Getting into the Weeds of Tax Invariance

Benjamin Hansen, Keaton Miller and Caroline Weber ()

No 23632, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide the first general empirical test of tax invariance (TIV). When a 25 per-cent tax remitted by manufacturers was eliminated in Washington state and the retail cannabis excise tax was simultaneously increased from 25 to 37 percent—a shift in-tended to be revenue-neutral—TIV did not hold. Manufacturers kept two-thirds of their tax savings instead of passing all their savings through to retail firms via lower prices as predicted by TIV. One-third of the retail tax increase was passed on to consumers via higher retail prices – TIV would have predicted constant or even declining tax-inclusive retail prices.

JEL-codes: H2 H20 H21 H22 H23 H25 H26 H32 H71 I1 I18 K4 (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-acc, nep-law, nep-pbe and nep-pub
Note: EH IO PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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