax Differentials, Transportation, Inter-jurisdictional Competition, Commuting, Social Welfare
JEL Classification: H20, H71, H73, R12, R28, R41
Suggested Citation: Suggested Citation
Agrawal, David R. and Hoyt, William H., Commuting and Taxes: Theory, Empirics, and Welfare Implications (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2541092 or http://dx.doi.org/10.2139/ssrn.2541092