Politicians Avoid Tax Increases Around Elections

51 Pages Posted: 29 Jul 2020

See all articles by Andrew C. Chang

Andrew C. Chang

Board of Governors of the Federal Reserve System

Linda Cohen

affiliation not provided to SSRN

Amihai Glazer

University of California, Irvine - Department of Economics

Urbashee Paul

Northeastern University

Multiple version iconThere are 2 versions of this paper

Date Written: June 19, 2020

Abstract

We use new annual data on gasoline taxes and corporate income taxes from U.S. states to analyze whether politicians avoid tax increases in election years. Our data provide three items of information: (1) when state politicians enact tax laws, (2) when state politicians implement tax laws on consumers and firms, and (3) the size of tax changes. Using a prespecified research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections reduce the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes, relative to the years just after the elections. These reductions are stronger for gasoline taxes than for corporate income taxes and do not depend on other political, demographic, or macroeconomic conditions. The greater election effects on gasoline taxes than on corporate taxes appears to be, at least in part, due to political salience rather than due to lower overall legislative output in election years.

Keywords: Corporate Income Tax, Electoral Cycle, Gasoline Tax, Preanalysis Plan, Preregistration Plan, Tax Salience

JEL Classification: D72, D78, H24, H71, K34, P16

Suggested Citation

Chang, Andrew C. and Cohen, Linda and Glazer, Amihai and Paul, Urbashee, Politicians Avoid Tax Increases Around Elections (June 19, 2020). Available at SSRN: https://ssrn.com/abstract=3641963 or http://dx.doi.org/10.2139/ssrn.3641963

Andrew C. Chang (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Linda Cohen

affiliation not provided to SSRN

Amihai Glazer

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States
949-854-6563 (Phone)
949-824-2182 (Fax)

Urbashee Paul

Northeastern University ( email )

220 B RP
Boston, MA 02115
United States

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