What Drives Tax Policy? Political, Institutional and Economic Determinants of State Tax Policy

70 Pages Posted: 22 May 2023 Last revised: 9 Jun 2023

See all articles by Sarah Robinson

Sarah Robinson

Claremont McKenna College

Alisa Tazhitdinova

University of California, Santa Barbara (UCSB)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2023

Abstract

We collect detailed data on U.S. state personal income, corporate, sales, cigarette, gasoline, and alcohol taxes over the past 70 years to shed light on the determinants of state tax policies. We provide a comprehensive summary of how tax policy has changed over time, within and across states. We then use permutation analysis, variance decomposition, and machine learning techniques to show that the timing and magnitude of tax changes are not driven by economic needs, state politics, institutional rules, neighbor competition, or demographics. Altogether, these factors explain less than 20% of observed tax variation.

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Suggested Citation

Robinson, Sarah and Tazhitdinova, Alisa, What Drives Tax Policy? Political, Institutional and Economic Determinants of State Tax Policy (May 2023). NBER Working Paper No. w31268, Available at SSRN: https://ssrn.com/abstract=4454888

Sarah Robinson (Contact Author)

Claremont McKenna College ( email )

Claremont, CA 91711
United States

HOME PAGE: http://www.s-robinson.com

Alisa Tazhitdinova

University of California, Santa Barbara (UCSB) ( email )

South Hall 5504
Santa Barbara, CA 93106
United States

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