The Political Timing of Tax Policy: Evidence from U.S. States

Chang Andrew C. (), Cohen Linda R., Glazer Amihai and Paul Urbashee
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Chang Andrew C.: Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington DC, USA
Cohen Linda R.: Department of Economics and School of Law, University of California – Irvine, Irvine, CA, USA
Glazer Amihai: Department of Economics, University of California – Irvine, Irvine, CA, USA
Paul Urbashee: Department of Economics, Northeastern University, Boston, MA, USA

The B.E. Journal of Economic Analysis & Policy, 2025, vol. 25, issue 3, 505-548

Abstract: We examine whether politicians avoid tax increases in election years. Using a pre-analysis plan and new data from U.S. states that distinguish between when taxes are legislated and when they come into force, we find that in an election year enacted gasoline and corporate income tax increases are less likely and implemented tax changes are smaller. We do not find evidence that these election-year effects depend on balanced budget rules, term limits, the state’s liberal-conservative ideological bent, demographics, macroeconomic conditions, or on changes in overall legislative output in election years. These effects are stronger for gasoline taxes, consistent with a legislative response to the high political salience of gasoline taxes.

Keywords: corporate income taxes; electoral cycle; gasoline tax; pre-analysis plan; political budget cycle; tax salience (search for similar items in EconPapers)
JEL-codes: D72 D78 H24 H71 K34 P16 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/bejeap-2024-0333

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