Politicians Avoid Tax Increases Around Elections

53 Pages Posted: 22 Apr 2021 Last revised: 9 Jul 2021

See all articles by Andrew C. Chang

Andrew C. Chang

Board of Governors of the Federal Reserve System

Linda R. Cohen

University of California Irvine - Department of Economics

Amihai Glazer

University of California, Irvine - Department of Economics

Urbashee Paul

Northeastern University

Multiple version iconThere are 2 versions of this paper

Date Written: January, 2021

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. These data contain 3 useful attributes: (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 pre-analysis research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections decrease the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes relative to non-election years. We find some evidence that politicians are most likely to enact tax increases right after an election. These election effects are stronger for gasoline taxes than for corporate income taxes and depend on no other political, demographic, or macroeconomic conditions. Supplemental analysis supports political salience over legislative e ort in generating this difference in electoral effects.

Keywords: Corporate Income Taxes, Electoral Cycle, Gasoline Taxes, preanalysis plan, Tax Salience

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

Suggested Citation

Chang, Andrew C. and Cohen, Linda R. and Glazer, Amihai and Paul, Urbashee, Politicians Avoid Tax Increases Around Elections (January, 2021). FEDS Working Paper No. 2021-4, Available at SSRN: https://ssrn.com/abstract=3881614 or http://dx.doi.org/10.17016/FEDS.2021.004

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 R. Cohen

University of California Irvine - Department of Economics

3151 Social Science Plaza A, University of Califor
Irvine, CA 92617
United States

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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