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

Sarah Robinson and Alisa Tazhitdinova

No 31268, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D7 H2 H7 (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-big, nep-his, nep-pbe and nep-pub
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Published as This paper has been split into two halves for final publication. The first half, "One hundred years of U.S. state taxation" is accepted and in-press at the Journal of Public Economics.

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