Are U.S. State Tax Policies Increasingly Polarized?

Abstract

We study the extent to which political polarization permeates U.S. state tax policies from 1910 to 2022. We document a dramatic increase in tax policy polarization in recent decades, particularly for personal income, cor- porate income, and cigarette taxes, but convergence in sales taxes. How- ever, the current levels of polarization are not unique relative to the past. Furthermore, this polarization is only pronounced among states with large political majorities and stable political regimes. Yet state tax policies are not gridlocked: swing states change taxes as frequently as, and with similar magnitude to, deep red and blue states. 

Keywords: JEL Classification: D72, H20, H71, H73, H77, N32 Polarization, partisanship, state taxes, income tax, corporate tax, sales tax, cigarette tax, alcohol tax, gasoline tax